Tech News and Opinions (by Paul Spain)

NZ Mobile Termination Rate announcement (updated)

, posted: 5-May-2011 10:20

News has just come in that the Commerce Commission (New Zealand) have formally announced changes to mobile termination rates. This alters the wholesale rates for landline to mobile calling, and mobile to mobile calling, and also SMS message (Text message) rates.

Current wholesale mobile calling rates are above 15c/minute on average - that will change to less than 4c/minute by April 2012 for all carriers (and reducing further in 2013 and 2014). This cut of more than 2/3 has been expected for some time and some providers such as 2degrees advise they have already taken the reduction into account with their existing rates.

While wholesale rates will be less than 4c/minute next year - the cuts begin almost immediately (6 May 2011). The schedule for wholesale calling rate changes is as follows:

  • 6 May 2011: 7.48c/minute
  • 1 Oct 2011: 5.88c/minute
  • 1 Apr 2012: 3.97c/minute
  • 1 Apr 2013: 3.72c/minute
  • 1 Apr 2014: 3.56c/minute

SMS text message prices will also be cut at a wholesale level - from 9.5c currently to just 0.06c - effectively immediately. I anticipate this drop to almost free is more than likely to lead to further reductions in retail rates, particularly for 'text bundles' (pre-purchase of large quantities of text messages) from 2degrees Mobile.

In my opinion, the determination is expected to have a dramatic impact on the NZ mobile industry in three areas:

  • Profitability: Reduces the long term profit margins of the currently dominate players in New Zealand's mobile market - Vodafone NZ and Telecom NZ (who own the XT Network). Vodafone have disclosed today the new rates will cost them $140 million in revenue - which will have a dramatic impact on their profitability in the New Zealand market.
  • Competition: The reduced wholesale rates will create a more level playing field and makes it easier for new and recent entrants in the mobile market to gain significant market share (such as 2degrees Mobile)
  • Calling Rates: Rates to call mobiles will come down. What is not clear yet is if it will just be rates from landline and VOIP (Internet calling) carriers - or if mobile telcos will move their rates down much in the short term. Ther

The 358 page Mobile Termination Access Services (MTAS) report released by the Commerce Commission is fairly heavy reading - I expect to update this news piece with any more information I find once I've digested it. In the meantime you can download it here. The topic of Mobile Termination Rates was discussed on Episode 9 of the NZ Tech Podcast - and will be discussed in more detail in the upcoming episode next week.

In the meantime - I'm keen to hear others opinions and impressions of what this reduction will mean for consumers, businesses and the carriers. Share your thoughts in the comments below.




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