Droptherate - Are people being mislead by PR spin?

By Steve Biddle, in , posted: 12-Aug-2009 10:42

My blog post from last night  discussing the Drop the Rate, Mate! campaign has generated plenty of comment. It's also made me think a little more about what the motives of 2degrees are with this campaign.

What is the goal of the campaign? The website goes into great detail explaining that lower MTR costs will reduce the price of calls. What the website doesn't say however is exactly what they mean when they say they want rates "dropped". Does "dropping" rates mean lowering them from existing levels or "dropping" them entirely and moving towards a new pricing model for interconnects?

Maybe this comment from spokesperson Matthew Hooton on Stuff today explains their real motive

"Drop the rate" spokesman Matthew Hooton said Telecom and Vodafone were "ripping off" customers to the tune of 15 cents a minute for calls.

It's very clear that Hooton believes that the current 15c voice MTR rate should be removed entirely and replaced by a new pricing model.
2degress have been very vocal in recent months wanting a move towards dumping Calling Party Pays (CPP) in New Zealand and a move towards mobile party pays (MPP) by implimenting a bill and keep pricing model. Dumping CPP means that mobile carriers receive no revenue for terminating a call on their network. It should be pointed out that no country has ever moved from a CPP to MPP model for mobile pricing.

In countries such the USA and Canada that use the MPP pricing model rather than CPP networks receive no revenue for inbound calling or SMS messages. This means users in many cases pay to receive calls or SMS messages on their mobile phone. This reason alone is one of the reasons no country has moved from CPP and MPP. Convincing users they should suddenly have to pay for receiving calls or SMS's would be a significant challenge.

Do people in NZ really want to pay? Do 2degrees really believe people want that?

The alternative that 2degrees are suggesting is Bill and Keep (BAK). Under this arrangement MTR costs are zero rated and no money changes hands between operators. Bill and keep is currently implimented here in New Zealand for local calling and in a market where local calling is free this model works fine. The flaws that exist within the bill and keep model are the reason no country anywhere in the world has so far adopted BAK for mobile pricing.

So what are the problems?

In moving to BAK customers who only use their phones for incoming calling and make very few outbound calls are unprofitable. Considering that many users in NZ fall into this category it would result in all networks suddenly facing not only a significant revenue drop due to the MTR corrections but also a situation where customers are infact costing them money to support. This would mean any gains by the move to BAK would be cancelled out as prices potentnailly increase to recover that most revenue.

Because traffic is zero rated it also means the potential for significant changes in call loading. If a carrier has to pay nothing to interconnect a call with another mobile carrier they could effectly offer plans with exceptionally generous off net calling rates. If large numbers of people took up these plans a mobile network could see their rates of inbound traffic increase significantly and with no MTR revenue to support this increase in traffic to fund network infrastructure these increased costs will simply be passed onto their own customers.

Is this really a fair model? If you have signed the online petition I assume you are have infact agreed to a move away from the CPP model towards MPP and will be happy to pay to receive both SMS and voice calls?

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No Newshub and NIWA. Vodafone’s 5G network won’t interfere with your weather satellite images.

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sbiddle's profile

Steve Biddle
New Zealand

I'm an engineer who loves building solutions to solve problems. I'll also a co-founder of the TravelTalk.nz travel site. 

I also love sharing my views and analysis of the tech world on this blog, along with the odd story about aviation and the travel industry.

My interests and skillset include:

*VoIP (Voice over IP). I work with various brands of hardware and PBX's on a daily basis
  -Asterisk (incl PiaF, FreePBX, Elastix)

  -xDSL deployments

*Structured cabling
  -Home/office cabling
  -Phone & Data

*Computer networking
  -Mikrotik hardware
  -WAN/LAN solutions

*Wireless solutions
  -Motel/Hotel hotspot deployments
  -Outdoor wireless deployments, both small and large scale
  -Temporary wireless deployments
*CCTV solutions
  -Analogue and IP

I'm an #avgeek who loves to travel the world (preferably in seat 1A) and stay in nice hotels.

+My views do no represent my employer. I'm sure they'll be happy to give their own if you ask them.

You can contact me here or by email at stevenbiddle@gmail.com