Mobile termination rates

October 5th, 2009 at 12:00 pm by David Farrar

As usual, Chris Keall has the best summary of what the offers are on mobile termination rates:

proposal
Voice calls: immediate halving of MTR on voice calls from 14 cents to 7.5 cents. Glide path to 3.8 cents by 2015.
Txt: immediate cut from 10 cents to 3.8 cents. Further cuts to 0.5 cents by 2015.


Voice: Looking to head off regulation with offer to cut MTR on voice calls to 12 cents per minute from April 2010, with glide path down to 73 cents a minute by 2015.
Txt: 1.2 cents from April 2010.


Voice: cut to 12 cents per minute from January 2010. Glide path down to 7 cents per minute by 2015.
Txt: no offer
Expresses support for bill-and-keep, an alternative to MTR that sees the a phone company whose network initiates a call pay all costs.

2degrees
Wants MTR scrapped on all voice calls and txt. Prefers bill-and-keep model (initiating caller’s telco pays all cost). If that’s not possible favours immediate drop to 6.54 cents per minute for voice, falling to 3.45 cents by 2015.

So let us look at voice calls first. In 2010 the rate would be 7.5c under the Commerce Commission proposal, 12c offered by Vodafone, and 12c offered by Telecom.

By 2015, the rate would be 3.8c under the Commerce Commission proposal, 73c offered by Vodafone, and 7c offered by Telecom.

For text messages in 2010 the rate would be 3.8c under the Commerce Commission proposal, 1.2c offered by Vodafone, and 10c offered by Telecom.

By 2015, the rate would be 0.5c under the Commerce Commission proposal, 1.2c offered by Vodafone, and 10c offered by Telecom.

It is good to see Vodafone offering a more tempting package, with the huge drop in termination rates for text messages.

Also interesting to note:

Telecom’s numbers are close to those of its previous submission. More noteably, the telco has also expressed support for bill-and-keep – an alternative to MTR in the US and elsewhere that sees the phone company that initiates a call paying all costs.

I don’t think that is explained right. With bill and keep there is effectively a zero interconnect fee or termination rate. It is pleasing to see Telecom moot that. I think it is a superior model.

Think how retarded the Internet would be if ISPs charged each other 10c an e-mail?

Also pleasing has been that the Minister has ruled out any last minute negotiations with telcos on the proposed regulation. Trevor Mallard fell into this trap of privately negotiating a deal. has said that any commercial offers have to go to the Commerce Commission, not him. And then once the Commerce Commission makes a recommendation, he will either accept it or not accept it – but won’t get into a game of considering ever increasing (or decreasing) commercial offers every few days.

It will be interesting to see what the final Commerce Commission recommendation will be.

Note that my company has done some market research for Exceltium Ltd on the issue of mobile termination rates, but all views are my own.

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10 Responses to “Mobile termination rates”

  1. Graeme Edgeler (2,972 comments) says:

    Think how retarded the Internet would be if ISPs charged each other 10c an e-mail?

    Yes … but think how much less spam there would be!

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  2. anonymouse (705 comments) says:

    I am not sure of any regime that is using “Bill and Keep” behind the scenes, without charging users for receiving calls. This would be a *big* step to go to in NZ.

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  3. scanner (340 comments) says:

    The six million dollar question is in two parts

    1. Would this have become an issue were it not for the emergence of 2 degrees in the market?
    2. How long will 2 degrees actually exist before we see a repeat of the Challege Oil scenario.

    One must ask if 2 degrees was actually set up to be sold to either of the big players at day one, then we return to our nice cozy (charge what you like) market.
    If we had a teleco watchdog with some teeth they would order the reduction of the MTR to zero, the only reason we know what is going on is that Telecom are forced to declare their profits, so we must assume Voda’s to be not far away from the same.
    Yet another rort paid for by muggins the consumer.

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  4. KiwiGreg (3,278 comments) says:

    Cartels FTW

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  5. MikeNZ (3,233 comments) says:

    The bastards (bad language!) are rorting us, lets screw em into the ground.
    3c by the end of this year in time for Christmas!

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  6. MikeNZ (3,233 comments) says:

    good point Graeme

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  7. Repton (769 comments) says:

    If Vodafone are offering the better deal, does that mean Telecom will be the winner (assuming it goes ahead that way)?

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  8. PaulL (5,449 comments) says:

    I’m interested in how bill and keep would work.

    On the internet, for the average home consumer, there is very little volume of upload and a lot of download. Hence asynchronous bit of ADSL. When you send a request to someone, say Google, it looks for the shortest path to Google, then follows their network to their servers. The response looks for the shortest path to your ISP, then follows your ISP’s network back. For most ISP’s this means it hits their network somewhere in the US, and they pay for the backhaul to NZ. So it is in one sense logical that ISPs would do something similar to bill and keep, as most of the cost accrues to the ISP that has the customer on their network. Pricing is very different for business type plans, where they are doing a lot of uploads.

    I’m not sure how this correlates to Telcos. The calling network probably has only half the cost at most, so bill and keep would presumably be a really good deal if your customers make lots of phone calls but receive few. If we think text messages it becomes a bit more clear – imagine someone sending bulk txt messages from a low cost provider. Most of the cost of delivery probably hits the recipient’s network. Bill and keep wouldn’t work very well here unless the recipient pays for receiving text messages. Buggered if I’ll be paying for receiving spam though.

    Not convinced, I like the Commerce Commission’s proposal most. But I think it should have a provision for review in, say, 2012. Pricing or technology might move way more than we know about today, so locking in that glide path seems a silly idea so far out.

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  9. libertyscott (344 comments) says:

    22 years ago there was one mobile operator, 16 years ago a second came along, moaned about how the government didn’t regulate to allow it to compete, was told to compete, had a fit of pique and sold up, and the new owner introduced prepay, SMS and the market changed, dramatically. All without the state setting prices.

    Now they run to the state to get approval, even though two operators both share the market between them with equivalent market power.

    What’s to stop a third operator setting up a duplicate network from scratch? Why shouldn’t this all be up to the companies that have poured a fortune into providing services that people want so much? Why should producers have to get permission from the state?

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