Vodafone gets vodaboned

Vodafone is not a happy operator in New Zealand. The mobile operators of NZ have been offered something of a Devils bargain by the Commerce Commission there. It has basically told the operators to agree internally on new, cheaper prices for network-to-network calls…. or else the Commerce Commission will do it for them. It looks like the operators will be taking care of matters themselves, and Vodafone is not happy about it.

What’s the deal?

The issue at hand is Mobile Termination Rates. This doesn’t refer to the end of the phone call, but rather where the phone call ends up - it’s “termination” point. In New Zealand, if that termination point is outside your own network then you can be charged up to 15 cents extra per minute. So if you’re a Telecom customer ringing a friend on Vodafone, your call will be significantly more expensive.

The Commerce Commission has decided that these prices need to drop, and informed the operators that if they could handle things themselves it wouldn’t need get involved.

How has that worked out?

Pretty good. The larger operators like Vodafone and Telecom are playing ball, and are introducing gradual price drops that should Mobile Termination Rates drop to 6 cents by 2014. The Commission wants them down to 3.8 cents by 2015, but we’ll see how that pans out. Complaints are rife around the whole process, unsurprisingly. Smaller operators are complaining somewhat - 2degrees claims that it’s unfair for smaller operators to have to cut the same kinds of costs as large operators.

What’s Vodafones worry?

Vodafone is kicking up a stink about the revenue loss it will see from this. The operator estimates it will see $50 million go down the tubes straight away, with more than being lost over the course of rate reduction. More than that, though, is Vodafones claim that the Commisions work on this area is “lacking”. Tom Chignell, Vodafone NZs General Manager of Corporate affairs, says that since the New Zealand market is declining the Commission hasn’t thought this through properly.

What we think?

Operators complaining about rate reductions? Really? I never!

To be fair, all of the operators involved here have been remarkably co-operative. Despite their concerns, so far it seems that none of the operators will be raising legal challenges to the new legislation and are working to meet Commission edicts.

But it should be noted that the Commission won’t be delivering a recommendation to the Government until February… so there’s plenty of time for it to collapse yet.