Telecom NZ offers reduced mobile termination fees to stave off regulation

Stuart Corner
Wednesday, 29 July 2009 07:32

IT Industry - Strategy

In its revised undertaking Telecom NZ has offered to decrease rates to 15cpm today and to 7cpm by 2015, with six annual incremental reductions. Its offer of a 3.5 cent fee for SMS termination is unchanged.

Vodafone has submitted no new undertaking but has responded massively to the Commission's draft report with a 136 page submission and reports commissioned from Analysys Mason and Covec. The Analysys Mason report accuses the Commission of using product benchmarking analysis that is "simplistic and produces a result that risks being inaccurate," and of making "incorrect use of the European Commission target [MTAS rate] for 2012 when cross-checking the reasonableness of the proposed MTR target for New Zealand."

The quantitative analysis undertaken by Covec, reaches damning conclusions. It says: "There are a number of serious problems with the Commission's analysis. There are errors in the spreadsheet model, and the Commission has made a number of unjustified and incorrect assumptions regarding some of the key parameters. The cumulative effect of these errors is that the Commission significantly overestimates the net economic benefits of regulation."

Covec claims that "In fact, regulation will reduce economic welfare relative to the undertakings that have been provided by Vodafone and Telecom. The Commission's analysis of the effects of regulation on competition in the FTM and retail mobile markets is also deficient. In our view the most likely effect of regulation is that fixed-line firms will be made better off at the expense of end users."

2Degrees, however congratulated the commission on "an excellent report." It claims that the telecoms market in New Zealand is "fundamentally broken" and that "the entrenched incumbents are not competing with each other."