Wellington, March 25 NZPA - Telecom is questioning the Commerce Commission's benchmark figures for its warning over proposed wholesale mobile termination rates.

The commission today said mobile termination rates proposed by Vodafone and Telecom were "significantly" higher than the commission thought they should be.

The termination rates are the amount mobile phone companies charge other carriers to terminate calls on their networks.

The commission is investigating whether mobile-to-mobile, fixed-to-mobile and short-message-service (SMS) termination should be regulated.

But Telecom chief executive Paul Reynolds said that, while it was still analysing the detail of today's announcement, "there are some aspects of it that we would question".

The commission used a figure of 6 cents per minute (cpm) for Australia in its benchmark, but the Australian regulator has this month rejected this as being unrealistically low, Dr Reynolds said.

Vodafone had offered rates starting at 15cpm and reducing over time to 11cpm for voice calls, and SMS rates starting at 9.5c and reducing over time to 7c.

Telecom had offered the commission rates starting at 16cpm and reducing over time to 10cpm for voice calls, and a flat rate of 3.5c per SMS.

"We need to be careful not to make important regulatory and industry decisions on the basis of theoretical information that does not represent the real world."

Telecom operated a mobile termination rate deed as an alternative to regulation and the company believed the deed delivered rates at the mid-point of cost-based international benchmarks. That would deliver better outcomes for New Zealanders than regulation ever would, he said.

Telecom would reflect on the commission's comments, before submitting its final undertaking for this service, he said.

But the Telecommunications Users Association fully backed the Commerce Commission's announcement.

Phone users were being charged hundreds of dollars a year more than the reasonable cost for calls they make from their fixed and mobile lines, to mobiles, chief executive Ernie Newman said. "The cost-based figure the commission has calculated for mobile termination is around 9c a minute less than Telecom and Vodafone are currently charging.

"That means for example, a user who spends (conservatively) 10 minutes a day on calls from their fixed or mobile phone, to somebody's mobile, is incurring $300 a year in excess charges that are way above a reasonable rate of return for the mobile operators."

If the commission accepted Telecom's and Vodafone's proposal of a very slow glide path down to 11c between now and 2014 such a user would incur around $1300 in excess charges over that time, he said.

"Given the extent of the over-charging, such a glide path is entirely inappropriate.

"Regulators and network economists around the world recognised years ago that some elements of the telecommunications market do not respond to market forces in the normal way and need to be regulated. Termination charges are one example."

C o mmission chairwoman Paula Rebstock earlier today said the mobile termination rates provided by Vodafone and Telecom in their undertakings were significantly above the commission's preliminary view on current international cost-based benchmarks.

"The commission's preliminary view, based on current benchmarks, is that cost-based termination rates could be as low as 7cpm for mobile-to-mobile and fixed-to-mobile voice calls, and 1c per SMS."

The commission expected any revised undertakings would need to offer significantly lower mobile termination rates before the commission could consider recommending they be accepted.

Any revised undertakings from Vodafone, Telecom and NZ Communications must be supplied by April 22. After the commission has received any revised undertakings it will issue a draft report. A conference will be held before the commission releases a final report.

NZPA WGT dw nb