NEW ZEALAND WATCHDOG TOLD TO RECONSIDER CURBS ON

UNCLAS WELLINGTON 000616

SIPDIS

SENSITIVE

STATE FOR EB/CIP FOR AHYDE AND EAP/ANP FOR DRICCI
STATE PASS TO USTR FOR BWEISEL AND LCOEN
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: NEW ZEALAND WATCHDOG TOLD TO RECONSIDER CURBS ON
MOBILE TERMINATION RATES

REF: (A) WELLINGTON 538; (B) WELLINGTON 461; (C) 04
WELLINGTON 882; (D) 04 WELLINGTON 598


1. (U) New Zealand's communications minister wants a review
of a Commerce Commission recommendation that would reduce
the high fees that mobile phone companies charge to
terminate calls on their networks.


2. (U) Communications Minister Cunliffe on August 9 asked
that the commission reconsider its recommendation that the
government regulate mobile termination rates. In his
request, the minister asked the commission to examine offers
by the country's two mobile-phone service providers --
Vodafone New Zealand and Telecom New Zealand -- to reduce
their termination rates voluntarily. The phone companies'
rate-cut offers would start sooner than under government
regulation, but also would likely bring smaller, more
gradual reductions. The commission -- the country's anti-
monopoly watchdog -- had concluded that the cost of mobile
termination is about NZ 15 cents (US 10.7 cents) per minute,
while New Zealand network operators have been charging about
NZ 27 cents (US 19 cents) per minute. Those fees are among
the highest in the OECD.


3. (U) Besides the commercial offers, Cunliffe also asked
the commission to reconsider how it distinguished between
second- and third-generation networks. The commission's
recommendation for regulation had excluded voice calls using
third-generation mobile networks because of concern that
such regulation might inhibit investment in the new
technology. Telecom complained because the commission said
the company's new 027 network did not qualify as third-
generation and thus would not be exempt from regulation.


4. (U) In addition, Cunliffe asked the commission to
consider how to ensure that savings from termination-rate
cuts are passed on to people calling mobile phones from
fixed lines. Vodafone had asserted that cuts in termination
rates would benefit only fixed-line providers, which would
be under no obligation to pass their savings on to
consumers.


5. (U) In a statement accompanying his request, Cunliffe
said he agreed with the commission's report issued June 9,
after a year-long investigation, that mobile termination
rates were too high and must come down (ref B). "I am
determined to see mobile termination rates reduced in a way
that is workable and that benefits end users," Cunliffe
said. In regulation of telecommunications companies, the
minister can act only on the commission's recommendation, by
accepting its recommendation, rejecting it or requiring the
commission to reconsider its recommendation.


6. (SBU) Comment: Martin Wylie, chief executive for the New
Zealand telecommunications company CallPlus, speculated in
the press that Cunliffe looked as if he were trying to avoid
taking on the powerful phone companies before the general
elections, scheduled for September 17. Regardless, Cunliffe
clearly is listening to the two company's complaints, and
the companies have succeeded in delaying any reduction in
their mobile termination rates. That delay is not good news
for U.S. callers to New Zealand, since AT&T and other U.S.
companies have faced increasing fees when they pass calls
into the country. However, it does appear inevitable that
the fees will come down, although questions remain as to
when and by how much.

BURNETT