NZ High Mobile Rates Stagnate SME Growth and Overall Trade

There is no other technology that has aided SME growth world over as that of mobile telephony did till date. However, in New Zealand, that premise cannot be applied as mobile rates did not periodically glide down, which would have encouraged self-employed and SMEs to grow their business while minimizing costs.

But a recent draft tabled by the New Zealand Commerce Commission hopes to intensify competition within the mobile industry by slashing the wholesale price of calls and text messages. The draft plan would reduce mobile termination rates for calls from around 14c per minute to 4.68c per minute. Text message rates would be set at zero, down from about 9c.

Termination rates are the fees telcos charge one another for the termination of a call or text message originating from a rival network. The draft regulations fly in the face of a voluntary reduction approach favoured by Telecom Corp. and Vodafone New Zealand Ltd., the countrys two biggest mobile operators, who claim the market is already competitive and price regulation is unnecessary.

Vodafones head of public policy, Hayden Glass, reacted to the draft by saying that cutting termination rates would reduce both revenue and costs and prices may not fall. On the contrary, chief executive Eric Hertz of 2degrees, the new entrant to the New Zealand mobile market said There is no doubt in anyones mind that competition causes prices to come down.

If the draft is passed, by April 1 2011 the mobile call/minute will be about 10c with free texting. Even at that rate, the New Zealand will only reach the mobile call rate level of neighbouring Fiji, which strike no comparison either geographically or in economic size; the GDP of New Zealand is about $136bn whereas Fiji is just $3bn.

Lower mobile telephony rates are expected to stimulate domestic growth, which could benefit small farmers, individual trade licensees and several other small businesses. The commission is taking submissions on the proposal, and will release its decision in March 2011.

By Jose Roy