US embassy cable - 05WELLINGTON538

UNCLAS WELLINGTON 000538 
 
SIPDIS 
 
STATE FOR EB/CIP FOR AHYDE AND EAP/ANP FOR TRAMSEY 
STATE PASS TO USTR FOR BWEISEL AND LCOEN 
COMMERCE FOR 4530/ITA/MAC/AP/OSAO/ARI BENAISSA 
COMMERCE FOR 6920/ITA/OTEC/MYLES DENNY-BROWN 
 
E.O. 12356: N/A 
TAGS: ECPS, ECON, ETRD, NZ 
SUBJECT: LAWSUIT MAY DELAY DECISION ON MOBILE TERMINATION 
RATES IN NEW ZEALAND 
 
REF: (A) WELLINGTON 461; (B) 04 WELLINGTON 882; (C) 04 
WELLINGTON 598 
 
1.  New Zealand's two mobile-phone service providers have 
gone to court to challenge the Commerce Commission's 
recommendation that the government begin regulating land-to- 
mobile phone charges.  The court case throws into 
uncertainty what had been an expected decision by the 
Minister of Communications to follow the commission's advice 
and oversee regulation of mobile termination rates.  The 
court review could take weeks or months to complete and 
could be further complicated by the outcome of the coming 
national elections. 
 
2.  The Commerce Commission -- New Zealand's anti-monopoly 
watchdog -- in a final report issued June 9 took aim at the 
now unregulated fees that mobile telephone networks charge 
fixed-line operators to complete calls on their mobile 
networks.  In New Zealand, these rates are among the highest 
in the OECD, the commission noted in its recommendation to 
the Minister of Communications (ref A).  The commission 
expected that regulation would increase competition in the 
domestic fixed-to-mobile market, resulting in lower retail 
prices for fixed-to-mobile calls.  Regulation also might 
reduce the charges paid by U.S. residents when making calls 
to New Zealand.  AT&T and other U.S. companies have 
protested increasing fees on calls they pass to mobile 
phones in the country. 
 
3.  Vodafone New Zealand on June 29 filed papers in the High 
Court in Auckland seeking a judicial review of the 
commission's recommendation.  A week later, Telecom New 
Zealand joined the proceedings.  In its court filing, 
Telecom contended that the Commerce Commission had failed to 
take sufficient account of public submissions during its 
investigation into mobile termination rates. 
 
4.  The minister, David Cunliffe, can accept the 
commission's recommendation, reject it or ask the commission 
to reconsider its recommendation.  However, a commission 
official said July 11 that, because of the court case, the 
minister is uncertain when, or if, he will issue a decision. 
Because a court ruling could change or restrain his 
decision, implementation of any decision he makes could be 
delayed until the court case is resolved, the official said. 
 
5.  While other industries have previously mounted court 
challenges to Commerce Commission decisions, this is the 
first case to be filed against the commission under the 
current telecommunications regulatory regime.  That regime 
came into force in 2002 with the establishment of a 
telecommunications commissioner within the Commerce 
Commission. 
 
6.  Comment:  Potential regulation of mobile termination 
fees could be further delayed -- or doomed -- by the outcome 
of coming national elections.  They are as yet unscheduled 
but must be held by September 24.  The opposition National 
Party has indicated that it might oppose regulation of 
termination rates.  Its communications spokesman told the 
New Zealand Herald that, if elected, the party would look at 
the issue "from a fresh perspective."  National and the 
ruling Labour Party have been running neck-and-neck in the 
opinion polls.  At this point, it seems very possible that 
neither party will attain a clear majority in Parliament, 
requiring the winner to seek a coalition partner. 
 
SWINDELLS