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WELLINGTON -(Dow Jones)- New Zealand's competition watchdog Tuesday released its draft report recommending regulation of mobile termination prices.
Mobile termination prices are the wholesale charges mobile phone companies charge for terminating calls or texts from other fixed or mobile networks.
"The Commission's preliminary finding, which is now subject to consultation, is that mobile termination charges are currently significantly above cost," the New Zealand Commerce Commission said in a release.
According to the regulator, current wholesale termination charges "are likely to limit the ability of a new entrant mobile phone company to compete."
New Zealand's mobile market is currently split between two dominant operators - Telecom Corp. of New Zealand (TEL.NZ) and Vodafone New Zealand Ltd., the local unit of U.K.-based Vodafone Group PLC (VOD).
A new entrant, 2degrees Mobile Ltd., which aims to launch in August, has said its biggest challenge is linked to mobile-to-mobile termination fees.
In May the company said the issue would not stop it from launching but will have an impact on what it can offer customers unless it is resolved.
The Commerce Commission launched its investigation into whether the wholesale rates should be regulated late last year. All three companies have offered voluntary undertakings in lieu of regulation but the Commission has recommended these be rejected.
It added that its preliminary view, based on its overseas benchmarks, "is that the initial cost-based termination rates in 2009 should be 7.2 NZ cents per minute for mobile voice calls and 0.95 NZ cent per text, with these rates reducing to 3.8 NZ cents per minute for mobile voice calls and 0.5 NZ cent per text by 2015."
According to the commission, the benchmarked rates are significantly below current wholesale prices in New Zealand. It noted that the prices are also below the prices offered by Telecom and Vodafone in their undertakings.
Submissions by interested parties are due by July 27.
The Commission's investigation will result in a recommendation before the end of the year to the Ministry for Communications and Information Technology, it said.
-By Rebecca Howard, Dow Jones Newswires; 64-4-471-5990; rebecca.howard@dowjones.com