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Termination Rates To Be Lower In NZ Than UK

Termination Rates To Be Lower In NZ Than UK If Minister Accepts Commercial Offer

17 October, 2006

Recent research by the UK communications regulator OfCom provides strong support for an industry solution over regulation in order to lower Mobile Termination Rates - the wholesale fees mobile operators charge fixed providers to terminate calls on their network.

In New Zealand the Commerce Commission has proposed regulating Mobile Termination Rates (MTRs) to lower the price of calls from fixed to mobile phones.

Hayden Glass, Vodafone's Regulatory Manager, says Vodafone has led on an industry solution involving a glidepath reduction of MTRs by Vodafone and a commitment by Telecom to pass on 100 per cent of savings from reduced MTRs directly to customers. These savings cannot be guaranteed under the regulated proposal.

The initiative will enable real retail price reductions for fixed calls to mobiles, is fast to implement and offers immediate customer benefit, as opposed to the proposed regulation which will have no impact for at least another nine to 12 months, he says.

Further, independent research by Colmar Brunton shows the public supports an industry solution over government regulation.

Mr Glass says OfCom's research shows the MTR rates offered by Vodafone in the industry's proposed commercial solution are lower in coming years than the UK costs OfCom has calculated.

NZ cents per minute at ComCom Exchange Rates years to 31 March 2006/7 2007/8 2008/9 2009/10 2010/11 Vodafone offer 20.00 17.00 16.00 15.00 14.40 Commission view 15.00 15.00 13.50 13.50 12.00 Ofcom latest 16.05 16.08 16.40 16.42 16.44

"In fact, the UK costs gently rise over time, once adjusted for inflation. The results show the Commerce Commission may have underestimated costs in New Zealand and may be premature in assuming that costs will fall over time.

Mr Glass says OfCom is also the first to publish a mobile termination cost model to include 3G networks. The results question the widely-held view that 3G networks are always lower cost than 2G networks.

"This work indicates that a lot depends on the price of spectrum and on the level of traffic on the network."

"If these are the figures from the UK, which has ten times our traffic, it is hard to see how New Zealand could be lower cost as the Commission claims." John Small from Covec says the OfCom research supports its independent analysis showing Vodafone's reductions will deliver greater benefits to the public than the proposed regulation.

"It clearly shows that the industry solution is a better deal for New Zealanders than the proposed regulated approach and puts us ahead of where the UK is going to be by 2008," he says.

Vodafone has committed to leading New Zealand into the top half of the OECD's mobile pricing benchmarks by 2010.


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