Executive Summary
This report assesses the comparative performance of the New Zealand telecommunications regime in respect of the prices for key telecommunications services and the uptake of key new services.
Comparative performance is assessed by benchmarking prices with other OECD countries. The limitations of the benchmarking methodologies have been taken into account in drawing conclusions.
Fixed Telephone Service Performance
The key fixed telephone network services market conclusions are:
- using the standard OECD basket of fixed network telephone services, New Zealand's residential telephone service relative performance was ranked 23rd out of 30 and business telephone service relative performance was ranked 22nd;
- however, the average residential user local call usage in New Zealand is about five times larger than the standard OECD basket usage and consequently the standard OECD comparison methodology needs to be modified to more accurately assess New Zealand's relative performance;
- when residential telephone service relative performance was assessed using a comparison basket of services more representative of New Zealand usage, relative performance was ranked in the top quartile of OECD countries performance; and
- the price of residential user and business user fixed-to-mobile calls in New Zealand is significantly higher than other OECD countries.
Cellular Telephone Service Performance
The key cellular telephone services market conclusions are:
- using the standard OECD basket of cellular services the price of cellular service for residential and small to medium sized business users in New Zealand was found to be significantly higher than most other OECD countries. In particular, prices in these service segments would have to reduce by over 45% to improve New Zealand's ranking to the top half of OECD countries.
- overall relative cellular pricing performance was ranked 29th out of 30 OECD countries; and
- it is likely that high cellular call prices have restricted demand for and use of cellular calling services relative to other OECD countries.
Broadband Access Service Performance
In the case of the broadband Internet access market the key findings are:
- New Zealand has good broadband access availability (currently ~92% of dwellings, projected to be available to ~95% by the end of 2004) which compares favourably with other OECD countries;
- significant broadband infrastructure competition is developing in particular areas;
- broadband uptake in New Zealand is low relative to other OECD countries. New Zealand's broadband uptake as at March 2004 is estimated to have been 2.9, compared with the OECD average of ~5.5. The overall ranking in December 2003 was 22nd out of 23 OECD countries with broadband Internet access uptake over 1%;
- for typical residential user broadband data usage, the price of residential broadband Internet access service now compares well with other OECD countries; and
- outside of areas with significant competition the price of business user broadband service for medium and heavy business users is significantly above the price in other OECD countries. The main factor underlying high broadband service pricing to business users appears to be the high per megabyte data transmission charge.
Summary of Performance
The following table briefly summarises the performance, relative to other OECD countries, of the main fixed telephone services, cellular telephone services and broadband Internet access services.
| Telecommunication Service | OECD Country Ranking
(out of 30) | Price reduction to rank in OECD 1Q/2Q |
| Standard OECD telephone service basket | Residential | 23rd | ~36%/~27% |
| Business | 22nd | ~38%/~25% |
| Non-standard residential telephone service basket (~1500 call minutes) | 2nd | n.a |
| Non-standard, fixed-to-mobile call basket only | Residential | 27th | ~64%/~50% |
| Business | 22nd | ~40%/~21% |
| Standard OECD Cellular Service Basket | Low User | 28th | ~50%/~30% |
| Medium User | 29th | ~50%/~42% |
| High User | 29th | ~57%/~50% |
Broadband Internet Access
(No standard comparison methodology available) | Uptake | 23rd out of 24 | n.a |
| Residential | 15th | ~23%/ n.a |
| Business | 17th out of 17 | ~72%/~65% |
In general New Zealand's relative performance in most categories is unsatisfactory and typically there is a very significant gap between New Zealand pricing performance and the top half of the OECD countries.
Other Issues
High fixed-to-mobile pricing is an issue that is currently being investigated by the Telecommunications Commissioner.
As broadband access uptake improves and the capability to support advanced telecommunication services such as voice over IP, video conferencing etc develops, it will be important to reliably benchmark New Zealand's performance relative to other OECD countries in promptly delivering the new services at cost based prices.
The Ministry plans to develop a means of reliably benchmarking the price of data services to small to medium business. This is not possible at present because of the high level of discounting of the so called standard list price.
The Ministry is developing a regime to more closely monitor the telecommunications industry performance in delivering cost effective telecommunications services.
The Ministry will shortly provide you with a report on the Commerce Commission's review of the wording of the proposed designated unbundled bitstream service (UBS). The report will recommend that you accept the Commission's UBS recommendation and move to implement it via an Order-in-Council. Following implementation of a UBS via an Order-in-Council it is recommended that you formally write to Telecom outlining your broadband performance measure expectations including related broadband service benchmarking issues such as making progress in closing the relative performance gap.
It is recommended that you:
- agree that MED officials discuss broadband performance measures including broadband service benchmarking issues such as making progress in closing the relative performance gap, with the major broadband telecommunication service providers;
- agree that this paper be circulated to other Minister's with an interest in telecommunications industry performance issues, for their information;
- discuss with officials how you wish to communicate the findings of this report and benchmarking issues such as making progress in closing relative performance gaps.
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