Vodafone is warning consumers there is no guarantee the price of cellphone-to-cellphone calls will drop despite the Commerce Commission's recommending a slashing of wholesale rates.
Speaking from Auckland, Vodafone public policy general manager Hayden Glass said the commission's recommendation to drop the termination rate from about 14c per minute now to 4.68c per minute on April 1 would inflict major damage on the revenue of mobile network companies.
"Taking 10% revenue out of the sector next year will flow on to less investment in mobile. The impact on retail prices for the consumer is unclear.
"If you are not going to get clear benefits to the consumer, you might want to think about the obvious damage you are causing without defined benefits."
Vodafone favoured a "glide path" for the implementation of lower rates, he said, recommending the time be used to make the first cut and see if any benefits emerged.
If the commission and the industry were comfortable benefits were there for consumers, the cuts could continue, Mr Glass said.
Craigs Investment Partners broker Chris Timms said there was no incentive for Vodafone or Telecom to drop their retail prices if the commission continued with its plan to slash rates, as it was basically a revenue swap between the two major companies.
"However, competition will force them to drop rates as disruptive offers enter the market at reduced prices and the main telcos are forced to follow suit."
Craigs saw the cuts as positive for Telecom in the short term, as Vodafone was a net payer of termination fees to Telecom.
But in the longer term the decision would be negative for both companies, he said.
Cellphone-to-cellphone calls were between 22c and 30c a minute now.
Taking the wholesale price down from 14c to 4.68c would allow competitors such as 2degrees and CallPlus to drop their rates substantially to reflect the changes, Mr Timms said.
The Telecommunications Association of New Zealand (Tuanz) immediately called for the price of calling mobiles to drop by 9c or 10c a minute.
For text, the commission adopted a bill-and-keep approach, under which networks would terminate calls from other networks at no charge.
That recognised the cost of terminating text was low and intercarrier traffic was fairly balanced, the commission said.
Telecommunications Commissioner Ross Patterson said the reduction in voice-call prices was justified because of unique market conditions in this country.
It was necessary to remove a significant, long-standing and growing barrier to efficient expansion by a small mobile network operator.
"The removal of this barrier will promote vigorous competition for the long-term benefit of consumers," Dr Patterson said.
Tuanz chairman Pat O'Connell said the proposed regulated rates would put this country in line with the best in the world.
A rate drop from about 14c per minute to 4c per minute represented a significant fall in costs for phone companies, and Tuanz called on the telcos to pledge their support for pass-through of those savings of at least 90% or more, Mr O'Connell said.
Tuanz would like to see the price of calling a cellphone drop by 9c or 10c a minute across the board.
"If this regulation simply leads to increased margins for some of the telcos, to phone companies pocketing the savings and consumers seeing no benefit, then we will be asking the commission to look at retail price controls for the sector."
The main concern for Tuanz from the commission's proposals related to text spam.
The pure bill and keep model for text could lead to an increase in text spam, Mr O'Connell said.
The commission had excluded texts originating from overseas from its ruling, allowing telcos to continue managing text spam sent from another country, but there was no scope for blocking New Zealand-based text spam.
The commission is seeking submissions and cross-submissions on its proposals.
After submissions, it will hold a conference with interested parties before releasing a final determination, expected in March.
Mr Glass saw the process as another step in what had already been a long process.
New Zealand was not alone in that.
Other countries had been looking at the same issue for many years.
Pricing plan
- Commerce Commission wants wholesale price for mobile voice calls slashed from 14c per minute to 4.68c.
- Prices to consumers could drop by up to 10c a minute for calls.
- Zero charge recommended for terminating text charges between networks.
- Final determination to be delivered in March 2011.
