By far the most terrifying blog you will ever read

“Former United States Vice President and Nobel Prize winner Al Gore is the inventor of the internet and global warming. He is a world-renowned expert on a whole host of issues, including technology, communications, nuclear disarmament, the environment, economics and the electoral college system.”

Oh yes, we so can. And don’t forget about S92a of the new Copyright Act on our election day either.

An Inconvenient Blog

Terminate MTRs!

We’re revisiting ye olde mobile termination rates issue, and TUANZ is sighing deeply. The MTRs as they’re known are what telcos charge one another for calls landing on their networks. MTRs work as a floor below which retail rates cannot drop.

If MTRs are high, well, retail rates which is what you and I pay, remain high too.

TUANZ has been up in arms about the high MTRs for a while. Ernie Newman says TUANZ asked the Commerce Commission in June 2003 to investigate New Zealand MTRs that are, he says, many times higher than in other countries.

The actual cost of landing calls is estimated to be somewhere in the five to six cents a minute region, whereas in 2005, MTRs in New Zealand were around 27 c/minute, dropping to 20c/minute in 2007. That year, the Australian telco regulator dropped MTRs to 10c/minute.

Over the next five years, the Commerce Commission investigated MTRs twice and said yes, they need to be regulated as they’re too high by any measure and way above cost. However, in April last year, Trevor Mallard rejected the Commerce Commission’s recommendations, in favour of a deal that Newman slammed as “an extremely poor one”.

Under the deal, Vodafone would drop its MTRs to 14.4c/minute by 2012 and Telecom to 12c/minute by the same time. Apparently, what swayed Mallard were promises that the telcos would pass on the savings to customers, whereas if the MTRs were to be regulated, such a thing wouldn’t happen.

That’s pretty hard to fathom, until you consider that at the time, the mobile market was quite different with two operators only and no sign of other players appearing. Now however there is one MVNO and goodness me, NZ Communications actually building a network — I can verify that there is one, as my phones can pick it up — so does the “no savings if you regulate” threat still apply?

Apparently so, according to Vodafone, which also believes its mothership will tell the local subsidiary to stop investing in New Zealand. And either way, all that lowered MTRs will do is to line Telecom’s pockets. Retail customers will keep on paying through their noses for their mobile minutes.

One curious issue that arose when the Commission investigated MTRs last time was the differentiation between 2G and 3G calls. The telcos appear to have convinced the commission that 3G calls shouldn’t be regulated because it was new tech at the time and needed to be left alone so that investment in it wouldn’t cease. That was probably silly. Everything I’ve seen point to 3G calls being cheaper for telcos, not costlier. If it wasn’t the case, telcos would think twice before they switched over to it and Telecom wouldn’t build a 3.5G HSPA network without a 2G GSM component.

In other words, the cost of 3G calls is most likely even lower than for 2G calls, so MTRs for those should be accordingly lower.

This time around, the Commission will look into not just mobile-to-mobile termination rates but also SMS ones and I hope, fixed-to-mobile charges. If that doesn’t happen, third or fourth entrants will be severely handicapped as they’ll be starting off with low customer numbers who will receive more calls from competitors’ networks than they’ll place to them — and end up paying heaps for the privilege. Meanwhile, customers try to make as few calls as they can, thus obviating the very purpose they got their phones for.

EU commissioners are already on the operators’ cases, and want mobile calling costs to come down by 70% over the next three years. In the EU, Vodafone says lower termination rates will lead to higher handset prices and charges for both incoming and outgoing calls like in the US. While call charges are lower without termination rates, overall costs for customers are higher Vodafone says.

The EU doesn’t agree however, and says that even if Europe moves towards both receiving and calling parties paying, customers will be substantially better off with lower mobile termination rates.

We’ll see, but here’s hoping that this round of MTR investigation won’t drag out for a three or so years, and then have its findings rejected by the government in favour of an ideologically better suitable commercial deal with the operators.

— ComCom to investigate mobile termination

— Mobile giants' £80bn nuisance call

— Mallard blinks on New Zealand termination rates regulation

— Vodafone Media Release on Mobile Termination Rates

Continue reading »