(adds comment from 2degrees and vodafone)

Wellington, Feb 22 NZPA - The Commerce Commission, in a split decision, has rejected regulation as a means to reduce the costs of mobile phone calls charged by the country's two main players.

Instead, telecommunications commissioner Ross Patterson, in a report released today, has recommended that the Government accept proposals put forward by Telecom and Vodafone as an alternative to regulation.

He was backed up by associate commissioner Gowan Pickering, but the other commissioner, Anita Mazzoleni, believed mobile termination access services should be regulated.

Ms Mazzoleni said that while Telecom and Vodafone's proposals would deliver a reduction in mobile termination rates three months earlier than under regulation, the rates would remain significantly higher than the commission's benchmarks over the five-year period of the undertakings.

"The barrier arising from the prices in the final undertakings continues to ensure an uneven playing field, and this will impede the benefits competition will otherwise deliver to New Zealand consumers."

New mobile company 2degrees also slammed the decision.

Its regulatory and commercial manager, Bill McCabe, said the commission appeared to have squandered a "golden opportunity to finally bring New Zealand mobile prices into line with the rest of the developed world".

The full benefits of rigorous competition bringing lower prices would be stifled, he said.

"New Zealand consumers suffer with some of the highest mobile prices in the world. The commission's recommendation to leave the decision on access pricing up to the incumbents, Vodafone and Telecom, will mean this burden on New Zealanders continues for the foreseeable future."

New Zealand's mobile termination access services, which are the wholesale charges mobile phone companies charge for terminating calls or texts from other land line or mobile networks, have been criticised as being too expensive.

During the commission's 15-month investigation both Telecom and Vodafone offered their own plans to reduce rates over time.

They have offered to slash their charges for routing calls to customers from their current rate of 15 cents a minute to 0.1 cents a second by the beginning of 2014 and do away with most charges for routing texts.

Vodafone welcomed the decision, saying it was a pragmatic one, given the uncertainty around a long regulatory process. Telecom was also happy, saying an industry solution was best for consumers.

Dr Patterson said the final undertakings offered mobile termination rates that were significantly lower than those offered in earlier undertakings. While these rates remained above the range of the commission's cost-based benchmarks, they addressed the competition concerns.

"The long-term interest of consumers will best be served by applying the least intrusive means to address the competition concerns identified in the investigation. This will allow market forces to continue to operate in areas outside the scope of intervention," he said.

Minister for Communications and Information Technology Steven Joyce, who can accept or reject the commission's findings, invited submissions on the final report. Submissions close on March 8.

NZPA WGT dw kn