Summary of Cellular Telephone Service Performance
13. The following table summarises New Zealand's ranking for the low, medium and high user OECD cellular service baskets using input price data as at February 2004. The baskets include a set number of cellular and national calls, and connection charges (if any) distributed over 3 years. The results also include an overall composite basket obtained by adding the low, medium and high user OECD cellular telephone service basket results for each country.
| Cellular basket | Call minutes per month | Basket price as % of OECD average | Approximate per annum spend (NZ$ excGST) | Country Ranking
(Out of 30) | Price reduction to rank in OECD 1Q/2Q |
| Low user | 37 | 146 | $393 | 28 | ~50%/~30% |
| Medium user | 148 | 162 | $1,012 | 29 | ~50%/~42% |
| High user | 315 | 178 | $2,003 | 29 | ~57%/~50% |
| Overall composite basket | Not applicable | Not applicable | Not applicable | 29 | ~53%/~45% |
14. In general New Zealand ranked 28 (or greater) out of 30 OECD countries and the price of the cellular basket of services were 46% or higher than the OECD average price for the basket. New Zealand's country relative ranking has fallen in all user categories relative to the November 2002 survey. Prices would have to reduce by ~50% or greater for relative performance to rank in the top quartile of OECD countries. New Zealand's relative performance remains firmly in the lower quartile of OECD ranking.
15. Telecom New Zealand cellular service usage data indicates that the low user and high user cellular use in New Zealand differ significantly from the standard OECD cellular service baskets. One possible explanation for this may be that high price of cellular telecommunications service in New Zealand is restricting demand. If this is the case it is likely that there is a sizeable dead weight economic loss.
16. In general, it is understood that only organisations who spend in excess of ~$1 million per annum on telecommunications services receive significant cellular service discounts. Such discounts are also understood to average about 40% off the best publicly available plans.
17. A graph of the overall composite basket results is presented (below) to illustrate the difference in cellular service prices across OECD countries.
Unweighted, Combined OECD Low, Medium and High User Mobile Baskets, No Taxes
→ Full size version of "Unweighted, Combined OECD Low, Medium and High User Mobile Baskets, No Taxes" [28 KB GIF file]
Key Conclusions
18. The benchmark data indicates that the price of cellular service for residential and small to medium sized business in New Zealand is significantly higher than in most other OECD countries. Prices in these segments would have to reduce by over 45% to improve ranking to the top half of OECD countries.
19. It is likely that high cellular prices have restricted demand for cellular service calls.
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