Draft recommends regulation of mobile termination

Media Release

Issued 22 December 2005/077

Draft report recommends regulation of mobile termination

The Commerce Commission has released its draft report to the Minister of Communications recommending that termination of fixed line voice calls on a cellular telephone network - known as 'mobile termination' - be regulated.

In June, a previous report also recommended that mobile termination should be regulated. In August, the Minister asked the Commission to reconsider that recommendation in the light of offers he had received from Telecom and Vodafone to voluntarily reduce mobile termination rates.

The Commission has compared the benefits of regulation to the offers by Telecom and Vodafone to lower termination rates and found that regulation would bring greater benefits for end users.

"The Commission continues to believe that regulation will bring substantial benefits to businesses and consumers making fixed-to-mobile calls," said Telecommunications Commissioner Douglas Webb.

Mr Webb said the Commission had changed its view on third generation or 3G networks. Its previous report recommended that calls to 3G networks should be excluded from regulation, to preserve the incentive for investment in 3G services. In its new draft report the Commission recommends that the termination of voice calls on 3G networks should be included in the regulation.

Mr Webb said that the Commission had observed an extensive roll out of 3G technology since its initial recommendation to the Minister.

"This suggests that the threat to investment in new technology from regulation is not as great as the Commission first thought," Mr Webb said.

The Commission expects that reductions in mobile termination rates will flow through into retail fixed-to-mobile prices paid by consumers, and it will monitor retail developments.

Written submissions on the Commission's draft determination close on 20 January 2006 and cross submission on 5 February 2006. The Commission expects to send its final reconsideration recommendation to the Minister of Communications in the first quarter of 2006.

A copy of the Commission's mobile termination reconsideration draft report is available on www.comcom.govt.nz (select Telecommunications and then Investigations).

Background

The Commission was asked by the Minister to reconsider its previous recommendation in order to consider:

* definitional and implementation issues concerning 2G and 3G and implications for dynamic efficiency;

* the commercial offers made by Telecom and Vodafone following the Commission's Final Report, in comparison to regulation; and,

* how best to ensure that end-users benefit from reductions in wholesale mobile termination rates; and

* new issues raised in submissions to MED on the Commission's previous report.

The Commission's recommendation is for the initial price for mobile termination to be set by benchmarking against other comparable countries and the final price by TSLRIC (forward-looking cost based modelling).

The Commission began its investigation into mobile termination in May 2004 after complaints that a potential lack of competition in the wholesale market for terminating mobile calls could be resulting in unreasonably high retail charges for fixed-to-mobile calls.

ENDS

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