• Home
• ICT
• Telecommunications
• Benchmarking
• Archive
• 30 June 2004 Report
• Appendix 2

• Telecommunications

• Benchmarking

• Archive

• 30 June 2005 Report
• 30 June 2004 Report

• Individual Basket Performance
  • Low User Basket
  • Medium User Basket
  • High User Basket
• Overall Performance
  • Combined OECD Rankings
• Cellular Telephone Service Discounts
  • Average Revenue Per User (ARPU)
• Robustness of Methodology
  • Combined - Standard and Non-Standard Baskets

1. Teligen, in conjunction with the OECD, have produced a database of OECD country cellular telephone service statistics to enable comparison between these countries. These results cover 675 packages across the 30 OECD countries and included pre- and post-paid packages. There are three standard OECD cellular service baskets representing low, medium and high users. This report presents the results of this analysis.

2. The following table summarises the key characteristics of the low, medium and high user OECD cellular service baskets and the lowest price New Zealand plan for that basket (NZD, including GST). The comparison approach used PPP exchange rates and excluded taxes.

3. The results for the standard OECD cellular service baskets are summarised in the following table. 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 ranking marginally worsened in all user categories relative to the November 2002 survey.

4. New Zealand's relative price performance is unsatisfactory. Only Turkey and Poland are reported to have higher comparative prices in any user category.

Individual Basket Performance

Low User Basket

5. New Zealand prices in the low user basket would need to be ~50% lower in order to be ranked in the upper quartile of the OECD countries and ~30% lower in order to be rank in the upper half of the OECD countries.

OECD Low User Mobile Service Basket, No Taxes

→ Full size version of "OECD Low User Mobile Service Basket, No Taxes" [30 KB GIF file]

Medium User Basket

6. New Zealand prices in the medium user basket would have to be ~50% lower in order to rank in the upper quartile of the OECD countries and ~42% in order to rank in the upper half of the OECD countries. New Zealand's relative performance was ~82% above the average of the top 25 OECD countries and ~96% above the average of the top 20 OECD countries.

OECD Medium User Mobile Service Basket, No Taxes

→ Full size version of "OECD Medium User Mobile Service Basket, No Taxes" [30 KB GIF file]

High User Basket

7. New Zealand prices in the high user basket would have be ~57% lower in order to rank in the upper quartile of the OECD countries and ~50% in order to rank in the upper half of the OECD countries.

OECD High User Mobile Service Basket, No Taxes

→ Full size version of "OECD High User Mobile Service Basket, No Taxes" [30KB GIF file]

8. It is notable that New Zealand is ~124% above the average of the top 20 OECD countries.

Overall Performance

9. By combining the low, medium and high user basket results an overall rating for New Zealand's cellular performance can be obtained. This assumes a weight of 1 for each result and in effect assumes that each basket is representative of that group and that each group is approximately the same in overall total user spend. Under this approach New Zealand's relative cellular telephone service was ranked:

• 29th out of the 30 OECD countries (28th in 2002);
• ~69% above the OECD average (~48% of the OECD average in 2002);
• ~106% above the average of the top 20 OECD countries;

10. These results indicate that New Zealand prices in the high user basket would have be ~53% lower in order to rank in the upper quartile of the OECD countries and ~45% in order to rank in the upper half of the OECD countries.

Combined OECD Rankings

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" [30 KB GIF file]

Cellular Telephone Service Discounts

11. Amos Aked Swift (AAS), a specialist telecommunications service consultancy, has previously advised that in general only corporate organisations who spend in excess of $1,000,000 per year on telecommunications services receive large corporate discounts, estimated to be about 43% off the best publicly available plans. Officials consider that these figures are unlikely to have significantly changed over the relevant period. Notably, discounts are also available in the form of additional services such as voicemail and free (or discounted) handsets.

12. Recent cellular service promotions, in particular the Telecom $10 TXT plan,¹⁵ represent a significant positive in terms of the introduction of real competition in terms of use and value targeted at users of SMS services.

Average Revenue Per User (ARPU)

13. These results indicate that the low user and high user baskets in New Zealand differ significantly from the standardised baskets of the OECD. They suggest that because of high prices on the average cellular telecommunications service users in New Zealand may not utilise cellular telecommunications services as much as their OECD counterparts.

14. For example, New Zealand customers who have the same cellular basket as the standard OECD low user basket (i.e. make 300 calls and send 360 text messages per annum) would spend approximately $390 on cellular telecommunications services each year. However, Telecom data suggests that low users in New Zealand (approximated by prepay users) spend approximately $85 per year on cellular telecommunications services each year. This may correspond to a cellular services basket of approximately 60 calls and 100 text messages per year.

15. The Ministry considers that this apparent underutilisation of cellular telecommunications services is most likely due to high cellular prices compared to other OECD countries.

Robustness of Methodology

16. Overall, officials consider that the methodology, taking into account the inherent limitations of basket of services comparison methodologies, reliably compares the price of comparable packages of mobile telephone services across OECD countries.

17. Arguably, the standard OECD price comparison baskets may not adequately reflect the full range of mobile plans available in the market place. Further, it is possible that some of the performance difference could arise from a poor fit with the standard OECD baskets. To assess whether such concerns might arise three non-standard baskets were compared across OECD countries. The first was a 500 call basket that arguably sits between the low user basket and the high user basket as defined by the OECD. The second and third represent higher user baskets than defined by the OECD. These are representative of the very high mobile use plans available in many countries including New Zealand. In addition results for a pre-pay service only, low user basket was included to better take into account the substantial use of a pre-pay service option in New Zealand.

18. The results of the non-standard tariff basket comparisons are presented in the following table. In general New Zealand ranked 24 (or greater) out of 30 OECD countries and the prices of the basket of services were 39% or higher than the OECD average. The results support the above conclusion that New Zealand's (relative) mobile service price performance is unsatisfactory.

19. The above results can be combined with the standard OECD baskets to obtain an estimate of the overall relative price performance of the range of plans available in each country. The results were combined on an unweighted basis that in effect placed a weight of 1 on each of the mobile service basket results.

20. The combined results were: a ranking of 27 out of 30 countries, 150% of OECD average, ~19% below the worst performer, 18 countries were below the OECD average and New Zealand was ~207% above the average of these 19 countries price performance.

Combined - Standard and Non-Standard Baskets

Unweighted, Combined Non-Standard and OECD Standard Mobile Baskets, No Taxes

→ Full size version of "Unweighted, Combined Non-Standard and OECD Standard Mobile Baskets, No Taxes" [32 KB GIF file]

¹⁵ Telecom Mobiles pay no more than $10 per month for up to 500 national person to person text messages and similar options, for the rest of 2004.

¹⁶ Published in Telecom's Nine months and third quarter results to 31 March 2004.