Kiwiblog

Sent in by a reader.

UPDATE: And Telecom have pulled the campaign. A good call.

Vodafone frustrates me. Some of the time they give great customer service – especially if you engage with their Twitter people who several times have sorted problems out for me within minutes.

But at other times the customer service is sub-standard.

In January I moved apartments. As part of that I gave both Telecom and Vodafone advance notice. Telecom scheduled the phone number to transfer for a specific hour on a particular day.

I was hoping Vodafone could arrange for my DSL connection to transfer the same afternoon as the phone transfers. But alas I was told they could not even log my job into their system until the Telecom transfer was done!

Then once the job was logged I was told there would be a 10 to 15 working day delay until my DSL connection was transferred.  In the end it took 16 days (including weekends) to get my DSL working again.

Now this wasn’t the end of the world as I had a vodem, and could survive on mobile broadband even though it is not as fast. So I got through the 16 days okay.

But then I got the bill for the vodem. And on top of the normal $50 monthly charge was $602 of excess data charges!

As I only used the vodem because my DSL connection was not available (which I was paying for incidentally) I e-mailed Vodafone on the 7th of March asking them to consider remitting the excessive usage charges as it was their own inability to reconnect my DSL within a couple of days, which caused the excess data charge.

I go an auto-reply which said:

We appreciate that you have taken the time to write and you can be assured that we will be in touch as soon as possible.

And apart from a further acknowledgement, I’ve never heard back.

The $600 I got whacked is reason enough to be less than happy. But that is not even the biggest issue for me. If I had got a reply saying this is our decision, then I would at least have a decision on which I can base my future purchasing decisions.

But just getting no reply at all is incredibly frustrating. I don’t have the time to spend hours on the phone being transferred from person to person while trying to find out what has happened. I expect a major company to have a system which ensures customers’ letters are replied to – especially those seeking a refund.

UPDATE: Vodafone have contacted me and the issue has been resolved satisfactorily. My thanks to them for this. I use Vodafone for my mobile phone calls and texts, plus as my home ISP, and also as data for my Blackberry, ipad and Vodem. Most months they get $300 to $500 from me, which is fine – but I did object to an extra $600 in the conditions outlined.

The Herald reports:

Passengers on Air New Zealand’s new black A320 will be able to make phone calls, send texts and check emails – if they are Vodafone customers.

The plane is one of two A320s which the airline is making “mobile phone capable” in the next month.

Being able to text and e-mail will be useful. Not so sure about the wisdom of voice calls, but to be fair in theory one can already make these on their international flights through the in seat phones.

Passengers will pay roaming costs of $3.50 a minute and 80c for every outbound text. They will also pay $20 per megabyte of data.

Well fuck that. $20,000 per GB of data is insanely high.

Will they also charge for incoming calls and texts?

A guest post by Steve Rieger, Vodafone’s General Manager of Wholesale and New Business Development:

Rural Broadband – an easy answer

The Telecom-Vodafone joint bid for the Government’s Rural Broadband Initiative (RBI) has certainly got attention.  Who would have thought that these traditional arch enemies would entertain such a partnership?  Well, it’s the right thing to do to deliver a step change in connectivity for New Zealand’s rural community and moreover we think it’s the way of the future.

We think rural Kiwis deserve high speed broadband, wider mobile coverage and a choice of service provider.  That shouldn’t just be the preserve of the city-dwellers.  That’s why our solution – a new open-access network which combines fibre and wireless gives better bang for the tax-payer’s buck.  It equips New Zealand’s economic heartland, which accounts for 60 percent of New Zealand’s exports, for the 21^st century.

So what will we deliver?  Fibre to 97 percent of rural schools and a minimum of 5Mbps broadband service to 80 percent of rural households within six years and priority users with fibre-based broadband services.  That’s a minimum of 5Mbps.  In time we will deliver more.  And, we will deliver it faster than the government’s timetable.

The solution looks like this: Chorus will extend Telecom’s existing fibre infrastructure to key rural points of presence, including schools and hospitals.  Vodafone will expand its wireless infrastructure to deliver wireless high speed broadband.  Chorus will build the fibre and DSL network and Vodafone will build the mobile towers.  XT and Vodafone will put their cellular equipment on the towers and provide independent services to their wholesale and MVNO customers as well as directly to retail customers.

The key is open access.  Anyone will be able to offer a retail service over the new infrastructure, whether fibre or wireless, on an equivalent basis.  2degrees, XT and regional wifi operators will be able to put their equipment on the towers and provide independent services to their customers, competing on equal terms.  The result – strong retail competition and a real choice of retail solutions and providers for rural customers.

We think this model is the new state of the telecommunications industry.  We compete vigorously on one hand and cooperate on the other.  The design of this solution means we will continue to be fierce retail competitors – and have created a platform that enables other operators to compete with us.  Trying to deliver this as a sole operator just doesn’t stack up economically.

Our proposed solution delivers choice to rural customers: either fixed broadband, or fixed wireless broadband.  In delivering wireless broadband we provide additional social advantages by enabling wider use of mobile voice and text, two important communication channels for individuals and communities.

Why not fibre to the farm? The economics just don’t stack up.  International best practice for rural communities is to deliver broadband over wireless networks.  Ireland, Germany, the US and Australia have all gone this way.  It means rural families can stay connected at home and on the farm, reducing geographical and social isolation.

Wireless is also future-proofed.  It means next generation mobile technologies such as 4G (otherwise known as Long Term Evolution – LTE), can be rolled out to rural users at the same time it’s made available to urban customers.  4G will offer faster data rates, lower latency, shorter delays and loading times, and ultimately a better experience.

Vodafone and Telecom can bridge the urban/rural digital divide in New Zealand, give other players equal access to the infrastructure, and deliver choice to rural New Zealand.

The Minister expects to make a decision by Christmas.

I am a big fan of the open access nature of the proposal, and think it is a model for future mobile expansion.

Four recent Telecom issues, so will talk about them all in the one post.

First they have a new data roaming deal.

The new pricing gives customers 100 megabytes (MB) of mobile data for $100 while roaming overseas in these locations that’s the equivalent of $1/MB.

Customers will be charged $8.00/MB for the first 12.5MB and a remaining 87.5MB worth of data for the rest of their billing month will be free.

A year ago we were all paying $30/MB for roaming data, so this is a good step in the right direction.

If you are on a big trip and will use close to 100 MB this is a damn good deal. If you will only use 10 MB or so, then not so great.

Vodafone charge $5/MB in Australia and $10/MB elsewhere (off memory). So if you plan to use more than 20 MB in Australia Telecom are better. And for US and UK they are cheaper at any rate.

My personal price point is around $1 – $2/MB. I will grudgingly pay that for international data for my mobile devices.

Secondly Stuff reports on the UFB tender:

Telecom will today step up its campaign to become the Government’s broadband partner, releasing a poll on its website that says more Kiwis would prefer its network arm Chorus got the job of building the ultrafast broadband network than electricity lines companies headed by Vector. …

UMR said 48 per cent of those polled would prefer to see Telecom broken up and have “an independent, stand-alone Chorus extend the existing fibre network”, while 28 per cent favoured the Government investing in a new network rolled out by electricity lines companies led by Vector.

Vector spokeswoman Philippa White responded: “Essentially the decision as to who will partner with the Government for the UFB build sits with Crown Fibre Holdings”.

The poll is interesting but to some degree irrelevant. Because it ignores the most important factor – cost.

If the Regional Fibre Group/Vector and Telecom/Chorus both say “Yes we can do fibre to the home to 75% of NZ if the Crown invests $1.5b”, then my view is you would absolutely go with Telecom/Chorus due to their existing infrastructure.

If the two bidders are even “close” to each other – ie Chorus says we can do it for $1.7b and Vector/RFG for $1.5b, then you’d probably still go with Telecom/Chorus – just to avoid the possibility of Telecom using the copper network to make the fibre network unprofitable by undercutting them.

But what the poll ignores, is that there may be a large difference between the two bids. If Vector/RFG are saying we can do 75% in 10 years for $1.5b and Telecom/Chorus are saying we can do 75% but need $2.4b to do it within 10 years, then one goes with Vector (in my opinion). And this scenario is not impossible. The lines companies already have infrastructure assets and resource consents which may allow them to do the job far cheaper than even a structurally separated Chorus.

So at the end of the day it is not a popularity contest between Telecom and Vector. The actual commercial details of their bids are vital.

Thirdly, Telecom have put together a one stop shop website about UFB and their bid. I’ve already read most of the site – lots of useful info there.

Finally, we have an announcement from Telecom and Vodafone about a joint bid for rural broadband:

Telecom and Vodafone have announced they have made a joint bid for the Government’s $300 million rural broadband initiative, bids for which are due in today.

Telecom chief executive Paul Reynolds said the solution would New Zealand’s two largest telecommunications providers “combining their extensive resources and skills to bring the benefits of high speed broadband to rural communities as quickly as possible”.

One goal of the rural broadband initiative is to ensure 93 per cent of New Zealand’s 900 rural schools have access to 100 megabit per second broadband, with the rest getting a 10Mbps service.

The other goal is that 80 per cent of rural New Zealanders get a 5Mbps service to their homes, with the rest able to access broadband with a speed of at least 1Mbps.

Telecom said the joint solution would involve extending Telecom’s existing fibre infrastructure to key rural points of presence, including schools and hospitals, and expanding Vodafone’s wireless infrastructure “that harnesses the power of this fibre to deliver high speed broadband services wirelessly”.

Telecom said any service provider would be able toretail services over the new infrastructure. “This means that rural customers will have not only faster data services but also a much wider choice of technologies and suppliers for these services.”

Telecom would be responsible for building fibre to schools and hospitals, cellsites and rural exchanges and cabinets.

Vodafone would be responsible for the design and build of “open access tower infrastructure” that Vodafone and Telecom XT would share, “as indeed could any other wireless service provider who wishes to do so”.

I’m very supportive of this. I think open access cellphone towers are where the future is. It makes a lot of sense economically, and from a resource consent point of view, to share this infrastructure.

Once we do have announcements on who will be the local (or national) fibre companies, there could well be a role for them in providing future cellphone towers, which Telecom, Vodafone, 2 degrees etc could all put gear on. The fibre company of course would provide high capacity backhaul. There are some technical challenges around size of towers and having all the gear high enough to get a good signal, but these are workable.

So good to see Telecom and Vodafone moving in this direction.

I’m not sure what the problem is, but Vodafone’s quality has not been great lately.

On around half a dozen occasions, people phoning me have not been able to get through – it goes straight to my voicemail, despite the fact my mobile phone is switched on, and not in use. I can only guess there was some sort of network congestion.

This is more than a minor inconvenience. Twice it has happened when radio stations are calling me to do live on air interviews at an arranged time.

I’ve also noticed lately many texts not being delivered to me for several hours, and sometimes not ever. Again this is more than a minor inconvenience when one of the texts is to say that someone is not meeting you at the airport, and you should grab a taxi instead.

Am I just very unlucky or have other Vodafone customers had these problems? Does this happen sometimes to Telecom customers? If calls and texts can not get through, then one has to seriously consider swapping networks.

A reader has sent me details of speed testing on an iPhone4 in Dunedin, comparing networks.

The author also has a website, detailing the tests.

He notes these are not a general comparison of speeds between networks, but a comparison on the iPhone 4 only, in Dunedin. He did try six different locations there and his conclusion was that Telecom XT provides far greater speeds – but only in places where it works. In two places a good signal could not be located.

Vodafone have dropped their mobile data roaming rate in Australia to $5/MB from $10/MB.

This is obviously a step in the right direction, but for me the price point is still too high.

Vodafone has had a temporary rate of $2/MB over the last two months for Australia. That was set at an affordable level so during my 8 days in Australia I kept data turned on and Vodafone made around $50 from me – did around 3 MB/day.

In July/August I spent a month in Europe. As data roaming cost so much I turned it on as little as possible, and used only 3 MB over four weeks. I just used local wireless networks instead.

So $5/MB, while cheaper than Telecom, still has a long way to go.

Just had several e-mails turn up, many days after they were sent. As far as I can tell the problem is at Vodafone/Ihug. I have posted the headers below, so those more proficient can confirm where the problem is. Has anyone else experienced such problems?

Return-path: xxxxxx
Envelope-to: dpf@ihug.co.nz
Received: from pub.filter4.content.vf.net.nz (filter4.content.vf.net.nz) [10.80.49.4]
by mx24.content.ihug.net.nz with esmtp
(Exim 4.60 #1 (Debian); Ihug conf #216)
id 1OkrVg-0008UB-RX; Mon, 16 Aug 2010 16:41:20 +1200
X-IronPort-Anti-Spam-Result: AmwNAP5daEzKCA0k/2dsb2JhbAB0UJE6hRUViBhxuQ6FOwSMSw
X-IronPort-AV: E=Sophos;i=”4.55,374,1278244800″;
d=”scan’208,217,145″;a=”289760230″
Received: from gatekeeperwn.acc.co.nz ([202.8.13.36])
by pub.filter4.content.vf.net.nz with ESMTP; 06 Aug 2010 08:40:50 +1200
Received: from mxwn.acc.co.nz (Not Verified[172.17.8.185]) by gatekeeperwn.acc.co.nz with MailMarshal (v6,5,4,7535)
id <B4c5b21d80000>; Fri, 06 Aug 2010 08:40:56 +1200
Received: from kdcsxc0001.ds.acc.co.nz (Not Verified[10.243.11.2]) by mxwn.acc.co.nz with MailMarshal (v5.5.7.1596)
id <B000f470ec>; Fri, 06 Aug 2010 08:24:02 +1200
Received: from corsxc0001.ds.acc.co.nz ([10.99.11.6]) by kdcsxc0001.ds.acc.co.nz with Microsoft SMTPSVC(6.0.3790.4675);
Fri, 6 Aug 2010 08:40:50 +1200
X-MimeOLE: Produced By Microsoft Exchange V6.5
MIME-Version: 1.0
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X-MS-Has-Attach:
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From: xxxxxx
To: “Dave Farrar” <dpf@ihug.co.nz>,
X-OriginalArrivalTime: 05 Aug 2010 20:40:50.0432 (UTC) FILETIME=[7D926000:01CB34DE]
Content-class: urn:content-classes:message
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To me it looks like a Vodafone server got the e-mail on the 6th of August and didn’t pass it on to the Ihug server until the 16th of August – 10 days later.

I will be very unhappy if this occurs again.

I like this aggressive little piece of comparative advertising, comparing the performance of two iPads – one on Telecom’s XT and one on Vodafone.

Basically XT kicks butt in the more rural locations, but also is faster even parked outside Vodafone’s HQ. It’s a smart wee video.

Now what I’d like to know is if other people can get the same results, as shown in the video. The speedtests should be easy to replicate.

My mum’s phone is not working in London, and my guess was it was not set to roam. E-mailed Vodafone asking if they could do it, and had an e-mail response back in five minutes and a phone call within 30 minutes, and then all fixed.

Makes a wonderful change from some companies. The worst customer service I have had recently the other way was a travel website where you had to phone them in Singapore to change a booking, and you spend around 40 minutes on hold – paying international call rates the whole way. Grrrr.

What are you good and bad customer service experiences?

Some good customer service from Vodafone. Tweeted them that my data on my Blackberry was not working in Sydney. They tweeted back some options to try, and then had a tech call me, and worked out the problem, and data now working. So much better than dialling a call centre and being on hold.

As data is only $2/MB here temporarily one of the few places where I wanted it on when roaming.

I also learnt something new – what it means if your signal says 3G or GPRS as opposed to 3g or gprs. If in caps it means that data should work over it, and if in lower case it means data won’t work.

My prediction that Vodafone’s new calling plan for on-network calls was a massive own goal, has been proven correct. Launching the plan just days before the Minister was due to decide on the recommendation not to regulate mobile termination rates will go down as arguably their biggest stuff up to date.

To be fair, their competitor Telecom, has many to choose from – CDMA, XT, AAPT etc etc.

The Herald reports:

Vodafone’s latest marketing deal has pushed the Commerce Commission to backtrack on an earlier decision and it is now recommending the Government regulate mobile phone ‘termination rates’. …

In a draft report out today, the commission says earlier undertakings offered by Vodafone and Telecom would not address competition concerns.

Considering the Minister asked the Commission to reconsider its 2-1 recommendation to accept commercial undertakings rather than regulate, what is the chance he will now turn down the new recommendation to regulate? I’d say close to zero.

If Vodafone had held off their new pricing plan for a couple of weeks, I reckon there was an 80%+ chance the Minister would have gone with the recommendation to accept the commercial undertakings.

The Dom Post reports:

Text messages have been mysteriously altered between sender and recipient in at least 20 cases, prompting a Telecom investigation.

Salvation Army church leader Steve Molen discovered the glitch last week when he sent a text to 10 people to remind them of an upcoming dinner.

It ended on a lighthearted note with “bring a date or your muma but would prefer it if you bought [sic] a youth and plenty of food should be a great night so see you there six o’clock”.

However, one recipient – his wife Faye – received a message that read “bring a date or your muma but would prefer it if you bought me she setting a bad example for me”.

Mr Molen, of Newtown, contacted Telecom’s call centre and was told he wasn’t the first to experience the problem. “[The call centre worker] said it was a software fault that adds lines to the last part of people’s texts … and there had even been swear words added on to some messages.

I had my own text problems this week. Had played a round of phone tag with a new client and left a voice mail message for them at around 2 pm.

At around half past midnight my Blackberry beeped. I was in bed but still awake, so leaned over to check it. It was the client asking if it was too late for them to call me now. My initial thoughts were unprintable, and I resisted replying at the time.

I then talked to the client this morning and gently inquired what time did they send a text to me yesterday. As I suspected it was not at half past midnight – it was at 5.30 pm, and it took seven hours to reach me. The client was somewhat mortified (it wasn’t their fault) and was extremely grateful I didn’t phone back at the time I received it

It would be really useful if text messages were like e-mails, and had both a time sent and time received stamp.

The Herald reports:

Vodafone will slash data roaming rates to Australia by 93 per cent and other international rates by 66 per cent by the end of the month, the mobile giant said yesterday.

This is a very welcome move by Vodafone. Rates will drop from $30/MB to $2/MB in Australia and $10/MB elsewhere.

I try to minimise data use when overseas, but it is very difficult to have zero use.

Great to see Vodafone respond to the numerous complaints.

UPDATE: A reader alerts me that the Vodafone rate cuts are for three months only. This is better than no drop at all, but people should be very careful after August to ensure if the rates have gone back to the normal daylight robbery.

I carried last week a guest post from Hayden Glass of Vodafone on the issue of mobile termination rates and Vodafone’s new calling plan.

As I predicted, Vodafone’s move was an own goal, and Steven Joyce has announced:

Communications and Information Technology Minister Steven Joyce has asked the Commerce Commission to reconsider its recommendation on mobile termination access services.

Last time the Commission split 2:1 in favour of commercial undertakings over regulation. Will this tilt the balance towards regulation.

In a fit of good timing, 2 Degrees Chief Operating Officer Bill McCabe has sent in this guest post responding to Vodafone.

Kia Ora Hayden,

Thanks for your kind words about 2degrees’ success so far. We put it down to the great value that 2degrees offers when compared to the Vodafone and Telecom charges.

People who move to 2degrees tend to either save a lot of money, or get far more for their money so it’s not surprising that over 200,000 people have joined us. It’s also good to hear Vodafone respond to 2degrees’ lead and start to acknowledge the value of talking.

What I find deeply concerning though is that your article tries to explain MTRs and in many places states as fact information that is plainly wrong and risks misleading consumers and Kiwiblog readers.

I tend to let Vodafone’s spin merchants get away with all sorts of exaggerations – most of which are picked up by the more inquisitive and informed Kiwiblog community, but the scale of the misleading information that you have provided here demands a challenge and that we set the record straight.

First, the UK average MTR is 4.3 pence per minute. That’s 9.2 New Zealand cents. As you well know, virtually all countries except New Zealand charge MTRs on a second plus second basis. The 14.4c that you mention equates to 17.7 NZ cents when adjusted for per second billing (according to the Commission) and should be the figure used for comparative purposes. So, perhaps you could explain how 17.7c is less than the UK rate of 9.2c?

Secondly, it won’t have escaped your attention that Ofcom, the UK regulator has conducted a review of MTRs and proposed that rates drop considerably to 2.5 pence next year and 0.5 pence in 2014 largely to avoid the competitive distortions that favour large mobile operators under the current UK rates. That’s also relevant to your comparison with the UK.

Third, the rates recommended by the Commission are not ‘just under 10c’ from October, but 12c. And not ‘just over 8c from 1 January’ but 10c. Now, exaggerating by around 20% is not hugely significant given the disparity between the undertakings and the UK regulator’s assessment that rates should be so much lower but it does seem that Vodafone are misleading Kiwiblog readers unnecessarily here.

Forth, Text message prices. Complex it is, zero rate MTRs it ain’t. You say that the undertakings ‘cut text prices to zero’ but fail to point out that the rate is only zero for the network that is a net receiver of text messages and is 4c for net senders unless traffic is less than 12% out of balance. So, the price is zero if an operator is a net receiver of text messages and that operator can send incremental text messages at no cost, but an operator that is a net sender of text messages can quite quickly be paying 4c for all incremental messages. I know it’s complex but that’s the Vodafone and Telecom proposal so you should be familiar with it. We advocated real zero rate termination rates but you came up with this very odd construct.

Fifth, you complain that you have to pay 2degrees several times your retail price for text messages but fail to point out that 2degrees has tried to bring wholesale text message rates to zero – that’s the real zero, not the 4c zero that you are trying to portray, for a long time. Are you now saying Vodafone supports Bill and Keep?

It’s very interesting that Vodafone takes one position when protecting a dominant position – as is the case in the majority of Vodafone’s territories, but where it tries to enter new markets it argues for low MTRs. I’ll jog your memory if you like. Here in New Zealand Vodafone argued for zero rate termination in the local calling market in 2006 and asked for (and received) regulation to prevent Telecom from charging its customers more to call a Vodafone number than a Telecom number arguing that without this competition would be ‘hobbled’ before it could commence. Overseas, Vodafone’s most recent ‘new entrant’ mobile investment has been in Qatar where again it argued for Bill & Keep. 2degrees’ success in New Zealand is eclipsed by Vodafone’s success in the Qatari market – well done, you did a good job of arguing for a pro-competitive regulatory environment there.

Bill McCabe
Chief Operating Officer
2degrees

Great to be getting both sides of the debate. A very robust response. Vodafone have responded to a similar post at Geekzone, so the debate continues.

Vodafone 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!

The Herald reports:

Vodafone’s new Talk plan for pre-pay customers has raised a red flag for the Commerce Commission on whether mobile termination rates should be regulated.

In February, the commission recommended Communications Minister Steven Joyce accept Vodafone and Telecom’s proposal as an alternative to regulation on the basis the final undertakings would address its competition concerns. The proposal is to reduce rates to 6c per minute by 2014.

But Vodafone’s new Talk pre-pay plan, launched last week, has raised questions whether an industry solution will hinder smaller companies.

The Talk plan offers customers 200 minutes on its network and to landlines for $12 a month on certain pre-pay plans. This works out to about 6c a minute.

It costs 89c per minute to call a Telecom phone from a Vodafone phone. The current termination rate between the networks is 14.4c.

2degrees chief commercial officer Bill McCabe said Vodafone’s new plan made it 15 times more expensive for a Vodafone customer to call a 2degrees phone than to call its own network.

Telecommunications commissioner Ross Patterson said it was the commission’s initial view that the Vodafone Talk plan may be material and have the potential to affect the basis for its recommendations in the final report.

Joyce said: “I wrote to the commission to ask them their view on whether Vodafone’s new Talk Add-on offer to its prepay customers is material to the decision on mobile termination access services. They replied that it may be the case.”

Vodafone’s move may be one of the more stupid commercial decisions in recent times. The Government is days or weeks away from making a decision on mobile termination rates. The Commerce Commission was split 2 to 1 on its recommendation not to regulate, so it is a close call.

And then Vodafone comes out with a plan which absolutely undermines their commercial offer on termination rates. They set a retail price for on-network calls which is half the current wholesale termination rate between networks and will be higher or equal to the termination rate even in 2014, under the commercial undertakings.

If you asked me to sit in a room and think up a stunt that is most likely to push the Commerce Commission and Government away from accepting the commercial undertakings, and towards regulation – this is what I would come up with.

The fact the Minister has written to the Commission and said “Does this changes things” and that the Telco Commissioner has already said “Yes” is significant – especially that the Commissioner was one of those who voted not to regulate.

If the Government does now decide to regulate, they only have themselves to blame. I’m amazed they didn’t hold off any pricing changes until after the Minister made a decision.

Labour yesterday announced a formal position on mobile termination rates:

The Government should put consumers first and regulate mobile termination rates to keep call costs down, Labour spokesperson for communications and IT Clare Curran said today.

“High mobile termination rates are a barrier to entry for new players in the market, which leads to less competition and higher prices,” Clare Curran said.

“While Vodafone and Telecom have now offered to lower termination rates by around 80 per cent, it still does not go far enough to reduce the major issues for new entrants.

I think it is a good thing that Labour have learnt from their mistakes, when they did a deal with the two telcos in 2007, rather than accept the advice to regulate.

Slightly amused that their formal policy stance comes just days after Clare had a whack at Matthew Hooton for implying Labour support the Drop the Rate, Mate campaign.

The Drop the Rate, Mate campaign also yesterday released their submission to the Minister, including some research done by Curia of 400 mobile phone users. Key findings were:

• Only 18% of respondents wanted the Government to accept the binding promises of Telecom and Vodafone, while 78% wanted the Government to regulate
• 79% agreed that Telecom and Vodafone are overcharging New Zealanders
• 85% agreed with the proposition that it should cost the same to call someone on a different network, as to call someone on your own network

The full results are here – EXCELTIUM MOBILE PHONE RESULTS MARCH 2010 PUBLIC.

Chris Barton in the Herald is not shy with his opinion of what the Government should do:

So far, you have to say, Joyce has played with an exceedingly straight bat. But it won’t be easy negotiating the quagmire of a split recommendation by Commerce Commissioners on mobile termination rates. Two argue for putting heads in the sand while one voice of reason says enough is enough – Vodafone and Telecom have had more than enough time to sort this out and have, time and again, shown they can’t be trusted.

Joyce will be familiar with the sordid last-minute deal stitched together between new mobile entrant 2degrees and Vodafone last year. While the public isn’t allowed to know about this venality, anyone who cares to can find it online (search under “NZ Cellphone racket”). It shows that Vodafone will move if it has a gun to its head. Joyce will also be familiar with www.droptherate.org.nz and www.fibretothedoor.co.nz – two campaigning websites where the public is helping the minister make up his mind.

Go there at once.

What fed-up consumers want minister, is Clint Eastwood’s Dirty Harry. For some of us, it’s so bad, we don’t just want Clint to pull out his .44 Magnum and ask whether the punk feels lucky. With Telecom and Vodafone, we want him to pull the trigger.

The challenge for the Minister, is how quickly can a regulated price be established, if he chooses to regulate. The undertakings would take place more quickly. However the likely regulated price would see prices by 2011 drop further, and remain lower.

Paul Brislen from Vodafone has offered me, and I’ve accepted, a guest post on the mobile termination rates issue. I’m happy to run both sides of the argument:

The Commerce Commission has recommended to the Minister of Communications that he should accept the Telecom and Vodafone undertakings rather than regulate the industry any further. Those that want regulation at all costs would have you believe this is a travesty and must be overturned, but really they should be celebrating. This is a big win for those that think termination rates are too high.

So what is a termination rate and why should you care? When you call a Vodafone mobile from a Telecom phone you’re paying Telecom a fee for that call. Vodafone doesn’t get paid for that call by the customer – it gets a cut of the earnings from Telecom directly. This is called a termination rate and it’s got very little to do with the retail price you pay. Think of a newspaper publisher – it earns its money from two sources: the cover price paid by the consumer, and the advertising rates, paid by the advertiser. The two are related but not directly linked. It’s a two sided market and so is telecommunications.

Over the past six years termination rates have fallen by 46% and the Commerce Commission feels they should be even lower. Part of the process is this idea of seeking “undertakings” from the industry – that is: what will you give us, industry players, to avoid regulation. It’s quasi-regulation that gives the industry the ability to offer a solution that will be quicker than regulation and still provide the solution the Commission is looking for.

In this case the Commission asked Telecom, Two Degrees and Vodafone, to submit undertakings to avoid regulation. We did, but the Commission asked for a unified undertaking from all three players to give it a benchmark with which to compare its own regulated solution. We tried, but there was no way the three players were going to agree on one solution – so Telecom and Vodafone put forward a combined best offer. After some wrangling, the Commission has recommend the government accept that offer.

The undertaking reduces the termination rate for voice calls from 15 cents to five cents per minute over five years. It happens in stages – so from October 1 it’s a 35% drop, followed by a further 10% drop on January 1, 2001 and further reductions in the years after that.

The second major part is that TXT message termination rates will drop immediately to zero. That is, aside for some wiggle room to stop TXT message spam, companies will charge customers directly for TXTs and won’t pass anything on to the other telcos.

The Commission’s job was to compare that offer with what it could best hope to obtain under regulation. Any regulation from this point on is at least 12 months away from implementation because of the Commission process, so the Commission has to weigh up these savings from October 1 versus potential savings delivered in 12 months time.

The undertaking is so close to the regulated outcome that any extra savings delivered under regulation clearly aren’t enough to outweigh the delay in delivering them.

So what’s in it for the telcos? Did we simply offer these deals out of the goodness of our hearts? Well, no. No company likes to be regulated and no company wants to be forced into a corner. Vodafone doesn’t like the Commission’s modelling, doesn’t trust its numbers, doesn’t like the outcome. But at the end of the day, the Commission is the regulator and we have to operate in that market and if it comes down to a commercial undertaking that offers a controlled descent or a regulated solution that includes revenue dropping off a cliff on a given day, I know which I’d prefer. We need some certainty around investment strategies otherwise it all becomes too hard.

We’ve offered to reduce rates dramatically. The Commission has recommended the Minister accept them and the customers will benefit sooner from the undertakings than they would from direct regulation. The telcos win because we have a solution in place and can get on and the consumers win because they can open their newspapers without having another story about MTRs rammed down their throats.

The Drop the Rate Mate campaign put together to influence this decision, ran a survey which looked at the public’s perception of the telco sector. One of the interesting outcomes of that research was that when asked whether they would change their political vote for a party that regulated MTR, only 20% of participants said they would. So in answer to my earlier question (why should you care) the answer is you shouldn’t. But finally we can all get on with our lives.

The HoS reports:

A kiwi salesman was stunned to receive a $1100 bill from Telecom for just 10 minutes of internet access from his laptop.

Michael Crake racked up the charges after using a computer fitted with a mobile broadband device while at Sydney airport.

Oh dear. He got clobbered with the outrageous $30 a MB that Telecom and Vodafone extort from users who roam overseas.

The price charged is massively higher than that faced by users from many other countries that roam. It has zero resemblance to actual costs.

But putting that aside, my bigger gripe is that the telcos do not do enough to inform people of this charge.

When you roam overseas it should flash up a huge warning that tells you what the cost will be on that network, and require you to confirm that you understand the price and accept it.

The Dom Post reports:

The Commerce Commission has opened the door to mobile phone companies sharing a 4G mobile network, saying it would be willing to engage in “appropriate discussions” on issues that may be relevant to network sharing.

Telecommunications Industry Group chief executive Rob Spray suggested in December that Vodafone, Telecom and 2degrees could build a 4G network using shared cellphone towers and radio spectrum that they jointly owned, to avoid a proliferation of cellphone towers.

2degrees chief executive Eric Hertz expressed support for the idea, while Telecom said it was open to it in principle. However, Vodafone feared that any move to a single mobile network might fall foul of competition law.

A commission spokesperson says the Commerce Act does not bar such arrangements, except where they might greatly lessen competition.

I think it is very sensible to avoid duplication in infrastructure for mobile phones. The competition should come in services and applications.

In fact an idea which has occured to me, is that regional fibre companies could be tasked with responsiblity for future cellphone towers in their areas. My rationale is:

• RFCs are set up to provide infrastructure to telcos and ISPs
• RFCs are not allowed to be majority owned by a telco that provides services or applications
• As more of the Internet goes over the mobile network, you need better backhaul from cellphone towers, so who better than the local fibre company
• The telcos might even consider selling their existing cellphone towers to RFCs

Of course at this stage we don’t have any RFCs yet, but once they are established it may well be a conversation worth happening.

I’ve blogged a few times on mobile termination rates, and Vodafone have offered a guest post to give their view (which is somewhat different to my view) on the issue. Always happy to have the debate. The guest post is:

Vodafone has made an Undertaking as part of the Commerce Commission’s investigation in to Mobile Termination Rates (MTRs) that dramatically changes the telco environment for all concerned. Instead of charging 15c/minute to terminate a voice call, Vodafone will move to 3c/minute. Similarly, to receive a TXT we are cutting the rate to 1.2c/TXT.

These are enormous cuts to the current rates:  an 80% drop in voice termination and 87% drop in TXT.

So why would Vodafone voluntarily make such an offer? Surely the cost of reduction – we put it at $450m over five years – is too much for a business to bear?

The short answer is: the alternative is regulation and any company will tell you regulation is bad for business – and sometimes consumers too.

The longer answer is that we want certainty and that regulation doesn’t deliver that.  Regulation also involves a very messy, drawn our process involving complicated cost models.  The business, the Commission and industry could well do without this if we can possibly avoid it.

In 2007 we had a deal with the government and contrary to popular opinion it wasn’t a last-minute smoky back-room deal designed to circumvent the process. When a minister of the Crown says “boys, sharpen your pencils or I’ll regulate” by crikey you sharpen your pencil.

Vodafone and Telecom agreed to drop rates over a period of time, to start immediately and (very importantly) to pass all those savings on to customers. The minister saw that getting a resolution immediately and having the money go to customers was better than anything the Commission could offer and he accepted the deal.

Job done, five years of certainty, let’s get on with business, we thought.

Eighteen months in, the Commerce Commission re-opened an investigation and removed any certainty we had from the deal.

Certainty is everything for investment and regulatory certainty is a must-have.

Instead we have a Commerce Commission that has changed its method of benchmarking termination prices three times during the last few years and which has assumed much higher levels of consumer benefits under regulation without really explaining why. And in New Zealand there’s nothing Vodafone or anyone else can do about it. There’s no merits review process for telecommunications, there’s no court of appeal, all we can do is seek a judicial review and frankly that’s a bad idea on many levels.

But do you know what? That’s the way this game is played. The Commerce Commission gets to ask the questions and the Commerce Commission gets to make the recommendations.  Today we need to tackle the issue in front of us right now.

So we set about trying to find an innovative solution that would work for all parties. We’ve accepted that while we have major issues with the Commission’s analysis on this issue, there’s nothing we can do that will change the Commission’s view, so we need to work with them to come up with the next best thing: some level of certainty over the large scale regulatory changes we are about to experience.

Which brings me to our new Undertaking.

Vodafone wants certainty and currently the only thing certain is that when the Commission reports in to the Minister in December it’ll opt for some of the most aggressive regulation in what used to be called the western world.

By putting in an Undertaking that offers to deliver better outcomes than regulation, we hope to do three things: avoid regulation; give the Commission the rates it wants and give Vodafone’s investors the certainty they need so we can keep investing heavily in the local market.

By lowering our TXT rates immediately (April next year, which is as immediate as things get in this discussion) we deliver ahead of the Commission’s timetable (which would see regulation taking effect in 2011 at the earliest).

For voice calls we’re offering a glide path from current rates down to 3c/minute by 2015. That’s slower than the Commission has laid out, but gets us to a lower number than the Commission has indicated. The glide path means we can plan better year on year for the next five years (and that’s good for us) and it’s a lower number, which is good for the Commission’s process. The Commission wins by forcing rates lower, and we get to do it in a business-like  manner.

The next step is for the Commission to report to the Minister in December and then Steve Joyce has to make the call. If we go down the regulation route we face two years of conferences and submissions on cost models and frankly that’s not something I’d wish on my worst enemy. If the Undertakings are accepted, by April next year we’ll be done and we can get down to doing what businesses should stick to: making products and selling them to customers.

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

Commerce Commission 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.

Vodafone
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.

Telecom
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. Steven Joyce 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.

Tom Pullar-Strecker writes in the Dom Post:

People might be forgiven for taking a joint media statement issued by Parents Inc and Youthline on Wednesday at face value. The charities said they were concerned the Commerce Commission’s proposal to regulate mobile termination charges might have a ”negative impact”.

Why would they be getting involved in this issue?

Vodafone’s charitable arm, the Vodafone Foundation, awarded Youthline $200,000 to build a centre in Papatoetoe in March and has also paid the salary of a Youthline counsellor. Parents Inc announced a three year partnership with Vodafone in June.

And their arguments:

Both Parents Inc. and Youthline are concerned about the other unintended consequences of regulation, such as the potential for an increase in text spam and text bullying. When a service is very cheap or free, it increases the risk of abuse.

They’re arguing that a reduction in the cost to phone or text someone is a bad thing as it may lead to text spamming and worst of all child abuse by text bullying.

That is like arguing we should introduce a charge to send e-mails, to reduce e-mail spam and e-mail flame wars. Absolute throwing the baby out with the bath water.

Yes it is possible more companies may try to send text spam, if sending texts is cheaper. However commercial text spamming is against the law, and further the telcos have a code of practice that bans it from their networks.

Pilbrow says, “One of the issues with young people and parents is that the technology is growing so fast we have not had time to put boundaries around it. Parents struggle with it, and when spam and other areas of abuse are factored in, the issues for parents increase immensely.”

So lowering the mobile termination rate will add to family stress for parents. I can not believe anyone in their right mind allowed this press release to go out with such vapid and stupid arguments – obviously motivated by a desire to please their funder.

Youthline CEO Stephen Bell is particularly concerned about text bullying. “The mobile is such a personal communications device, and teenagers in particular rush to read and respond to a text message as soon as they hear the phone beep. Texts can easily be anonymous, which emboldens bullies and intimidates victims. Anything that makes it easier for bullies is of grave concern and we should take it very seriously.”

Again this is just an outrageous argument. It is like arguing that lowering the price of petrol makes it easier for drunk drivers, or that lowering the price of newspapers make it easier for arsonists!

Incidentially Curia, which I own did some market research for Exceltium for their Lower the Rate, Mate campaign. This was well publicised at the time. My views on mobile termination rates pre-date that arrangement, and my response to these press release is entirely my own initiative fueled by outrage at the arguments used. No-one at all pointed the article out to me, suggested I should blog on it, or even knows I was going to blog on it.

There are valid arguments for and against mobile termination rate regulation. However scaremongering about text bullying and spam are not amongst them, and shame on whomever put these groups up to making such ludicrous assertions.