New Zealand to look into regulating termination fees

AUCKLAND – The Commerce Commission is commencing an investigation into whether mobile termination services should be regulated.

The decision follows consultation on an issues paper on mobile termination released by the Commission in August. The Commission says after consultation it considered developments in the mobile market required a fresh investigation into termination.

Mobile termination access services are the terms under which mobile phone companies terminate calls and text messages from other networks on their networks. Mobile termination charges are a significant contributor to the retail prices of calls and text messages to mobiles.

“The Commission has assessed views in the submissions on the issues paper. Although there was a mixture of views expressed, the Commission considers that there are reasonable grounds to commence an investigation into mobile termination,” Commerce Commission chair Paula Rebstock says. The Commission says current international benchmarks for mobile termination rates (MTRs) indicate MTRs in New Zealand are likely to be significantly above the cost of providing the service. These could present a barrier to entry for new mobile entrants.

It also considers an investigation is warranted because of the growth of on-net pricing plans in New Zealand over the last two years. One of these entrants, NZ Communications, welcomed the investigation.

“New Zealanders, in particular, suffer some of the highest mobile tariffs in the OECD, the lowest levels of industry competition and some of the lowest mobile usage levels as a result,” said Bill McCabe, NZ Communications’s regulatory manager. “NZ Communications considers that regulation is absolutely necessary to facilitate competition and we encourage the Commerce Commission to reach conclusion on the matter in as short a time as possible.”

User association TUANZ called on the government to support its regulator “this time round”, reminding that the termination issue has been traversed before.

“TUANZ is utterly frustrated at the time this issue has been around, the discord on this matter between the Commission and the government, and the consequent excessive cost passed onto business and residential users over many years,” says TUANZ CEO Ernie Newman. Since 2003, he says, the Commission has twice investigated the matter, and both times made recommendations in favour of regulation.

“Yet in April 2007 the government chose to reject the advice of its own specialist regulator developed through an open and transparent investigation, and instead made a deal with the mobile phone companies behind closed doors,” Newman says. “This gave the companies five years — nine years from our initial complaint — to reduce the rates to a level that regulators around the world had calculated should apply already at that time.”

In addition to this investigation, the Commission is also considering whether there are reasonable grounds to commence an investigation into national mobile roaming services.

The move comes as the European Union plans to cut termination fees.

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