Background
Composition of Telecommunications Service Sector
34. The following chart shows the current estimated market shares by revenue for the three main telecommunication services categories.6 fixed telephone network services; data services; and mobile services. Data services7 can not at present be benchmarked because reliable information on New Zealand and other OECD countries' data services prices is not available.
Estimated Telecommunications Services Market Shares by Revenue
→ Full size version of "Estimated Telecommunications Services Market Shares by Revenue" [21 KB GIF file]
Fixed Telephone Network Services
35. The key traditional fixed telephone network services are residential telephone service, business telephone service, both of which include local and national calls, fixed to mobile calls and international calls. It is estimated that these key fixed network services comprise between 45-50% of the total telecommunication services market by revenue. The key features of these services are the maturity of the technology used to provide them and the relatively large number of facilities based competitors in the long distance calls market.
Cellular Services
36. The cellular telephone services market is estimated to comprise about 20-25% of the total telecommunication services market by revenue. This is a relatively young market that in New Zealand has grown rapidly over the last six to ten years. Cellular services are provided currently by two providers of roughly equal size.
Broadband Services
37. It is estimated that the emerging broadband Internet access services market (part of the data services market) presently comprises about 1% of the total telecommunication services market by revenue. This market is considered to be strategically very important as affordable higher speed Internet access will progressively provide residential and business telecommunication users with new and improved services such as faster access to web-based information sources, voice over IP based call services, e-commerce, e-learning and tele-working opportunities, web-based alarm monitoring, telemedicine, distance learning, services for people with disabilities, community networking etc.
Benchmarking Methodology Issues
38. The use of representative "baskets" of telecommunications services is a widely accepted method of benchmarking the price of key telecommunication services between countries. An internationally recognised method of benchmarking a number of telephone services has been developed by the OECD that is based on an internationally agreed demand pattern as opposed to any one country's pattern.
39. The relative accuracy of benchmarking methodologies, such as the OECD tariff basket comparison methodologies, is limited by the following factors:
- the basket of services used to benchmark relative performance of each OECD country may not be representative of the typical average user demand within a country;
- they adjust imperfectly for the differing prices across countries of inputs to local services by using a suitable exchange rate, such as a purchasing power parity exchange rate;
- they do not readily take into account the effects of network density including scale and scope economies;
- they do not readily take into account productivity differences between countries that are outside of the control of telecommunications industry managers and regulators;
- some services may not be directly comparable (such as different speed broadband Internet access services); and
- the methodologies do not provide uncertainty bounds for assessing the reliability of the resultant rankings.
40. In drawing conclusions the Ministry has taken into account, where possible, these methodological limitations.
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