9 Feb 2011

Phone companies respond to terminaton rate proposal

8:47 am on 9 February 2011

Vodafone says fixed line operators like Telecom stand to pocket the gains from slashing the cost of switching phone calls between networks, not consumers.

The UK-based mobile phone giant says the Commerce Commission should modify its plan to slash mobile termination rates to boost competition and lower the price to users.

In an initial draft, the regulator recommended cutting rates from 17 cents to 4.7 cents a minute by April, with further reductions to 3.9 cents by 2014.

It said the text termination rate should be eliminated.

However Vodafone argues that Telecom and TelstraClear will benefit at the expense of mobile operators, saying the sector stands to lose up to $290 million in revenue, while the reduction may not be passed on to consumers.

The company is instead promoting a gentler approach and a higher end price.

Vodafone proposes mobile to mobile calls being cut to 7.4 cents by 2012 and to 5.3 cents by 2016.

The text termination rate would fall and stay at one cent from 2012.

Vodafone also favours reducing fixed to mobile termination rates more gradually, in line with what happens overseas, with the Commission checking regularly to ensure the reductions are passed on to users.

Telecom's submission questioned the Commission's calculations and argued at least a one step process in bringing down prices to a low point of 5.2 cents.

Meanwhile Two Degrees agrees with the Commission's preliminary findings but wants the regulators to do more to stop phone companies charging different retail prices based on which network is being called.

A final decision from the Commission is expected in March.