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