April 21, 2010 8:02am by David Farrar

A possible own goal

Vodafone’s new Talk plan for pre-pay customers has raised a red flag for the Commerce Commission on whether mobile termination rates should be regulated.

In February, the commission recommended Communications Minister Steven Joyce accept Vodafone and Telecom’s proposal as an alternative to regulation on the basis the final undertakings would address its competition concerns. The proposal is to reduce rates to 6c per minute by 2014.

But Vodafone’s new Talk pre-pay plan, launched last week, has raised questions whether an industry solution will hinder smaller companies.

The Talk plan offers customers 200 minutes on its network and to landlines for $12 a month on certain pre-pay plans. This works out to about 6c a minute.

It costs 89c per minute to call a Telecom phone from a Vodafone phone. The current termination rate between the networks is 14.4c.

2degrees chief commercial officer Bill McCabe said Vodafone’s new plan made it 15 times more expensive for a Vodafone customer to call a 2degrees phone than to call its own network.

Telecommunications commissioner Ross Patterson said it was the commission’s initial view that the Vodafone Talk plan may be material and have the potential to affect the basis for its recommendations in the final report.

Joyce said: “I wrote to the commission to ask them their view on whether Vodafone’s new Talk Add-on offer to its prepay customers is material to the decision on mobile termination access services. They replied that it may be the case.”

Vodafone’s move may be one of the more stupid commercial decisions in recent times. The Government is days or weeks away from making a decision on mobile termination rates. The Commerce Commission was split 2 to 1 on its recommendation not to regulate, so it is a close call.

And then Vodafone comes out with a plan which absolutely undermines their commercial offer on termination rates. They set a retail price for on-network calls which is half the current wholesale termination rate between networks and will be higher or equal to the termination rate even in 2014, under the commercial undertakings.

If you asked me to sit in a room and think up a stunt that is most likely to push the Commerce Commission and Government away from accepting the commercial undertakings, and towards regulation – this is what I would come up with.

The fact the Minister has written to the Commission and said “Does this changes things” and that the Telco Commissioner has already said “Yes” is significant – especially that the Commissioner was one of those who voted not to regulate.

If the Government does now decide to regulate, they only have themselves to blame. I’m amazed they didn’t hold off any pricing changes until after the Minister made a decision.