Vodafone welcomes MTAS regulation*

By Steve Biddle, in , posted: 13-Apr-2010 20:45

Vodafone today launched a new mobile add-on plan into the marketplace. Offering 200 minutes of calls to other Vodafone mobiles or landlines in New Zealand at any time of the day or night for $12 it is arguably the best value mobile add-on in New Zealand. The catch is that it's only available to Prepay users - if you're a On Account user helping prop up Vodafone's ARPU you've just been given the big finger. Vodafone do assure us this plan is coming "soon" to On Account plans, but right now we're all stuck paying more than a pimply teenager who had absolutely no brand loyalty.

$12 for 200 minutes equates to 6c per minute for a call to any other on net Vodafone mobile or landline. That's fantastic value in anybody's terms and is the cheapest available calling rate available on any mobile network in NZ for calling another mobile or landline (excluding deals such as Best Mate, TalkZone or Favorites that only allow calling to nominated numbers. The launch of 2degrees in New Zealand has finally broken the mobile duopoly that existed in New Zealand and finally lead to some significant competition for the customers hard earned dollar.

I've blogged on numerous occasions about the Commerce Commission led MTAS (Mobile Termination Access Services) investigation that has been in place for approximately 18 months. This purpose of this investigation was to look at mobile termination rates (MTRs) - the rates that mobile operators charge each other for terminating voice calls and SMS messages on their network. These rates have been falling consistently for the last 10 or so years from approximately 45c per minute down to approximately 18c per minute now. Many people believe that high MTR costs cause inflated retail mobile calling rates, a conclusion that I neither agree with or have seen compelling evidence to agree with. What is clear however is that rate should be set to reflect the cost of terminating an inbound voice call on the network, it should not be used as a revenue source for operators. International benchmarking shows that our current MTR costs are not excessive but  globally pressure is being put on mobile operators by regulators to force these MTR costs down, primarily because they believe current charges are inflated and do not reflect the true cost of terminating a call in this day in age.

In early 2009 the Commerce Commission welcomed dialogue from all interested parties and in June 2009 issued a draft recommendation that recommended prices should be cut significantly. Needless to say this didn't go down well with either Telecom or Vodafone who were intent on maintaining the status quo. Because only two mobile operators existed in the marketplace the charge became almost irrelevant for calls and SMS messages between Vodafone and Telecom - while they paid the other provider money when a call made off network, they received money when a call was terminated on their network. While there was a marginal imbalance in voice termination rates, SMS termination rates were very equal for both networks which meant very little money actually changed hands at the end of the day. This cosy duopoly upset new entrant 2degrees, who aggressively campaigned for MTR costs to be lowered significantly and also pushed for a move away from the Calling Party Pays (CPP) pricing model to Bill and Keep (BAK) as a replacement pricing model. BAK would mean no money would ever be paid from one operator to another, and that mobile operators would in effect receive no money for terminating a call on their network. This model is used in the USA and typically means that a mobile user pays for incoming calls (normally out of included minutes) as a way of the mobile provider recovering call termination revenue. 2degrees funded what I consider to be a dirty tricks campaign known as Drop The Rate, Mate! that mislead people into thinking that MTR costs were the root cause of high mobile calling costs and the lack of competition in NZ, however the hugely successful launch of 2degrees into the marketplace with aggressive pricing shows that the existing regulatory environment was not broken - we were being ripped off as mobile users because of a lack of competition in the marketplace. Despite MTR costs having fallen by well over 50% in recent years, retail pricing has not followed suit with a Vodafone or Telecom prepaid mobile user still paying similar rates now to what they were three years ago.

In the following months plenty of debate took place and numerous submissions were made by all three networks putting forward their cases. The Commission indicated it would prefer an industry lead solution rather than being forced to regulate the market and in December 2009 both Vodafone and Telecom submitted final submissions to the Commerce Commission pledging to reduce MTR costs for voice calls to 12c per minute (billed per second) from October 2010 and gradually reducing to 6c per minute (billed per second) by 2014. 2degrees threw all of their toys out of the cot believing the Commerce Commission were ignoring them, and withdrew all offers they had previously put on the table.

In February 2010 the Commission delivered it's final report to the Minister for Communications and Information Technology, Steven Joyce. This report recommended that the Minister should accept the submissions from both Telecom and Vodafone rather than regulating the market, but the decision was not without controversy, only two of the three Commissioners involved in the investigation agreed with this approach, with Commissioner Anita Mazzoleni recommending that regulation of the market take place.

So now back to todays news..Vodafone have now told us loud and clear that  6c per minute is now sufficient revenue for an on net call from one Vodafone customer to another Vodafone customer. One has to now ask the question - why do Vodafone believe that the rate for any other mobile network operator to terminate a call on the Vodafone network should exceed 6c per minute from today? If that 6c was split 50/50 between the revenue cost of the A party making the call and B party answering the call then that MTR cost should not exceed 3c per minute. What possible argument could Vodafone have for charging another network operator more to terminate a call on the Vodafone network than they "charge" themselves?

The decision  to either accept the proposals from Vodafone and Telecom currently sits with Minister Joyce, who has the decision as to whether he should accept voluntary proposals from both networks or with the full force of the law regulate MTR pricing. Vodafone have now very openly come out and made a mockery of many of their claims that MTR costs can't drop to 6c until 2014. I'm no fan of regulation but if I were Minister Joyce I'd calling Vodafone's bluff and  recommending regulation. Thumbing your nose at both the Commission and Minister like Vodafone have done is not smart business.


*= my opinion of what Vodafone's new plan represents

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UFB voice, power cuts, copper invincibility and mainstream media FUD.

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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