Vodafone responds
April 23rd, 2010 at 4:38 pm by David FarrarVodafone have sent a response to my recent post on their pricing change:
Got a prepay mobile with Vodafone? Give up your landline
Last week we released a new add-on called Talk that lets Vodafone Prepay customers talk for up to 200 minutes a month to landlines or to Vodafone mobiles for $12. We want to encourage our mobile customers to use their voices rather than their fingers, and their mobiles rather than their home phones.
Certainly Talk has got a reaction. A range of parties have expressed a view, including the Minister, the Commerce Commission, TUANZ, 2degrees, and the blogosphere. Even DPF himself has weighed in.
I want to make three points. First, why we are launching Talk. Second, why it is good for competition. And third, what the implications are for the Minister’s decision on mobile termination rates.
Why Talk
Talk is a great deal. In particular, you should buy Talk and give up using your landline. You pay too much for it anyway.
We all know that New Zealand mobile users are very keen on text messaging. New Zealand has amongst the lowest prices and highest usage for text in the world. But the same enthusiasm doesn’t extend to talking.
Our research tells us that three quarters of customers wait till they get home to make a call longer than five minutes. Talk is part of our response, letting customers get on with what they want to do with their mobiles.
This is not the only change we are bringing to prepay this year. Recently we introduced cheap international calling rates for our top destinations, but it began in 2006 with Best Mate TXT2000, $2 for 2 hours off-peak, and the introduction of Family in 2008. There is much more to come.
Competition
2degrees has argued for years that it cannot compete without a laundry list of regulatory concessions. 2degrees has not deviated from this line despite the numerous changes that have been made to accommodate it. But with several hundred thousand customers after just over six months, 2degrees is already one of the most successful new entrants in the world. I see the Commission this morning reported 2degrees’ market share at 4% as at 31 December. Five percent market share in a year would be very good performance. So 4% percent in around six months is remarkable.
The real question is not what our competitors think, but whether they can match or better Talk. Clearly they can, and they will if they think that doing so will gain them an advantage in the market.
Comparison between headline retail rates and mobile termination rates is not helpful. Operators offer lots of different products, some are higher priced, others are lower priced. All three mobile network operators offer products that are cheaper than MTRs. Some examples:
• Telecom offers calls from a Telecom fixed line to a Telecom mobile for sixty minutes for no more than a dollar. If calls are long this could easily generate a very low average price (hat tip: Steve Biddle).
• Vodafone allows unlimited calling between all connections on one business account in return for a monthly fee per connection. Clearly this also generates a very low average price if usage is high.
• 2degrees offers its customers text messaging to any other 2degrees’ customer for 2 cents a text. Under our agreement with 2degrees, we are required to pay more than four times that amount to text a 2degrees customer.
The Commission does have a cross-check between mobile termination rates and retail prices in its final report. It’s not based on the level of any particular retail plan; instead it compares industry average retail on-net mobile prices with mobile termination rates. Talk shouldn’t affect that average.
Decision
The Minister needs to decide what to do with the Commission’s termination rate recommendation. He can send it back to the Commission for more work or accept the undertakings as recommended by the Commission.
Accepting the undertakings means lower mobile prices from October. Voice termination rates would fall from 14.4 cents (already lower than the UK) to just under 10 cents, and then again to just over 8 cents on 1 January with more falls over time. The undertakings cut text prices to zero.
Sending the report back to the Commission for more work means termination rates stay where they are for a longer period.
The Minister’s decision is quite straightforward. His best choice is to take the money on the table now, accept the undertakings and reduce mobile prices from October. If the Commission wants to look further at retail pricing and the relationship with mobile termination rates there is nothing to stop it doing so.
Hayden Glass
Public Policy
Vodafone NZ
We all await the Minister’s decision with interest. In the meantime, the debate will continue!
Related posts:
- 2 Degrees responds to Vodafone
- A possible own goal
- Well done Vodafone
- Vodafone on Mobile Termination Rate Undertakings
April 23rd, 2010 at 5:33 pm
Why?
DPF’s post today illustrating the indefensible rates we pay for data transmission in the form of SMS messages needs an answer. Telling those of us who prefer to send a quick text rather than indulge in a pointless conversation with some ninny to use voice rather than data is not an acceptable excuse.
Vote:April 23rd, 2010 at 5:48 pm
quite right Rex
if they weren’t shafting us we wouldn’t be complaining.
It is time the minister got this sorted, it should be cheap to call, then we would all use it so much more, there should be no difference what network you call in termination rates.
There’s no excuse they have the monopoly position and are acting together to keep the rates up.
It’s similar to the Elec market, they are maximising the rates and not building extra capacity, the prices could be much lower.
Vote:There the minister should make it legal for anyone to generate power to the grid through a box that calculates the usage either way and force the companies to have to accept the generation at at least the rate they charge.
Imagine 100,000 people and businesses putting into the grid during their off peak.
some work needs to be done to strengthen the grid sure.
April 23rd, 2010 at 6:39 pm
“We all know that New Zealand mobile users are very keen on text messaging. ”
Yes, because it is prohibitively expensive to use the cellphone for its original purpose- making telephone calls!
That is an example of circular reasoning if ever I saw it- Vodafone make calling prices so high that everybody text messages, so Vodafone then say that obviously everybody wants to text message rather than call. Everywhere else in the world people call far more than they text message. Why? Because calling is so much cheaper!!!
Check out the rates in the US and the UK- NZ is getting screwed by the mobile phone operators (other than 2degrees, of course!).
Vote:April 23rd, 2010 at 7:33 pm
Talk doesn’t encourage competition Hayden, it is glaringly obvious that talk is the antithesis of competition.
Vote:April 23rd, 2010 at 7:38 pm
What a crock of shit……
Of course NZ’s text up a storm Hayden Glass….. Go and do some analysis in other countries on mobile phone charges….. NZ’s are raped with mobile phone charges…..
Give me strength!
Vote:April 23rd, 2010 at 8:53 pm
I moved from Voda to 2Degrees this week, carried over my number, and couldn’t be happier. Painless, swift and easy – great customer service and excellent prices. Vodafone and Telecom are as bad as each other, behind that funky face they are big bad money suckers who want to keep us all bent over and taking it while they whisper sweetly, “See it really is better this way.”
Vote:April 23rd, 2010 at 10:22 pm
Been living in the UK for the last few years. Vodafone there have been doing something similar for a few years now.
Even on “prepay”, a monthly mobile contract was a lot cheaper than using landlines there.
The only reason we had a landline was to be able to get broadband…the same reason we have a landline here.
Stupid really that you have to pay an extra $35 odd a month on top of your broadband package to have an internet connection.
Vote:April 24th, 2010 at 10:37 am
bullshit. that is all
Vote:April 24th, 2010 at 1:07 pm
Got a Xnet VOIP phoneline (on TC cable) – calls to mobiles in the US/Canada? 9c min, to NZ mobiles? 30c min.
Vote:April 24th, 2010 at 8:55 pm
I got similar 2 degrees numbers for all my family – and now we can actually make phone calls to each other and to landlines at a good price.
Vodafone’s new plan is aimed directly at 2degrees – and if 2degrees goes under as a result of competition, Vodafone’s prices will return to their previous levels. The big telcos just can’t be trusted, they need to be regulated.
Vote:April 25th, 2010 at 9:19 pm
Most of us don’t give a shit what the wholesale rate for voice calls are. We do care what we pay out of our pockets, and it is clear that if a new entrant can provide voice services for half the price of the incumbents, then we are getting rorted.
Vote:And yes, when I am in NZ I do use 2degrees for voice calling.