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Commission’s MTR Report: No Benefit To New Zealand

Media Release

1 May, 2006

Commission’s MTR Report: No Benefit To New Zealand

Vodafone New Zealand says the Commerce Commission’s Final Mobile Termination Rates (MTR) Reconsideration Report released today does nothing to deliver real benefits to New Zealanders.

Vodafone CFO David Sullivan said today the report on MTRS – the wholesale fees mobile operators charge fixed providers to terminate calls on their networks - had moved on little since the last draft, and in fact, presented a weakened case for regulation.

"The net public benefit stated by the Commission of between -$5m and $5m is based on fixed line operators voluntarily passing through MTR savings to landline users. There is no regulated enforcement of the “pass through” feature so achieving any real cost savings for landline users relies wholely on the goodwill of fixed line operators,” said Sullivan.

“Alternatively, Telecom’s commercial solution promises 100% “pass through” which would secure a better outcome for everyone. We question how the government can accept the case for regulation when the Commission’s case falls away if “pass through” does not occur?"

Communications Minister David Cunliffe had asked the Commission to deliver a solution to the “pass through” issue. Sullivan says the Commission has failed to do this, leaving the case for regulation flawed and extremely weak.

In its Report, the Commission says it expects Vodafone to raise retail mobile prices by around 2% to recover lost revenue.

“The Commission itself has acknowledged that mobile prices will go up by an average of $9.61 each year over the next five years, and predicts that 18,567 Kiwis will stop using their mobiles altogether over the same period– that’s equivalent to everyone in the town of Levin,” Sullivan said. (Source – Commerce Commission’s ‘Waterbed Effect’ linear.)

Sullivan says Vodafone wants to continue to work with the government to find viable alternatives which would provide a more certain outcome for operators and consumers.

The regulation on the table from the Commerce Commission has a number of shortcomings which are open to challenge. Sullivan said the commercial solution between the government, Vodafone and Telecom could remedy many of the shortcomings of the regulated approach, and that the government has an opportunity to support mobile operators to continue investing in networks and new technologies.

“Mobile technology is key to New Zealand’s growth and productivity. New Zealand cannot afford to be constrained by unnecessary and poor quality regulation when there are quicker, and far more certain commercial alternatives.”


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