US embassy cable - 05WELLINGTON161

UNCLAS WELLINGTON 000161 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR EB/CIP-AHYDE AND EAP/ANP-TRAMSEY 
STATE PLEASE PASS TO USTR FOR AAUGEROT AND DKATZ 
 
E.O. 12958: N/A 
TAGS: ECPS, ECON, ETRD, PREL, NZ 
SUBJECT: SECTION 1377 TELECOM REVIEW -- NEW ZEALAND 
 
REF: A. STATE 26652 
 
     B. 04 WELLINGTON 882 
 
Sensitive but Unclassified -- for U.S. government channels 
only. 
 
(U) U.S. telecommunications companies have reported excessive 
fixed-to-mobile termination rates as a barrier to competition 
in New Zealand.  Responses to questions posed in ref A follow: 
 
1. (U) Is there a ratio between rates charged for termination 
of fixed networks and rates charged for termination on mobile 
networks that reflects the disparate costs of the different 
networks? 
 
The New Zealand government is unable to provide such a ratio. 
 While fixed network termination rates are regulated under 
the Telecommunications Act 2001 at cost-based prices, mobile 
termination rates are not regulated.  Instead, they are 
determined by commercial agreements, and the government does 
not have access to the terms of those agreements. 
 
2. (U) What would be a reasonable ratio? 
 
Mobile termination rates are not regulated, and the 
government does not have a view on what would constitute a 
reasonable ratio. 
 
3. (U) What is the status of the regulator's preliminary 
finding of excessive fixed-to-mobile fees? 
 
Since release of the Commerce Commission's draft report on 
its investigation into regulation of mobile termination rates 
on October 18, 2004 (ref B), the Commission has received 
written comments on the draft report, as well as 
cross-submissions commenting on other parties' submissions. 
The Commission was expected to hold a conference February 23 
to 25 to seek additional information on particular aspects of 
the submissions and cross-submissions.  The Commission will 
provide its final report to the Minister of Communications in 
the next quarter.  The Communications Minister then could 
accept the Commission's recommendations, reject them or refer 
them back for further consideration. 
 
4. (SBU) What is the prospect for the GONZ to implement 
remedies to address this problem? 
 
We expect the Commerce Commission's final decision to be 
consistent with its draft report, which recommended that 
mobile termination charges be regulated.  However, the 
Commission is fully capable of reversing course, having done 
so in its recommendation in December 2003 against unbundling 
the local loop -- a turnabout from its earlier draft 
position.  The Communications Minister affirmed that 
recommendation in May.  Nevertheless, the Commission has 
tended to favor increased regulatory pressure in situations 
where it might increase competition in the telecommunications 
market. 
 
Even if the Communications Minister accepted a final 
recommendation by the Commission to regulate rates, the 
implementation of remedies would not be automatic.  A party 
in a dispute over access to the market would have to ask the 
Commission to step into the dispute, and only then would the 
Commission potentially set rates at a regulated level. 
Swindells