Customers need certainty, not wishful thinking

Media Release
17 February 2008

Customers need certainty, not wishful thinking

Another round of regulation of the mobile industry is unnecessary because customers already have a guaranteed saving on calls to mobile phones.

Vodafone and Telecom signed a legally-binding contract with the government ensuring that every penny saved by mobile termination rate reductions would be passed on to customers – something the regulator cannot guarantee.

Vodafone’s general manager of corporate affairs, Tom Chignell, says the Deed ensures customers receive all the savings, unlike the situation in Australia where mobile termination rates have not been fully passed on to customers and instead the fixed line incumbent has pocketed the majority of the savings.

“In the 21 months since we signed our five-year, legally binding contract with the government, customers have saved $21 million. That’s $1 million a month and by the time the Deed expires in 2012 the savings will have reached $90 million, every penny of which goes directly to the people who should receive it– fixed-line customers.”

In the last review of mobile termination rates the Commerce Commission expected a saving of no more than $65 million if the government adopted its recommendation. The government chose the Deed because it guaranteed a greater level of saving and ensured all of it was passed on to the fixed line customers.

Vodafone and Telecom voluntarily signed the Deed in 2007 after a three year investigation into mobile termination rates, and Vodafone questions the need for yet another lengthy regulatory review so soon after the signing of the Deed, especially in light of the regulator’s inability to enforce pass through to customers.

“We signed up to the Deed in good faith with the expectation that it would run for five years and yet here we are, not even half way through the period, undertaking yet another regulatory process when the Deed itself is benefiting customers. We’ve lived up to our end of the agreement – the government should live up to its.”

The Deed ensures that any reduction in termination rates is directly passed through to consumers. Over the five year course of the Deed, fixed to mobile termination rates will drop from 20 cents to 14 cents, with 100% pass through to customers.

“The Commerce Commission is taking a punt on the belief that regulation will lead to lower retail prices. Customers already have a guaranteed saving but the Commission has decided to gamble $90 million of savings on the off chance that it can win more. But as with all lotteries, there is no guarantee of success,” says Chignell.

ENDS

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