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NZ govt needs mobile pricing balls

Even though I like to argue against the consensus, after weighing up the points for and against regulation of mobile termination rates (MTRs), I am for once on the side of those demanding regulation.
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Written by Darren Greenwood on

Even though I like to argue against the consensus, after weighing up the points for and against regulation of mobile termination rates, I am for once on the side of those demanding regulation.

A few weeks back, the New Zealand competition regulator announced a 2-1 split decision against regulating how much one telco charges another to terminate calls on their network.

The Telecommunications Commissioner, Dr Ross Patterson, and one other appointee accepted Voluntary Undertakings from Telecom and New Zealand to lower mobile termination rates as an alternative to regulation, even though the prices in those undertakings did not satisfy many.

Dr Patterson justified his decision by arguing that although there were concerns over competition, a free market would mean better competition and lower prices.

However, campaigns calling for regulation point out the mobile market in New Zealand is distorted thanks to current high termination rates, which is why mobile users will only phone others on their network, or have several simcards, one for each network.

Thus, there are Vodafone towns, Telecom towns, Vodafone schools, and so on, as the costs of ringing or texting another network is much more expensive. It makes overall mobile call charges higher too.

This week, the Telecom Users Association of New Zealand (TUANZ) sent out a booklet explaining how termination rates were used to subsidise the cost of handsets, but were also now "a slush fund" for mobile operators, as well as a barrier to competition.

This was why New Zealand for years had just two networks, TUANZ argued, with third operator 2 Degrees only entered the market expecting termination rate barriers to drop significantly. Now, 2 Degrees says =http: www.nzherald.co.nz="" connect="" news="" article.cfm?c_id="1501833&objectid=10631263" "="" target="_blank">its investment plans are threatened if there is no regulation.

Certainly such a loss of income will impact on investment from the current duopolists, but on balance we have 2 Degrees to think about too. Despite moaning about investment in one breath, 2 Degrees ""="" target="_blank" rel="noopener noreferrer nofollow">slashed phone charges charges again last week. Competition is certainly good.

The final decision from ICT Minister Steven Joyce is likely "in due course", his spokeswoman tells me, though someone else suggested April. Like me, I guess Minister Joyce will weigh up the pros and the cons and set aside preconceived beliefs and ideologies.

Sometimes a stick needs to be used now and then. Think about how much Vodafone and Telecom improved their Voluntary Undertakings already after the threat of regulation. The real thing could signal a pricing revolution.

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