The Commerce Commission today released its draft report recommending that the mobile termination prices should be regulated. The Commission also recommended that the undertakings submitted in lieu of regulation by Vodafone, Telecom and 2degrees should be rejected.

Mobile termination prices are the wholesale charges mobile phone companies charge for terminating calls or texts from other fixed or mobile networks. The Commission's preliminary finding, which is now subject to consultation, is that mobile termination charges are currently significantly above cost. The Commission's draft report recommends regulation of the wholesale rates that telecommunications companies charge each other, rather than the price that consumers directly pay for mobile services.

"Where wholesale services are priced at cost, consumers are expected to benefit from the resulting increase in competition, which in turn should lead to lower retail prices," said Commissioner Anita Mazzoleni.

"In the mobile market, these above cost wholesale mobile termination charges are therefore likely to limit the ability of a new entrant mobile phone company to compete," said Ms Mazzoleni.

"Overall, the Commission has estimated that the retail cost of calling a mobile from a fixed line could be significantly lower as a result of regulation. Additionally the Commission also expects that there would be benefits to consumers in the mobile market as a result of moving to wholesale charges that are cost-based," said Ms Mazzoleni.

"The Commission's preliminary view, based on its overseas benchmarks, is that the initial cost-based termination rates in 2009 should be 7.2 cents per minute for mobile voice calls and 0.95 cents per text, with these rates reducing to 3.8 cents per minute for mobile voice calls and 0.5 cents per text by 2015. These benchmarked rates are significantly below current wholesale prices in New Zealand of 15 cents per minute for mobile voice calls, and also significantly below the prices recently offered by Telecom and Vodafone in their undertakings, which simply continue with their current termination rates for voice," Ms Mazzoleni said.

Submissions from interested parties are due by 28 July 2009. Telecom, Vodafone and 2degrees have been invited to submit revised undertakings at the same time as their submissions on the draft report.

In reaching its final recommendation, the Commission will take into account any advantages offered by revised undertakings, including the potential delivery of earlier reductions in mobile termination rates than would be available under regulation, and the avoidance of direct costs of regulation and the regulatory process. Implementation issues, such as glide paths to achieve acceptable outcomes, would also be considered at that time.

The Commission's investigation will result in a recommendation before the end of the year to the Minister for Communications and Information Technology on whether these services should be regulated or whether any of Vodafone, Telecom or 2degrees' undertakings should be accepted.

The Commission's draft report, the undertakings and the submissions received to date are all available on the Commission's website www.comcom.govt.nz under Mobile termination Access Services.

For more information see the complete release (pdf).