VZCZCXRO9337
RR RUEHNZ
DE RUEHWL #0331 1210524
ZNR UUUUU ZZH
R 010524Z MAY 06
FM AMEMBASSY WELLINGTON
TO RUEHC/SECSTATE WASHDC 2736
INFO RUEHBY/AMEMBASSY CANBERRA 4389
RUEHNZ/AMCONSUL AUCKLAND 0734
RUCPDOC/USDOC WASHDC 0044

UNCLAS WELLINGTON 000331 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR EB/CIP AND EAP/ANP FOR DRICCI 
STATE PASS TO USTR FOR BWEISEL 
COMMERCE FOR 4530/ITA/MAC/AP/OSAO/ARI BENAISSA 
COMMERCE FOR 6920/ITA/OTEC/MYLES DENNY-BROWN 
 
E.O. 12958: N/A 
TAGS: ECPS ECON ETRD NZ
SUBJECT: ONCE AGAIN, NEW ZEALAND REGULATOR SUPPORTS CUT IN 
MOBILE TERMINATION RATES 
 
REF: A. 2005 WELLINGTON 616 
 
     ¶B. 2005 WELLINGTON 461 
     ¶C. 2004 WELLINGTON 598 
 
¶1. The New Zealand Commerce Commission for the second time 
has issued a recommendation to reduce the high fees that 
mobile phone companies charge to terminate calls on their 
networks.  Before acting on the recommendation, the 
Communications Minister has allowed three more weeks for 
public submissions on the issue.  That gives New Zealand's 
two mobile-phone service providers time to come up with yet 
another offer of voluntary rate cuts to forestall regulation. 
 
¶2. The commission, which functions as New Zealand's 
anti-monopoly watchdog, in May 2004 began investigating 
mobile termination rates, which are the fees that fixed-line 
network operators are charged when calls are completed on 
mobile telephone networks (ref C).  U.S. telephone service 
companies have complained that fees incurred on calls passed 
into New Zealand are among the highest of OECD countries. 
The commission in June 2005 issued a report recommending that 
the rates be regulated and, thus, reduced (ref B).  The 
commission found that a lack of competition in the wholesale 
market had resulted in the two mobile network operators 
setting rates significantly higher than the costs they 
incurred. 
 
¶3. Communications Minister Cunliffe in August 2005 bounced 
the issue back to the commission, asking that it examine 
offers made by the country's two mobile-phone companies -- 
Vodafone New Zealand and Telecom New Zealand -- to 
voluntarily reduce their termination rates (ref A). 
 
¶4. On May 1, Cunliffe made public the commission's final 
report, which again recommended regulation of the fees and 
extended its suggestion to all voice calls.  The commission's 
previous recommendation excluded calls made over 
third-generation (3G) mobile networks so as not to discourage 
investment in the new 3G technology.  Cunliffe can accept or 
reject the commission's recommendation or again send it back 
to the commission for reconsideration.  If he accepts the 
recommendation, the commission then would set the mobile 
termination rates, most likely based on benchmarking against 
other OECD countries. 
 
¶5. The commission estimated the cost of providing mobile 
termination to be about NZ 15 cents (US 9.5 cents) per 
minute, while the New Zealand mobile network operators have 
been charging an average of NZ 27 cents (US 17 cents) per 
minute.  The fee charged overseas carriers has been almost US 
6 cents higher than that.  Both Vodafone and Telecom oppose 
regulation of the mobile fees. 
 
¶6. A copy of the commission's 112-page decision can be found 
on its website, www.comcom.govt.nz. 
 
¶7. Comment: Vodafone and Telecom already have had one 
opportunity to submit a proposal for voluntary rate 
reductions.  Minister Cunliffe's patience appears to be 
wearing thin, especially as public opinion has turned against 
the large telephone companies.  He is likely to accept the 
commission's recommendation. 
McCormick