Termination rates: the facts
What’s a “mobile termination rate”?
When you call or text someone on a different network – or call them from your landline – their network charges yours a fee for receiving the call or text. It’s called the mobile termination rate, and it gets included in the price you pay.
Rates are higher in New Zealand than in other countries.
Telecom and Vodafone’s standard termination rates are around 15 cents a minute for calls, and nearly 10 cents for texts. That’s far more than what it really costs for them to receive the calls and texts. The Commerce Commission’s draft report says that a fair price is likely to be just 4-7 cents for calls and 0.5 - 1 cent for texts. These would still be far higher than in more competitive countries.
See just how bad the rip off is.
So what?
Telecom and Vodafone’s high rates hurt consumers:
- HIGH COSTS: The average Kiwi pays hundreds of dollars a year more than they need to
- LOW USAGE: Kiwis make fewer calls to and from mobile phones, because we can’t afford to
- TWO PHONES: Thousands of Kiwis are forced to suffer the indignity and extra costs of having two phones to get around the high prices.
What Kiwis think
Before launching the campaign, Drop the Rate, Mate! carried out some polling to see what Kiwis thought of the current mobile and landline charges in New Zealand. Not suprisingly, the results showed that:
- 81% of Kiwis know they’re being over-charged by Telecom and Vodafone
- 86% say it should cost the same to call or text someone on another network, as it does to contact someone on the same network
- 81% of us want the Government to accept the Commerce Commission’s recommendations to cut termination rates
Since then we’ve polled again. Read the reports in full:
Worse – there’s been no competition.
Until recently, we’ve only had two mobile networks – Telecom and Vodafone. Most countries like ours have three or four or more, for at least the last ten years. This also distorts the landline market.
The high termination rates imposed by Telecom and Vodafone have closed their networks to competition. When a new operator starts, its customers have to make most of their calls to other networks. So, proportionally, they spend far more on excessive termination rates, and call prices don’t come down as much as they should. The new company ends up having to subsidise Telecom and Vodafone just to enter the market.
How come Telecom and Vodafone have got away with it?
In New Zealand, mobile termination rates are set by the companies themselves. Unlike in most other countries like ours, the big two haven’t been made to keep termination rates at efficient, competitive levels by government and the competition watchdogs. That means Telecom and Vodafone have kept charging well above the cost of providing the service, to keep competitors out. In the meantime, the big two have picked up a subsidy from pretty much everyone who uses a phone – as much as $2.5 billion in just the last ten years.
How can we fix it?
Back in June 2009, New Zealand's competition watchdog, the commerce Commission, said that mobile termination rates should come down to reflect the efficient and reasonable cost of connecting a call. Otherwise, it said, retail prices will stay high and competition won't take hold.
Since then, two Commissioners have done an about-face and are siding with the big telcos, while one is standing by their original recommendation - the Commissioners can't agree on a way forward. That's why it's important that we let the Government know we want regulation of mobile termination rates.
Join us. Tell the Government: Drop the Rate, Mate!
