UPDATED 2.30pm: Commission Commission also promises monthly reviews to monitor pricing of Best Mates-style on-plans, which escape regulation - but drops strong hints of price controls if it doesn't see movement.
UPDATE 2.30pm: The Commerce Commission has revealed its decision on mobile termination rates – the cost of carrying a text or call on another network.
Termination rates for cellphone calls will drop by 10 cents a minute to less than 4 cents by 1 April 2012, with further reductions until 2014.
It's a slowboat timetable that will disappoint those who had been hoping for a 10 cent cut straight off the bat (to around 4.6 cents)
Termination rates for text messages will drop to 0.06 cents from 6 May 2011 (the nominal charge is to deter spam).
Vodafone said the commission had taken an "extreme position", claiming the watchdog had priced MTR below cost. General manager of corporate affairs Tom Chignell told NBR his company was likely to seek a review, and was considering its options - including a judicial appeal.
Cellphone call MTR rates (current rate is around* 15 cents a minute)
May 6, 2011: 7.48 cents/minute
Oct 2, 2011: 5.88 cents/minute
April 1, 2012: 3.97 cents/minute
April 1, 2013: 3.72 cents/minute
April 1, 2014: 3.56 cents/minute
Telecommunications users association chief executive Paul Brislen told NBR, "I think the timetable is fine. Internationally, glide paths of three or four years aren't uncommon - this is quite a short sharp glide path and we support that."
Lower phone bills on the way?
The cuts "will flow through to the prices paid by the 4.7 million mobile subscribers in New Zealand in the coming year, said Telecommunications Commissioner Ross Pattterson.
The watchdog promised monthly market reports to monitor if the cuts were being passed on to customers, or being pocketed by telcos (as happened with similar regulation in Australia).
Some customers have an expectation of lower phone bills.
Yeehaa on hold
Automobile Association CIO Doug Wilson greated this morning's decision with a "yee ha".
Mr Wilson told NBR his organisation, with many of its 1000 staff in the field, has high mobile phone costs, and many of its members call the AA's 0800 number from mobiles.
Yet 2degrees, one of the biggest advocates for regulation, maintains that anticipated MTR cuts are already "priced in" to its plans. Today's announcement will only serve to prevent price increases.
And if the newcomer doesn't cut its retail rates, Telecom and Vodafone will have little immediate commercial incentive.
On-net regulation may be on the way
The commission did not extend its decision to cover so-called on-net deals such as Vodafone's Best Mates and Telecom's Favourites, as the two big telcos had feared last week (when the decision was originally due).
But Dr Patterson did this morning reiterate the themes of the commission's recent annual report, which highlighted that New Zealanders text more, and talk a lot less, than mobile phone users in most other countries - which the commissioner attributed to on-net pricing, which offers steep discounts for calling people on the same network.
2degrees maintains that Telecom and Vodafone use on-net plans in concert with MRT to put the squeeze on new competitors.
"We continue to be concerned about the extent to which the price of calls and text messages between people on different networks are significantly higher than calls and text messages between people on the same network. These price differences create significant barriers for the new entry and growth of small mobile operators in the mobile market,” Dr Patterson said.
While the commission expects reduction in wholesale termination rates for calls and text messages to resolve this problem, it will be monitoring this situation closely, including publishing monthly reports, and is prepared to move quickly to limit these price differences if required, the watchdog said (NBR's italics).
Vodafone and to a lesser extent Telecom (whose XT network features many plans with the same rate for on-net or off-net calls) mutter darkly about on-net customers losing their big discounts. Opponents say the price of off-net calls and txts (those to other networks) could be cut.
A chance to play nicely
Tuanz' Paul Brislen said his group believed there was a case for on/net pricing differentials to act as a barrier to competition, and noted that the Commerce Commission expected the differential to "narrow sharply".
"Given the reduction in prices at a wholesale level there's no reason for that not to happen so they're giving the telcos an opportunity to play nicely. If they don't, then the Commission will respond and we would absolutely support that move," Mr Brislen said.
Telecom, 2degrees react
In a statement this morning, Telecom said "in recent weeks we have already dropped our mobile and fixed-to-mobile calling rates."
2degrees chief executive Eric Hertz offered that "Earlier this year we made big cuts to calling costs for our post-paid [contract] customers. There's more to come."
The newcomer was not worried that on-net regulation was only threatened, not enacted. "The commission's decision shows they really get this issue. Although we asked for regulation and believe reduced termination rates alone won't solve the off-net issue, the commission clearly intends to be vigilant on the issue. It's a smart decision," a spokesman told NBR.
Telecom shares (NZX: TEL) were down 0.69% to $2.15 in midday. The broader market was down 0.18%.
RAW DATA: Public version of the commission's decision (PDF)
* Although it's been shy of admitting to it, 2degrees has enjoyed a sweetheart MTR deal with Vodafone.
