Wednesday, 2 March Shane Kinley Chief Advisor Telecommunications Commerce Commission Wellington.

Transcription

1 Vodafone New Zealand Limited Corporate Affairs 20 Viaduct Harbour Avenue Private Bag Auckland, New Zealand Reception Facsimile Wednesday, 2 March 2011 Shane Kinley Chief Advisor Telecommunications Commerce Commission Wellington By shane.kinley@comcom.govt.nz Dear Shane, Vodafone comments on MTAS implementation issues 1. This letter is Vodafone s response to the Commission s request of 23 February 2011 for some further MTAS-related information, and some comments on matters of detail on potential approaches the Commission might take in relation to regulating MTAS. 2. The Commission seeks comments on the possible implementation of a ban on on-net pricing, a glidepath for fixed-to-mobile calls, and asymmetric termination rate pricing. Before we turn to those matters, we want to register our objection to the timeframe and process for this consultation. 3. Included with this submission is a short note from Covec, updating its MTR glidepath benchmarking after feedback from Network Strategies in the cross-submission phase. Timeframe and process concerns 4. The five working days the Commission has provided for comment falls short of a reasonable timeframe. While various glidepaths have been discussed in the course of the process to date, the details of how asymmetry in termination rates or a ban on on-net pricing might work are new issues. And each of these three issues could impact dramatically on the scope and effect of the regulated MTAS service. 5. It is also difficult to provide meaningful comment because the Commission has not advanced specific proposals for comment. The details of the on-net pricing ban that 2degrees seeks were revealed for the first time in submissions on 7 February although 2degrees has said for some time that it is keen on a ban. To our knowledge the question of how an asymmetry might work has never been articulated in this process, since the Commission has always rejected asymmetry on principle. 6. If major issues are raised substantively so late in the STD process, we are concerned that

2 interested parties are not being afforded a reasonable opportunity to provide informed comment, and the quality of the Commission s decision-making may be in peril. 7. In particular, the proposed ban on on-net pricing is such a significant change to the scope of the MTAS that it warrants full independent assessment. The scope and impact of a ban on onnet pricing would be enormous, with major negative customer impacts, and no assessment has been made at all of what the scale of benefits associated with the ban would be, if indeed any measurable benefit can be identified. 8. Giving parties five working days to submit on an intervention of this magnitude and without essential details so late in the MTAS process is not reasonable. We cannot see how the Commission could possibly hope to resolve the issues of legality and principle, let alone figure out the details of implementation, and determine whether on balance banning on-net pricing would promote competition, in the period that remains before the Final Report. We note that Telecom raises a number of practical issues that are still to be worked through in its crosssubmission. We echo Telecom s concerns, and note that the exact form of any ban on on-net pricing will determine its impact on competition and on customers. Interconnection arrangements that use Bill and Keep 9. The Commission has asked for information on any commercial interconnection agreements to which we are a party that use bill-and-keep (BAK) or hybrid BAK pricing for either voice or SMS. 10. Before we turn to the agreement details, it is worth noting two preliminary comments on BAK agreements. 11. First, commercial arrangements for SMS on a BAK basis are not entered into until both parties have made a risk assessment of the likely volumes and value of the arrangement. This could include the following factors: Past traffic balance / imbalance Expected volume/scale (e.g., international SMS has volumes 1000 times lower than domestic SMS) The extent to which international interconnect SMS is included as part of a wider, higher value arrangement e.g., for international roaming Reciprocity Expected percentage imbalance Expected absolute imbalance (e.g., number of SMS) The rate at which traffic might grow Whether previous arrangements between the parties have been paid or BAK The extent to which changing incentives might be anticipated to change behaviour / traffic The extent to which billing and measuring systems are already set up, or would be required to be set up with associated costs Appropriate pre-conditions for BAK continuing 2

3 Risk of arbitrage Risk of abuse such as spam The extent to which monitoring processes or systems would have to be put in place to detect or prevent arbitrage or abuse, and the cost of this Whether mechanisms to deal with spam (e.g., by blocking) have already been developed and put in place, or whether they would need to be developed The term for the arrangement The ability and extent to which agreed contractual mechanisms are in place to unwind the arrangement e.g., by moving to paid arrangements, and the certainty around these mechanisms The ability to terminate the arrangements on notice Concurrent background events, e.g., increasing volumes of SMS spam in the marketplace 12. Second, volumes of international SMS and domestic SMS vary significantly. For Vodafone, the average number of inbound SMS per month per international roaming partner is only [ ] VNZRI thousand. We note that this compares with SMS volumes inbound from Telecom of [ ] VNZ/TNZ API2 million per month and from 2degrees of [ ] VNZ/2D API2 million for January Commercial BAK arrangements entered into on this basis and on this scale are fundamentally different to the Commission mandating pure BAK, without limitation or regard to traffic imbalances, or any prior agreement of review conditions or consideration of the circumstances under which the arrangements would move to paid arrangements. International interconnect SMS arrangements with international roaming partners 14. Vodafone has approximately [ ] VNZRI international roaming partners. International SMS with [ ] VNZRI of these international roaming partners is on an informal BAK basis. These roaming arrangements are put in place in order to provide international roaming service to our customers. As a by-product, the roaming signalling link can also be used for interconnect (non-roaming) SMS. These roaming arrangements are governed by a suite of GSM-A (GSM Association) standard agreements, with whatever variations the parties may agree. 15. The GSM-A suite of agreements includes agreement AA19, which covers international SMS. Historically, industry standard practice has usually not been to sign an AA19 initially. There are usually at least three signed AA agreements covering roaming services (AA12, AA13, AA14), but AA19 is signed on request by either party. 16. This means that there is no formal signed agreement (BAK or otherwise) between the parties in most cases. It is an informal arrangement based on trust, and it is understood in the industry that these signalling links should only be used for person-to-person (P2P) SMS between the subscribers of each mobile network, i.e., it is not intended for transit or for application-to-person (A2P) SMS. It is industry practice that either party can at any time give notice it wishes to move to a paid arrangement by entering into an AA19 for any reason. 3

4 17. It is also useful to note that the GSM Association AA19 agreement, which covers international SMS, provides that the AA19 SMS agreement can be terminated if an unacceptable level of use occurs and the other Party is not capable of remedying such event within 60 days of a written notice to such effect These BAK SMS arrangements exclude all forms of transit, including Access Seeker transit. Spam Issues 19. Vodafone is experiencing increasing problems with SMS spam, especially advance fee SMS lottery scams. 20. Vodafone has put in place processes to better follow up on Vodafone customer complaints or incidents of SMS spam. Any spam SMS of which we are made aware is traced back to the sending operator, and that operator is moved to paid arrangements, regardless of the number of SMS spam involved. In Vodafone s experience, the most effective means of deterring spam is paid arrangements 21. Over the last 6 months, Vodafone has identified [ ] VNZRI additional international roaming partners with SMS imbalances that are of concern, or who are sending spam, and we are in the process of moving these international roaming partners to paid SMS arrangements. These [ ] VNZRI are in addition to [ ] VNZRI international roaming partners that were already on paid SMS arrangements. International SMS hubbing arrangements 22. Vodafone has [ ] VNZCOI international SMS interconnects with [ ] VNZCOI for international P2P SMS. 23. [ VNZCOI ] 24. This is the arrangement referred to in the Commission s draft STD of 23 December 2010, para 66, where the Commission notes that Vodafone has provided an example of a hybrid BAK arrangement for hubbing international SMS with Sybase365, which provides that if the traffic imbalance is greater than 25 thousand SMS per month (or if traffic is imbalanced by greater than 5%), then it moves to a paid arrangement for all SMS. Note that only one of these conditions is required to be met to move to paid arrangements, e.g., if traffic is imbalanced by 26,000 SMS, that is sufficient, even if the imbalance were only 1%. 25. [ 1 GSM Association Official Document AA.19 SMS Interworking Agreement, version 12.0, clause 7.1 4

5 ] VNZCOI Intra-LICA voice calls including dial-up internet traffic 26. [ ] VNZ/TNZ API2 27. The Commission will be aware of the historic industry disagreements regarding 0867 and dialup internet, free dialup internet services such as Zfree, i4free and Freenet, the court action against Telecom over 0867, and Telecom s TSO obligations to offer free local calling to residential customers. 28. Prior to substantial increases in traffic that resulted from dialup internet traffic, especially free dialup internet traffic, interconnect arrangements for intra-lica calls were on a paid per minute basis, and dial-up Internet calls simply used normal local numbers there was no need for a special 0867 number. 29. These increases in dialup traffic led to a fundamental disagreement between Telecom and other operators about whose traffic these local dialup calls were. Interconnect generally works on a cascade payments basis. The party collecting the money from the retail end user cascades some of that money on to the other carrier to cover their network costs. Telecom took the position that the ISP was collecting the retail money for dialup internet and should contribute to Telecom s network costs as an Access Seeker. Other operators took the position that dialup internet was no different to other local calls, and Telecom was the Access Seeker, because it was collecting a monthly line rental from its residential and business local service customers, and a per minute charge from its business local customers, and should pay interconnect termination as normal. 30. Note that without doubt, it is Telecom who is providing the retail outgoing local call service for dialup calls (from the Telecom network to the ISP s network). Therefore Telecom s position is effectively that dialup internet calls are billed on an RPP (receiving party pays) basis at retail, i.e., the end user is a customer of both service providers, and the ISP is billing its customers for incoming calls to access the dialup internet service (and Telecom provides the outgoing call service). Interconnect arrangements such as BAK that are being used for RPP services are not necessarily a good precedent or desirable arrangement for CPP (calling party pays) services. 31. Telecom also raised the issue of call sinks, arguing that the average cost per minute for dialup internet (on the termination side of the handover point) was significantly lower than other intra-lica calls. 32. Telecom s initial response to free dialup internet was to change its interconnect agreements so that all intra-lica calls remained on a paid per minute basis, except for calls to call sinks, which were BAK / zero charge. Call sinks were defined as any local number which generated more than 10 times inbound minutes as outbound minutes, and was intended to capture local numbers used for dialup internet, which was one-way traffic. 5

6 33. ISPs then started generating a small amount of reply outbound local calls from the dialup internet access numbers, in order to keep traffic ratios at about 9:1, and again attract per minute payments. 34. Since that time, Telecom has insisted on BAK for all intra-lica calls including dialup internet calls, [ ] VNZ/TNZ API2 35. The BAK arrangements for intra-lica calls should be viewed taking into consideration Telecom s TSO obligations, the issues arising from free dialup internet, and these fundamental disagreements about who should pay whom. 36. Although intra-lica voice (non dialup) calls are likely to be balanced between local access networks, this is not the case for dialup internet calls. In the case of dialup internet calls, these arrangements are not really BAK, they are Telecom imposing a termination rate of zero on Access Providers. Dialup internet traffic is not expected to be balanced, and there is no requirement of reciprocity. If an ISP has no local access customers of its own, dialup internet traffic will be entirely in one direction (outbound from the Telecom local network to the ISP). 37. In other words, if an ISP has no local access customers of its own, and simply offers dialup services, Telecom refuses to pay interconnect termination for outbound local calls from Telecom to the ISP (and requires use of 0867 numbers), but this is not really BAK because it is not reciprocal it is simply Telecom imposing a termination rate of zero on Access Providers (or a practical outcome of a fundamental disagreement about who should pay whom, depending on your perspective). This was the reason for the court action against Telecom over BAK treatment of intra-lica calls has resulted in extra complexity (distinguishing BAK intra- LICA calls from standard 1 cent per minute calls for billing purposes), and extra network costs for parties other than Telecom, for example Telecom requires standard calls (which are charged at 1 cent per minute) to be delivered on separate physical trunks (SPOLI trunks) to intra-lica calls (delivered on POLI trunks) and separate trunks again for dialup traffic. As a result, 24 locations x uni-directional trunks in 2 directions x 3 different types of trunks results in a proliferation of trunks (144 for nationwide interconnect with Telecom). 39. In order to avoid this extra cost and complexity, [ ] VNZCOI 40. We also note that these BAK arrangements for intra-lica calls exclude all forms of transit, including Access Seeker transit ie retail local calls which involve Access Seeker transit are treated as standard (1 cent per minute) calls, not intra-lica (BAK) calls. 41. BAK for intra-lica calls is not evidence of good commercial precedent for BAK as an economically efficient outcome. Rather it is evidence of the far-reaching, market-distorting impacts of mandating a rate of zero (whether for TSO local calls, or for MTAS SMS). 6

7 Post-paid customer numbers 42. The Commission has asked for the numbers of post-paid customers with various levels of time remaining in contract. 43. In our cross-submission we stated we currently had approximately [ ] VNZRI customers under contract, or [ ] VNZRI of our On Account customer base of [ ] VNZRI customers. 44. Specifically, as of the 18th Feb, Vodafone had [ ] VNZRI customers with time remaining in contract. This is divided as follows: Customer contracts with under 12 months remaining: [ ] VNZRI Customer contracts with over 12 months remaining: [ ] VNZRI 45. The balance of the [ ] VNZRI On Account customers is made up of [ ] VNZRI customers that have either completed the term commitment of their contract or were on no term contracts. Retail non-discrimination condition 46. The Commission has asked for comments on the design of a potential retail nondiscrimination condition. It is not clear from the letter, but we assume that the Commission wishes to discuss a ban on on-net calling by Vodafone and Telecom that would operate to give 2degrees a commercial advantage in the retail market. This is what 2degrees has proposed in its submission, and it is the only party to seriously argue for the imposition of such a condition. 47. The Commission has expressly tied imposition of such a condition to a glidepath in its draft STD, and we assume this continues to be a pre-requisite for implementation of an on-net pricing ban in favour of 2degrees. 48. We reiterate our view that imposition of any form of retail price control is unlawful under the Telecommunications Act We refer the Commission to our submission and crosssubmission on this point, where our views are set out more fully. 49. In case the Commission were to proceed in any case to ban on-net pricing, any retail pricing intervention would need to be clearly justified in terms of the long-term benefit for end-users. 50. It is very hard to see anything but significant detriments in the retail market from a ban on onnet pricing. All operators provide retail plans that they think will attract and retain customers. All operators offer on-net calling deals. There is no impediment in the retail market preventing any operator from replicating any other operators offers, including on-net calling offers. Removing these pricing initiatives from the retail market harms both end-users, especially those enjoying the benefit of on-net calling discounts, and competition. 51. In the face of such obvious detriment the benefits of retail price intervention must be carefully articulated. We see no benefit to retail price control in favour of 2degrees, because there is no evidence of detriment to 2degrees under current arrangements. As is obvious from the evidence in our Draft STD submission, 2degrees is continuing to attract customers and to 7

8 grow, with a market share already over 10%, and it has publicly announced that it continues to attract investment to expand its network, its distribution and its capacity to serve customers. 2degrees is a net beneficiary of termination rate revenues today, and reductions in fixed-tomobile revenues will harm its commercial performance. 52. Preventing Vodafone and Telecom from competing on their merits in such circumstances cannot be in the long-term interests of any party other than 2degrees. It should be plain at this point that 2degrees is seeking a regulatory leg up in the market for its own benefit rather than to address any competition concern in the retail mobile market. 53. We can understand that 2degrees may not wish to compete with other operators retail calling offers, just as it may have difficulty competing with their more extensive distribution, better handset range, stronger brands, or faster mobile data networks. But none of these matters are appropriately matters for Commission intervention, since they are not bottleneck points susceptible to regulation. They are some features, among many, of a competitive market, which consumers can weigh up in the balance when choosing a provider. 54. We note that the Commission has previously imposed informal controls on on-net pricing. The effect of the guidance it set out in its Final Reconsideration Report was to require that operators release no plan where the average on-net price for usage was less than 2½ times the termination rates that operator offered to 2degrees. As we explained in our submission, this is the guidance we continue to use when considering retail offers to bring to market. 55. Even this apparently relatively modest intervention, is a good example of the difficulties of retail price controls. This is because calculating whether this guidance is breached or not by any particular plan is complicated and uncertain. For example, in the case of testing a new voice and text bundle against these guidelines: We need to allocate bundle revenue between the voice and text components, We need to consider whether to count all retail revenues generated by the customer, or just revenues associated with the bundle, We need to consider whether to count inbound interconnect revenue for the customer, and the margins on inbound reply calls (including on-net reply calls) for the operator originating those calls, and We have to make judgements about likely bundle utilisation, which critically determine the average on-net rate in every case. 56. We have faced real practical difficulties in applying these guidelines in relation to new retail offers. They retard mobile competition from Vodafone, i.e., there are offers that have been ruled out from launch due to the Commission s guidelines. As we said in our submissions on the Draft STD, we suggest that the Commission clarify the status of these restrictions in its Final STD. That would remove uncertainty from our pricing approach, and encourage Vodafone specifically to compete more firmly with other operators, which can only be good for competition and for customers. 57. Although we consider a ban both illegal and impractical, if the Commission is to impose an on- 8

9 net pricing ban, we would encourage it to set up a separate industry process to develop the methodology for how the ban will work. It would be best if all issues were canvassed fully before any retail price intervention were implemented. 58. In our view the best resolution for the Commission s on-net pricing issue is that proposed by TUANZ: the Commission can reduce mobile-to-mobile termination rates (which, up to this point, 2degrees has argued is the necessary intervention) and monitor the impact on the retail market. If it concludes that that intervention has not achieved its goals (and it would be helpful if it could set out exactly what its goals are and how they would be measured), it can come back and look again at whether it needs to intervene. Differential glidepath for fixed-to-mobile calls compared with mobile-to-mobile calls 59. The Commission has asked for comments on how to set a differential glidepath for fixed-tomobile calls. 60. Vodafone s proposed glidepath for the fixed-to-mobile MTR (as set out in our submission) is based on international benchmarking against glidepaths used in other countries. We have proposed that the fixed-to-mobile MTR fall from the current rate of 17.7 cpm (on a second + second equivalent basis) to a cost estimate of 5.5 cpm by 1 April 2014, starting with a 5.7 cpm reduction on 1 April Overall our proposal represents a 69% reduction in the MTR over three years. A subsequent reduction to 5.3 cpm on 1 April 2015 reflects estimated cost reductions after the cost target is achieved Covec s glidepath benchmarking (now updated with new data for Hungary and Lithuania) shows that the median glidepath duration used by other regulators is 959 days just over 2 ½ years, and there is no relationship between duration and the overall reduction of the MTR, i.e., almost regardless of how much termination rates are being cut, regulators use a glidepath that is long by the Commission s standards. 62. Vodafone s proposed glidepath duration of three years is very similar to the median, and is of identical or very similar duration to the glidepaths used in the UK, Denmark, Australia, Lithuania, Sweden, and France, as shown in the following figure. 2 Note that the revised cost model results submitted on Monday would mean slight changes to the proposed fixed-to-mobile glidepath, with rates of 6.0 cpm and 5.8 cpm on 1 April 2014 and 2015 respectively. The chart below reflects the earlier proposal, with a 5.5 cpm rate from 1 April

10 Norway 1 Austria 1 UK Denmark Australia Lithuania Vodafone proposal Sweden France Belgium 2 Norway 2 Netherlands 2 Austria 2 Hungary 1 Belgium 1 Netherlands 1 Hungary 2 Overall Duration (days) Benchmarked glidepath durations 2,000 1,750 1,500 1,250 1, Covec also found a positive relationship between the number of drops on the glidepath and the overall reduction, with a 69% reduction corresponding to five drops. 64. A benchmarked glidepath for a 69% MTR reduction would therefore involve five drops of 2.4 cpm each. The first drop would be on 1 April 2011, with subsequent drops at intervals of 240 days. 65. The following figure shows Vodafone s proposed glidepath versus this international benchmark. Vodafone s proposal is more aggressive initially, delivering gains to fixed-line consumers and operators faster while helping to minimise the detrimental effects on mobile consumers. 66. We have commented in our submission on the draft STD on the need to monitor fixed-tomobile passthrough and what form that should take, and we say no more about it here. We would note that termination rates are going to move from minute plus second rounding to second plus second rounding. It would also be worthwhile to look at the extent to which that change which amounts to a reduction of almost a quarter in rates in itself is reflected in retail pricing. 10

11 Cents per minute (second + second) Vodafone s proposed glidepath and a benchmarked glidepath Vodafone Proposal Benchmark ,000 1,100 1,200 Days Asymmetry in termination rates 67. The Commission has asked for comments on how to set an asymmetry in termination rates. We assume that it has in mind setting termination rates for 2degrees that would be higher than those applying to Telecom and Vodafone for some interim period. 68. We have argued previously that there is no justification for an asymmetry in rates in practice since 2degrees needs no further regulatory assistance. We continue to hold that view. 69. In response to the Commission s question, we also state that the Commission has not established any kind of case for an asymmetry, and that it has not carried out the work that would need to be done as a precursor to design of an intervention. 70. As noted by other submitters, the European Regulatory Group (ERG) has fleshed out the arguments about asymmetry in some detail. 3 In its analysis the first step is to ask whether asymmetric rates applied in the wholesale market are a better remedy that other competition law options. In New Zealand s case the Commerce Act exists to address anti-competitive behaviour. In our view this is the correct place for the Commission to start as, if there is a problem, it should address it directly. If a competition issue exists (in this case it appears to be a Commission allegation that Vodafone s Bestmate plan is transgressing the Commerce Act), the Commission has the necessary powers already. 3 ERG Report on the Consultation for the ERG Common Position on symmetry of fixed call termination rates and symmetry of mobile call termination rates ERG (07) 83b final Note ERG is now BEREC. 11

12 71. If this is still thought inadequate for some reason, the ERG suggested two specific reasons for allowing temporary asymmetries between mobile termination rates of different operators: Objective and justifiable cost differences between operators, beyond their control, and Impediments to retail market entry and expansion, or late entry meaning, for a transitional period, a new entrant may face higher unit costs than other operators. 72. The only objective and justifiable cost difference the ERG points to is differences in spectrum cost and availability that cannot be resolved via market transactions. This is a not a problem in NZ. The Commission itself has said that barriers to expansion for 2degrees in the New Zealand market are few (draft STD, para 177). 73. The ERG also identifies three criteria where temporary asymmetries might be justified if all are met: There must be high traffic imbalances as a result of operator strategies, Existing MTR tariffs for new entrant operators must be significantly above cost, and The benefits of setting transitory asymmetric rates outweigh any short term detriments. 74. The case for impediments to retail market entry and expansion has not been made out in New Zealand either. Traffic imbalances are not high, [ ] VNZ/2D API2 75. The EU recommendation based on the ERG s work is deeply ironic when viewed in the context of the New Zealand market: 4 Drawing upon the ERG Common Position, it is reasonable to envisage a timeframe of four years for phasing out asymmetries based on the estimation that in the mobile market it can be expected to take three to four years after entry to reach a market share of between 15% and 20%, thereby approaching the level of the minimum efficient scale degrees has managed to almost reach the ERG s estimate of efficient scale in less than two years after entry. To argue for an asymmetry from this point has no support in the European approach. 77. In addition, the Commission s modelling of total welfare benefits, and benefits to end users, has not focused on the net benefits of providing one operator with asymmetric rates. Instead it focused on fixed-to-mobile termination cuts compared to the undertakings. This modelling has not been tested against real world evidence so is innately unreliable and uncertain. This uncertainty is compounded by examining the more detailed question of whether favouring one operator provides a net benefit to the economy or end users. This analysis has simply not been done. 4 Commission Recommendation on the Regulatory Treatment of Fixed and Mobile Termination Rates in the EU Brussels, C(2009) 3359 final paragraph (17) 12

13 78. If the Commission were to investigate this, it would need to show that the benefits outweigh the detriments, i.e., incremental investment by 2degrees, resulting directly from some temporary asymmetric rate, outweighs the costs of distorting competition. These distortions would arise through the costs of giving 2degrees a competitive advantage over others, and thereby reducing competition. 79. The Commission would also have to ensure that it was not just factoring in standard economic effects: higher unit costs for market entrants are normal throughout the economy and typically require no intervention. We note that it is common for new market entrants in many sectors to sell at a price below average costs in order to try to fill up spare capacity after beginning operations. As NERA puts it: 5 In any workably competitive market with fixed costs, entrants will have an average cost disadvantage to incumbents, all else being equal... We typically do not see regulation imposed in other markets where new entrants could benefit from having their entry and expansion assisted in a similar way. Likewise, entrants in real world markets are not able to charge more than their incumbent rivals, just because entrants have higher average costs. 80. Therefore the Commission would have to show an economic loss from 2degrees being less efficient than it would otherwise be as a result of barriers to expansion not caused by costbased termination rates. With mobile-to-mobile termination rates at cost we can think of none but the most ethereal arguments that could be used to justify providing an industry subsidy to 2degrees in the interests of end-users. 81. This would appear to leave the Commission sitting at the end of a very long branch if it does introduce asymmetry for 2degrees. But if it does decide to perch out on a twig, Vodafone believes that the asymmetric rate should reduce to cost by March 2012 or when 2degrees hits 15% market share, whichever comes first. 82. [ ] VNZ/2D API2 [ ] VNZCOI 83. [ ] VNZCOI 84. [ ] VNZCOI [ 5 NERA Review of Submissions on Draft STD for MTAS Telecom New Zealand 24 February

14 ] VNZ/2D API2 85. [ ] VNZ/2D API2 86. We strongly oppose putting in place both an asymmetry in termination rates and a ban on onnet pricing in favour of 2degrees. This would create strong incentives for 2degrees to manipulate retail traffic to benefit itself at interconnect. Conclusion 87. We would be happy to discuss these matters further at your convenience. Yours sincerely, Hayden Glass GM, Public Policy Vodafone New Zealand Limited 14