Regulation must serve the customer

Media Release

26 March 2009

Cutting mobile termination rates does not equal savings for customers
 
Regulation must serve the customer

While the Commerce Commission is calling for a massive reduction in mobile termination rates the Australian Competition and Consumer Commission (ACCC) has stopped reducing MTRs partly because savings are not being passed on to customers[i].

The Australian experience has been that the incumbent fixed line operator, Telstra, has only passed on 25% of the reduction in MTRs to consumers[ii]. Recently, Telstra has gone so far as to increase the cost of making a residential call from fixed to mobile phones[iii].

In fact, despite MTRs being lower in Australia, the price of making a fixed-to-mobile call is higher than it is in New Zealand[iv].

Vodafone estimates that over three years, Telstra has pocketed around A$715m that should have gone to the customer[v].

In New Zealand we have a Deed of Undertaking that legally requires Telecom and Vodafone to pass on all of the savings to customers. In the first 21 months the Deed was in effect, customers saved $21m and we estimate that over the five years of the Deed customers will save at least $90m[vi]. Unfortunately, the Deed will cease to operate should the Commerce Commission regulate the industry.

If the Commerce Commission is to regulate the industry it must be to the benefit of the customer. Simply taking money from one company and giving it to the other in the hope that customers will somehow benefit just does not work.  This has been the experience in Australia.  We should not repeat their mistake.

The ACCC has said it is looking at the New Zealand model and our Deed of Undertaking and asking whether this approach may be a better way to handle this issue[vii]. Vodafone would ask why the Commerce Commission is so intent on throwing the baby out with the bath water. Ultimately, regulation must benefit the consumer, otherwise what’s the point?

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