US embassy cable - 05WELLINGTON616

UNCLAS WELLINGTON 000616 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR EB/CIP FOR AHYDE AND EAP/ANP FOR DRICCI 
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. 12958: N/A 
TAGS: ECPS, ECON, ETRD, NZ 
SUBJECT: NEW ZEALAND WATCHDOG TOLD TO RECONSIDER CURBS ON 
MOBILE TERMINATION RATES 
 
REF: (A) WELLINGTON 538; (B) WELLINGTON 461; (C) 04 
WELLINGTON 882; (D) 04 WELLINGTON 598 
 
1. (U) New Zealand's communications minister wants a review 
of a Commerce Commission recommendation that would reduce 
the high fees that mobile phone companies charge to 
terminate calls on their networks. 
 
2. (U) Communications Minister Cunliffe on August 9 asked 
that the commission reconsider its recommendation that the 
government regulate mobile termination rates.  In his 
request, the minister asked the commission to examine offers 
by the country's two mobile-phone service providers -- 
Vodafone New Zealand and Telecom New Zealand -- to reduce 
their termination rates voluntarily.  The phone companies' 
rate-cut offers would start sooner than under government 
regulation, but also would likely bring smaller, more 
gradual reductions.  The commission -- the country's anti- 
monopoly watchdog -- had concluded that the cost of mobile 
termination is about NZ 15 cents (US 10.7 cents) per minute, 
while New Zealand network operators have been charging about 
NZ 27 cents (US 19 cents) per minute.  Those fees are among 
the highest in the OECD. 
 
3. (U) Besides the commercial offers, Cunliffe also asked 
the commission to reconsider how it distinguished between 
second- and third-generation networks.  The commission's 
recommendation for regulation had excluded voice calls using 
third-generation mobile networks because of concern that 
such regulation might inhibit investment in the new 
technology.  Telecom complained because the commission said 
the company's new 027 network did not qualify as third- 
generation and thus would not be exempt from regulation. 
 
4. (U) In addition, Cunliffe asked the commission to 
consider how to ensure that savings from termination-rate 
cuts are passed on to people calling mobile phones from 
fixed lines.  Vodafone had asserted that cuts in termination 
rates would benefit only fixed-line providers, which would 
be under no obligation to pass their savings on to 
consumers. 
 
5. (U) In a statement accompanying his request, Cunliffe 
said he agreed with the commission's report issued June 9, 
after a year-long investigation, that mobile termination 
rates were too high and must come down (ref B).  "I am 
determined to see mobile termination rates reduced in a way 
that is workable and that benefits end users," Cunliffe 
said.  In regulation of telecommunications companies, the 
minister can act only on the commission's recommendation, by 
accepting its recommendation, rejecting it or requiring the 
commission to reconsider its recommendation. 
 
6. (SBU) Comment: Martin Wylie, chief executive for the New 
Zealand telecommunications company CallPlus, speculated in 
the press that Cunliffe looked as if he were trying to avoid 
taking on the powerful phone companies before the general 
elections, scheduled for September 17.  Regardless, Cunliffe 
clearly is listening to the two company's complaints, and 
the companies have succeeded in delaying any reduction in 
their mobile termination rates.  That delay is not good news 
for U.S. callers to New Zealand, since AT&T and other U.S. 
companies have faced increasing fees when they pass calls 
into the country.  However, it does appear inevitable that 
the fees will come down, although questions remain as to 
when and by how much. 
 
BURNETT