Commerce Commission cuts mobile termination rates

Commerce Commission cuts mobile termination rates

The Commerce Commission today released its decision on mobile termination rates – the cost of carrying a text or call on another network. There will be significant reductions in the wholesale termination rates for mobile calls and text messages. As a result of competitive pressure, the Commission anticipates that these reductions in the wholesale rates will flow through to the prices paid by the 4.7 million mobile subscribers in New Zealand in the coming year.

Termination rates for calls will drop to less than 4 cents by 1 April 2012, with further reductions until 2014. Termination rates for text messages will drop to 0.06 cents from 6 May 2011.

“These changes are intended to address significant competition problems in the wholesale mobile market which have resulted in high retail prices - particularly for prepay customers - a low number of mobile calls and high rates of people switching networks, compared to other countries,” said Dr Ross Patterson, Telecommunications Commissioner.

“However, we continue to be concerned about the extent to which the price of calls and text messages between people on different networks are significantly higher than calls and text messages between people on the same network. These price differences create significant barriers for the new entry and growth of small mobile operators in the mobile market,” said Dr Patterson.

While the Commission expects reduction in wholesale termination rates for calls and text messages to resolve this problem, it will be monitoring this situation closely, including publishing monthly reports, and is prepared to move quickly to limit these price differences if required.

The graduated reduction in termination rates for calls will allow mobile providers time to adjust retail rates. In providing this graduated reduction, or glide path, the Commission has sought to balance the benefits for consumers in terms of lower prices, while allowing mobile providers time to adjust retail prices.

You can view the final MTAS determination on the Commission’s website at: www.comcom.govt.nz/mobile-termination-access-services-std

Background

The MTAS (mobile termination access service) relates to the portion of a call or text message to a mobile phone, once it has been handed over to a mobile company to be transmitted to a mobile phone.

History of the MTAS investigation

On 6 November 2008, the Commission commenced an investigation under Schedule 3 of the Telecommunications Act 2001 (the Act) into mobile termination access services (MTAS). The MTAS incorporates mobile-to-mobile voice termination (MTM), fixed-to-mobile voice termination (FTM) and short-message service termination (SMS). The investigation is considering whether these services should be recommended to be regulated services under Schedule 1 of the Act.

Under the Telecommunications Act 2001, the Commission can only commence a standard terms development process for services that are specified in Schedule 1 of the Act.

On 16 June 2010, the Commission recommended in its reconsideration report that the Minister for Communications and Information Technology allow for the regulation of mobile termination access services (including the price for those services) by adding the services to Schedule 1 of the Act, and to reject undertakings offered by Telecom and Vodafone in lieu of the proposed regulatory change.

On 4 August 2010 the Minister for Communications and Information Technology, Steven Joyce, announced that he had accepted the Commission’s recommendation to amend the Telecommunications Act 2001 to allow the regulation of mobile termination access services.
The mobile termination access services were added to Schedule 1 of the Act as a result of the Telecommunications (Mobile Termination Access Services) Order 2010, which came into effect on 24 September 2010.

Subpart 2A of Part 2 of the Act specifies the process the Commission is required to follow in making a standard terms determination, which sets the terms on which a designated access or specified service must be supplied with reference to all access seekers and access providers of the service.

The process for the MTAS standard terms determination commenced on 28 September 2010, and has included submissions from industry and a Conference held on 15 and 16 March 2011.

ENDS

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