Drop the Rate, Mate
August 11th, 2009 at 11:24 pm by David FarrarCuria did some polling for the Drop the Rate, Mate campaign, and the full results of the polling are on curiablog.
The eight organisations behind the campaign are not ones you would normally see agree on much. You have Federated Farmers and the Unite Union. You have the Consumers Institute and the Federation of Maori Authorities. You have NZUSA and TUANZ, plus the new mobile carrier 2degrees and Airnet.
They are calling on the Government to accept the recommendation of the Commerce Commission and reduce the termination rates telcos charge each other as these rates keep competition out, and keep costs higher. You can sign the online petition on the campaign website.
The Commerce Commission previously recommended the rates be lowered speedily by regulation, but Trevor Mallard on behalf of the then Labour Government rejected doing this, in favour of a deal with the two big telcos for smaller slower voluntary reductions (with a guarantee the reduction in the wholesale fee would be reflected in their retail fees). The Commerce Commission has concluded these did not go far enough and has recommended more dramatic drops. It is thought the current termination rate for a text message is around ten times greater than the actual cost of receiving a text message and passing it onto a phone.
I’m not surprised to see NZUSA supporting the campaign, as I found out first hand what a hot issue this is for both secondary and tertiary students. We had a couple of focus groups with students aged from around 16 to 24 and I was astonished by how passionate they were about their dislike of the current billing arrangements caused by the high termination rates.
Many said that their choice of mobile phone provider has nothing to do with personal choice, but totally dependent on who all their friends are with. Hence in Wellington most students are Telecom and in Auckland most are Vodafone. Again many of them simply will not text (or call) someone on a different network due to the cost.
I sometimes wonder what a mess we would have if ISPs charged a termination rate for e-mails. Imagine having to pay 7c to e-mail someone on a different ISP. You’d end up with only a couple of ISPs probably as no-one would want to send e-mail to people at a different ISP. This might explain why up until recently we have had only two mobile phone providers but many dozens of Internet service providers!
Related posts:
- Mobile rates to come down
- Vodafone on Mobile Termination Rate Undertakings
- Mobile termination rates
- The spam red herring
August 11th, 2009 at 11:43 pm
Lowering termination rates will also lower the GST take… ergo governments have not be keen to go down that path. Same situation as electricity, petrol etc.
Vote:August 12th, 2009 at 12:20 am
If the Commerce Commission recommends regulation, then assume that’s the opposite of what is needed. The Commission is among the least competent public bodies in my experience. They are simply inept in all matters related to economics. In fact not only do they lack any competence at all in economics, they are not interested in finding out. They are an activist organisation dedicated to expanding their own capricious power at the expense of competition and long run consumer welfare.
Yes, New Zealand mobile rates are high, but having the Commission come in and lump bad regulation built on the Commission’s faulty understanding of the mobile market (hint to Commission: its 2 sided, so perfect competition the wrong yardstick) will add nothing and destroy plenty.
The Commission’s inept activism in the last 10 years has made it more profitable to invest in lawyers and lobbying than it has been to invest in infrastructure. The Commission is part of the reason mobile’s third competitotr took so long to arrive. New Zealand would be better off without such an intellectually bankrupt public body. They have no understanding of even the most basic economics, which makes their power dangerous.
Vote:August 12th, 2009 at 1:10 am
The termination charges for texts are currently arounf 10 cents per text. For phone calls about 15 cents per minute. Voda can charge $10 for 1000 texts or 1 cent per text. The termination charges are 20 x for other networks what they retail charge their own customers. This is protectionism that Muldoon would would have been proud of. The Commerce Commission must and without hesitation eliminate all termination charges. Only by doing this will NZ come into the 21 century.
Vote:August 12th, 2009 at 6:39 am
“ben” must be one of those paid blog commentators that Vodafone and Telecom pay to post comments all day on the internet – nice work if you can get it!
My nephew is talking about getting a third phone now that 2degrees if here, to add to his Vodafone and Telecom phones. “ben” should tell us why a 14 year old thinks that’s a good idea
Vote:August 12th, 2009 at 7:13 am
Perhaps Ben and the other paid Vodafone and Telecom commentators could also play the Gay card as a line of defense.
Vote:These two companies are the best examples of Price gouging verging on theft
August 12th, 2009 at 7:26 am
Ben, are you retarded? The reason there has been no move from the commerce commission et al is that VF and TC have spend hundreds of millions of dollars to stop any change, and preventing competition.
Vote:August 12th, 2009 at 8:04 am
Interesting combination. Elements of the National Party, Iwi, and trade unions banding together to take on the telcos that have gouged the NZ population for years.
Well done! Keep it up!
Vote:August 12th, 2009 at 8:18 am
Nope, I’m not paid by Telecom or Vodafone. What I know is that mobile comms is a 2 sided market. If you cap termination then these companies, being profit maximisers (anybody want to disagree with me on that?) will raise charges elsewhere. Regulating termination acts as a sort of collusion device in this type of market. The Commission remains ignorant on this point, to the detriment of consumers.
I am not defending TC or VF at all. It is plainly very very expensive to own a mobile in NZ. My point is that lumping bad regulation on top of an uncompetitive market just gives you a badly regulated uncompetitive market. What is the point of capping one type of charge if that is going to force up charges elsewhere, particularly if those other charges make it (even) harder to own a mobile by raising handset prices and monthly fixed fees? That is what will happen in a 2 sided market. This is something the Commerce Commission still does not understand.
Vote:August 12th, 2009 at 8:26 am
The current NZ market “encourages” people to buy two and may now three separate phones. That must only be good for sales.
And – something is very distorted in the “free” market when it costs more for a business call next door than to make a call to the other side of the world.
Vote:August 12th, 2009 at 8:26 am
Ben , you’re a fool.
Don’t you realise that vodafone and telecom are conspiring to keep prices high through the interconnect rates?
The interconnect rate is an amount which vodafone and telecom have agreed to charge each other for cross-customer network access. This is a form of market price manipulation, and it needs to be stomped.
Unless, you would like a fragmented telco environment where you cannot make calls to people on other networks?
Vote:August 12th, 2009 at 8:30 am
Well said Wreck.
Ben, for someone “not paid by Telecom or Vodafone” you certainly seem pretty swayed by their spin that dropping termination rates will force them to up their prices elsewhere. These clowns are reaming us.
Maybe you’re paid by Voda/Telc not to say that you’re paid by them…
Vote:August 12th, 2009 at 9:24 am
Ben, you are obviously retarded or paid by an industry body.
” If you cap termination then these companies, being profit maximisers (anybody want to disagree with me on that?) will raise charges elsewhere.”
Bullshit, TC and VF use this tactic to artificially set ‘market rates’ on calls and texts – in other countries its called racketeering or gouging.
VF and TC have spent hundreds of millions to avoid regulation in this area because it has made them both billions in revenue.
Who was that dumbarse Labour Minister who let them off the hook around 2006?
Vote:August 12th, 2009 at 9:59 am
If 2degrees wants lower prices, they should build their own network and offer them. Not ask the government to regulate.
Enough of this commie crap. Give us competition!
[DPF: They have built their own network. The termination fees work against competition by charging a huge fee to merely receive a text message and pass it on. As I said think if ISPs acted in this way - you would only be e-mailing people on your own ISP]
Vote:August 12th, 2009 at 1:45 pm
wreck1080, indie, expat, thanks for the personal attacks and all the quality thinking. I don’t think a single thing any of you said in reply has anything to do with my post. Well done.
Vote:August 12th, 2009 at 2:03 pm
Partly true as I understand it. They have built a network which gives them partial coverage (think it’s to 10% of NZ’s population) which then entitles them to mandated roaming on Vodafone network and Telecom’s XT network. They have to have shown a plan to complete their own national network within a certain time, several years if I recall. VF and TCNZ have some right to feel aggrieved that their investment in infrastructure is being leveraged to provide competition and therefore lower the return on that investment.
Vote:August 12th, 2009 at 4:31 pm
2degrees has built extensive and solid networks in Auckland, Wellington and Christchurch regions (is this close to 50% of the population?). Hopefully they will extend their network and provide their own coverage throughout NZ in time. In the meantime the consumer remains the winner because they seamlessly roam onto other networks when out of the range of the 2degrees network – at no additional cost to the consumer. The rort is in the interconnection / termination charges that Telecom and Vodafone use to make it as difficult as possible for additional entrants into the market. The Commerce Commission must sort this out to ensure a level playing field for all operators.
Vote:August 12th, 2009 at 9:44 pm
Woo hoo
Cerium and I both won a karma count for possibly the first time ever for both of us …
What can this mean?
Vote:August 12th, 2009 at 11:25 pm
Perhaps Ben would like to comment on the fact that Vodafone NZ paid a special dividend to its parent company of $500 million in 2006 and $742 million in 2008! And the fact that virtually every other Western country has regulated mobile termination rates!
Vote:August 13th, 2009 at 12:54 am
Ben, you are correct, apologies.
Vote:August 14th, 2009 at 11:31 pm
Mobile prices in NZ are among the cheapest in the world according to the OECD. Most countries around the world allow mobile networks to charge termination rates. Currently NZ termination rates are about middle of the pack compared to most European countries – according to European Regulators. Ben is right mobile is a two-sided market. Even the NZ Commerce Commission agrees that retail prices for mobile calls will go up – not down – if termination rates are regulated down. The debate is over by how much. In countries such as the USA where they have a different charging scheme for mobile and either no or very low termination rates the mobile companies recoup their revenue by charging higher prices for calls. That’s why the USA has one of the worst records in the OECD for mobile retail prices. Oh, and consumers have to pay to receive calls! So, while 2 degrees and its American owners might like no termination costs to build their private business I don’t think consumers would really like the idea of higher prices that result from lower termination charges – or of having to pay for calls made to them by telemarketers on a Sunday night!
Readers might also ponder the fact that the Crown in 2007 agreed a five year Deed of Understanding with Telecom and Vodafone under which the companies reduced termination changes and passed on all the savings in retail prices for fixed to mobile calls to consumers. If you believe governments should honour their commitments and that property rights are worth having then why not honour the Deed?
Vote:January 17th, 2010 at 3:38 am
Well centreforward, I don’t know where you get your figures from, but I can tell you, currently living in UK and on a Prepay/Pay As You Go type scheme, I was shocked on a recent trip back home to NZ using my NZ sim card, at the amount I spent on calls over there. Way in excess of what I would pay here. I managed to spend $85 in 2 days over there. Extortionate.
89c per minute is way more than I am paying here no matter how you compare the exchange rate. My rate is 20p per minute (current exhange rate around 40c pm or at it’s worst rate 60c per minute) and that’s to ANY network or landline. Take a look at this you will see the rates as quoted for Virgin Media which is the network I am with.
http://www.virginmobile.com/vm/genericContent.do?contentId=payasyougo.our.tariff.shop.sm285
THe other thing that Kiwis are being ripped off with is broadband. Again over her in the UK (and I know in the USA) there are NO caps on data. My current broadband speed is the lowest that Virgin Media does at 10MB speed and no caps. If I returned to NZ to live that is one thing I would really miss. Oh and that I get for £10 ($30) per month.
Think on New Zealand.
Vote:January 18th, 2010 at 2:41 am
Oh, by the way, we do NOT get charged here for receiving a call either. Everyone uses mobiles for all sorts of things and not once have I ever detected extra charges on my bill for receiving a call – from anywhere!!
Vote:That is something that has always bugged me when mobile phone technology first got established in NZ.
If someone chooses to phone me from a mobile phone why the h*ll should I be charged for their convenience. Not my problem, mate. It’s the caller’s.