SECTION 1377 TELECOM REVIEW -- NEW ZEALAND

UNCLAS WELLINGTON 000161

SIPDIS

SENSITIVE

STATE FOR EB/CIP-AHYDE AND EAP/ANP-TRAMSEY
STATE PLEASE PASS TO USTR FOR AAUGEROT AND DKATZ

E.O. 12958: N/A
TAGS: ECPS ECON ETRD PREL NZ
SUBJECT: SECTION 1377 TELECOM REVIEW -- NEW ZEALAND

REF: A. STATE 26652


B. 04 WELLINGTON 882

Sensitive but Unclassified -- for U.S. government channels
only.

(U) U.S. telecommunications companies have reported excessive
fixed-to-mobile termination rates as a barrier to competition
in New Zealand. Responses to questions posed in ref A follow:


1. (U) Is there a ratio between rates charged for termination
of fixed networks and rates charged for termination on mobile
networks that reflects the disparate costs of the different
networks?

The New Zealand government is unable to provide such a ratio.
While fixed network termination rates are regulated under
the Telecommunications Act 2001 at cost-based prices, mobile
termination rates are not regulated. Instead, they are
determined by commercial agreements, and the government does
not have access to the terms of those agreements.


2. (U) What would be a reasonable ratio?

Mobile termination rates are not regulated, and the
government does not have a view on what would constitute a
reasonable ratio.


3. (U) What is the status of the regulator's preliminary
finding of excessive fixed-to-mobile fees?

Since release of the Commerce Commission's draft report on
its investigation into regulation of mobile termination rates
on October 18, 2004 (ref B),the Commission has received
written comments on the draft report, as well as
cross-submissions commenting on other parties' submissions.
The Commission was expected to hold a conference February 23
to 25 to seek additional information on particular aspects of
the submissions and cross-submissions. The Commission will
provide its final report to the Minister of Communications in
the next quarter. The Communications Minister then could
accept the Commission's recommendations, reject them or refer
them back for further consideration.


4. (SBU) What is the prospect for the GONZ to implement
remedies to address this problem?

We expect the Commerce Commission's final decision to be
consistent with its draft report, which recommended that
mobile termination charges be regulated. However, the
Commission is fully capable of reversing course, having done
so in its recommendation in December 2003 against unbundling
the local loop -- a turnabout from its earlier draft
position. The Communications Minister affirmed that
recommendation in May. Nevertheless, the Commission has
tended to favor increased regulatory pressure in situations
where it might increase competition in the telecommunications
market.

Even if the Communications Minister accepted a final
recommendation by the Commission to regulate rates, the
implementation of remedies would not be automatic. A party
in a dispute over access to the market would have to ask the
Commission to step into the dispute, and only then would the
Commission potentially set rates at a regulated level.
Swindells