Commission to investigate mobile termination rates

Telecommunications Act: Commission to investigate mobile termination rates

The Commerce Commission today announced it will undertake an investigation into whether or not mobile phone call termination rates should be regulated.

The Commission acted after considering complaints that lack of competition in the mobile termination market means charges for fixed-to-mobile calls in New Zealand are unreasonably high. Telecommunications Commissioner Douglas Webb said the Commission was satisfied that an investigation into regulating mobile termination is justified.

Mobile termination rates are the fees mobile phone companies charge other carriers to terminate calls on their networks, enabling mobile phone users to receive calls from different phone networks. Mobile termination charges are a significant contributor to the retail prices of fixed-to-mobile and mobile-to-mobile calls.

This is the first time that the Commission has looked specifically at the mobile sector under the Telecommunications Act.

"There has been significant expansion and technological change in the mobile telephony industry in recent years, and this is likely to continue," said Mr Webb.

"However, the Commission considers that there are features of the mobile termination market that give rise to concerns about the exercise of market power by mobile carriers.

"In particular, where the calling party (on a fixed or mobile network) and the called party (on a mobile network) are on different networks, the originating network operator has no option but to seek terminating access on the mobile network of the recipient, in order for the call to be completed. In these circumstances, mobile carriers may be able to charge prices for wholesale mobile termination above competitive levels, leading to high retail prices for callers to mobile phones."

The Commission is initiating the investigation under Schedule 3 of the Telecommunications Act. Under Schedule 3, the Commission can undertake an investigation into whether or not a new telecommunications service should be regulated. The Commission will then make a recommendation to the Minister of Communications.

The Commission emphasised that its decision to commence an investigation does not mean that a regulatory outcome is inevitable. The Commission expects to receive submissions from the industry and from user groups. It will hold hearings, and will listen carefully to all views before making a decision.

The Commission will issue a Gazette notice shortly to formally signal the commencement of the investigation under Schedule 3 of the Telecommunications Act 2001.

Background

Telecommunications Act 2001: Part 1 of Schedule 3

Procedure for designated services or specified services (except specified services that are to become designated services)

1. Commission's investigation

(1) The Commission may, on its own initiative or if requested to do so in writing by the Minister, commence an investigation into whether or not Schedule 1 should be altered in any of the ways set out in sections 65 to 67 (the proposed alteration) if:

(a) the Commission is satisfied that there are reasonable grounds for an investigation into the matter; and

(b) in respect of an alteration of a kind set out in section 65, it is not less than 1 year before the expiry of the service.

(2) If an investigation has been requested by the Minister and the requirements set out in subclause (1)(a) and (b) have been met, the Commission must commence the investigation not later than 10 working days after receiving the Minister's written request.

(3) The Commission must give public notice of the commencement of the investigation.

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