Commerce Commission New Zealand to leave voice and text MTAS regulated

Opportunity still exists for Kiwi telcos to ramp up voice costs, while texts are likely to be re-examined in the coming years.
Written by Chris Duckett, Contributor
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The Commerce Commission New Zealand (ComCom) issued its final decision on whether to deregulate Mobile Termination Access Services (MTAS) on Wednesday, choosing to roll over the current arrangements in place and leave the services regulated.

MTAS is a wholesale service that allows consumers to send and receive calls and messages between different mobile phone network providers. If unregulated, it would allow telcos to charge higher prices for incoming calls and text messages from other providers.

In 2010, ComCom recommended MTAS be regulated with set prices, with a review to happen at least once every five years.

Of particular interest was whether over-the-top (OTT) services were able to be a competitive replacement for voice or text services. ComCom said, however, they were not an effective constraint yet and deregulation would result in higher prices, particularly for voice.

"Our final position is that we consider that OTT services are currently not at this stage an effective constraint against MNOs profitably raising MTAS rates for voice services," the final decision said.

"This is because there is some doubt that enough consumers using mobile calling services would switch to OTT services to constrain MNOs from profitably increasing MTAS rates. In this case, ongoing regulation of MTAS for voice services at this time is likely to benefit consumers by preventing MNOs from passing increases in MTAS rates through to retail prices."

For text messages, with customers being more likely to switch to OTT services, the decision said if a single provider increased prices it would not lead to a large increase in retail prices.

The current MTAS rates are NZ$0.06 per SMS and NZ$0.0356 a minute for calls.

"Most submitters agreed with our draft decision to roll over current arrangements and maintain a regulatory back-stop for mobile termination access services. We are confirming this position in our final decision," ComCom telecommunications commissioner Tristan Gilbertson said.

"However, we will likely look at the text messaging element of this service before our next mandated review in 2025. This is because of early indications that regulation of text messaging may no longer be necessary due to the increasing popularity of over-the-top messaging services like Facebook Messenger and WhatsApp."

ComCom noted that the Australian Competition and Consumer Commission (ACCC) decided in June 2019 to deregulate SMS services.

"When we decided to regulate wholesale SMS termination services in 2014, mobile operators were charging each other significantly above cost for these services, with a flow-on impact for retail SMS prices," ACCC commissioner Cristina Cifuentes said at the time.

"We have found that this need to regulate SMS termination has disappeared over time because of increasing competition from over-the-top services ... and because most mobile plans in the market now offer unlimited SMS."

One area ComCom said it could explore further was the impact on app-to-person service providers that use text messages to reach customers, an area where the ACCC decided there were sufficient alternatives.

"We note that there may be some businesses (for example, GP practices) which may rely on SMS to contact their customers," ComCom said.

"Businesses may not regard alternatives such as OTT services as close substitutes."

The next review is scheduled to be handed down no later than 2 September 2025.

Updated at 4:06pm, 2 October 2020: fixed error regarding MTAS rates for calls.

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