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Commission to investigate mobile termination

Commerce Commission decides to investigate mobile termination

The Commerce Commission today announced it is commencing an investigation into whether mobile termination access services should be regulated.

The investigation, under Schedule 3 of the Telecommunications Act 2001, will look at whether mobile termination access services (incorporating mobile-to-mobile voice termination, fixed-to-mobile voice termination and short-message-service termination) should become regulated services under Schedule 1 of the Act.
This decision follows consultation on an issues paper on mobile termination released by the Commission in August 2008 and a Commission letter sent to the telecommunications industry in May 2008, asking for views on a possible Schedule 3 investigation. The Commission has previously investigated fixed-to-mobile termination services, but after consultation considered that developments in the mobile market required a fresh investigation into mobile termination access services.

Commerce Commission Chair Paula Rebstock said, “The Commission has assessed views in the submissions on the issues paper. Although there was a mixture of views expressed, the Commission considers that there are reasonable grounds to commence an investigation into mobile termination.”

In particular, the Commission considers that there are reasonable grounds for an investigation as the current international benchmarks for cost-based mobile termination rates (MTRs) indicate that the prevailing MTRs in New Zealand are likely to be significantly above the cost of providing the service.

The Commission also considers that there are reasonable grounds for an investigation to consider whether above-cost MTRs represent an entry barrier for new entrants into the mobile market.

Finally the Commission considers that, given the growth of on-net pricing plans in New Zealand over the last two years, there are reasonable grounds to investigate this issue in the context of the investigation into MTRs.

The Commission also considered whether an investigation is appropriate given the recent commercial interconnection agreement between Vodafone and NZC, and Telecom’s reference offer for mobile interconnection. Notwithstanding these commercial developments, the Commission considers that there are reasonable grounds for commencing a Schedule 3 investigation.

The Commission will, however, consider during the Schedule 3 investigation the potential impacts of a decision (if any) to regulate MTAS on the incentives to reach commercial interconnection agreements in the future.

Telecommunications companies that supply mobile termination access services may submit undertakings with the Commission. Ms Rebstock said, “Any party proposing to lodge an undertaking, as a proposed alternative to regulation, is required to do so by 12 January 2009. If no undertakings are lodged, the Commission expects to issue a draft report on this matter in February 2009.”

In addition to this investigation, the Commission is also currently considering whether there are reasonable grounds to commence an investigation under Schedule 3 into the whether the national mobile roaming service should be subject to price regulation under Schedule 1 of the Act.

“These processes reflect the priority that the Commission places on the mobile market, along with the broadband market, and the potential for benefits to consumers from increased competition. Our recent monitoring has shown improvements in telecommunications services as a result of increased competition, and we look forward to seeing similar improvements in the mobile market,” said Ms Rebstock.

The Commission’s reasons for being satisfied that there are reasonable grounds for commencing the mobile termination investigation, the issues paper and submissions are available on the Commission’s website under IndustryRegulation/Telecommunications/ Investigations/Mobile to Mobile Termination/mobile to mobile termination
Mobile termination access services are the terms and conditions under which mobile phone companies terminate calls and text messages from other networks on their networks, enabling mobile phone users to receive calls and text messages from different phone networks. A key condition is the mobile termination charges, or price charged for the termination of calls and text messages. Mobile termination charges are a significant contributor to the retail prices of calls and text messages to mobile phones.

Schedule 3 of the Telecommunications Act. Under Schedule 3, the Commission can commence an investigation into whether or not a new telecommunications service should be regulated ie included in the list of regulated services in Schedule 1. The Commission then makes a recommendation based on its investigation to the Minister of Communications and Information Technology.

A regulated service under Schedule 1 of the Telecommunications Act can be either a designated service, where the terms and conditions including price of the service can be set by the Commission, or a specified service, where the Commission can set non-price terms and conditions only.

An undertaking under Schedule 3A of the Telecommunications Act is an alternative to a proposed regulatory change where an access provider commits to terms and conditions under which they will supply a service to all access seekers.


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