Appendix 3: Broadband Internet Access Service Benchmarking - June 2004
1. 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. Project Probe has been a significant factor in spurring broadband availability in remote areas in this regard.
2. Significant broadband infrastructure competition is developing in particular areas. For example:
- TelstraClear's cable broadband access networks in Wellington, Christchurch and Kapiti. Telstra is also rolling out wireless broadband Internet network in nine New Zealand cities. Fibre access has been rolled out in larger central business districts.
- Other fibre broadband access providers such as Citylink (Wellington), Vector (in conjunction with electric line distribution) and Wired Country (Pukekohe CBD).
- Wireless based broadband access providers such as Woosh, BCL (Extend network), Wired Country and others.
- Woosh (formerly Walker Wireless) provides broadband access via wideband CDMA. It provides service in Auckland and reports 70% coverage, recently commenced offering service in Central Wellington with a coverage of 14,000 househols and will shortly launch its service in Christchurch. Woosh is also rolling out network in the Southland Project Probe region.
- Wired Country (coverage over 35,000 users in Pukekohe, Papakura, Manurewa, Takanini, Ardmore and Tuakau. Project Probe broadband service provider to schools and rural communities in the Auckland region),
- BCL's EXTEND wireless broadband wholesale products are aimed at providing voice, data and fast Internet access in rural and provincial areas. Stage one, completed in November 2003, provides access to ~600,000 user sites in Northland, South Auckland, Franklin, Waikato, Bay of Plenty, Manawatu, Wairarapa, Taranaki, Canterbury, Otago and Southland.
- Wave Internet (Waikato area), Hawkes Bay Internet and ThePacific.net (Nelson/Marlborough).
3. It is generally accepted that broadband access service should have a minimum average downstream data rate of at least 256 kilobits17 per second (kbps) and an average upstream rate not less 128kbps. Lesser broadband speeds are common but are not considered to be "true" broadband. However, broadband uptake statistics from many countries typically include significant numbers of "lesser speed" broadband connections.
Broadband Uptake
4. As at December 2003 New Zealand's uptake of broadband Internet access services per 100 population (~2.4) was ~30% of the average uptake performance of the 20 leading OECD countries.18
Broadband Connections in OECD Countries plus Taiwan - per 100 Population, December 2003
→ Full size version of "Broadband Connections in OECD Countries plus Taiwan - per 100 Population, December 2003" [23 KB GIF file]
5. At 31 March 2004 Telecom had 103,000 JetStream customers - 66,000 residential and 37,000 business customers (a broadband uptake of ~2.9, assuming 10% of total connections are provided by other providers). Over the last 12 months, Telecom JetStream numbers have grown by 66%, or 42,000. Telecom says its on target for 100,000 residential broadband customers by the end of 2004.
6. New Zealand would have to double its present number of broadband access lines to be ranked in the top half of OECD countries' performance. This is a moving target as other most other OECD countries are rapidly improving broadband access uptake.
7. A factor that is not currently measured by broadband uptake is the capability of the broadband link, i.e. the data speed supported and the capability to support advanced telecommunication services such voice over IP, video conferencing etc. This will become increasing important as broadband access services develop and new services and applications emerge to exploit that capability.
8. The Ministry is working with Statistics New Zealand to put in place a process to reliably collect a range of broadband statistics including connections, speed capability etc.
Broadband Pricing
9. The following graph ranks the lowest priced widely available residential broadband offering in OECD countries for 3GB19 of broadband data or more.20 The data suggests that Telecom's latest residential DSL Internet access prices are on a par with the OECD average, for users who typically use less than 3GB of data. The price would have to reduce by ~23% to rank in the top quartile of the OECD performance.
10. However, many of the tariffs in OECD countries include an unlimited amount of data. Telecom's 10GB plan without telephone service is some US$PPP 19 per month more expensive than the 3GB option, which ranks the relative price performance of this plan in the lower quartile of the 24 OECD countries compared. Telecom does not allow business users to take up residential DSL based broadband access offerings other than in the home office segment. This type of restriction is not typically present in other OECD countries broadband service offerings.
Comparison of Residential Broadband Internet Access Plans across OECD Countries (Note: Speeds Vary)
→ Full size version of "Comparison of Residential Broadband Internet Access Plans across OECD Countries (Note: Speeds Vary)" [37 KB GIF file]
11. Comparative pricing information on business grade broadband access prices across all OECD countries is not readily available. The following graph compares the purchasing power parity price of business grade ADSL based broadband Internet access service suitable for use by typical small to medium business users, in 17 OECD countries.21 For low data usage Telecom New Zealand's price was ~80% above the 17 country OECD average. For medium data usage it was ~160% above the 17 country OECD average. For medium data usage, the price would have to reduce by ~70% to rank in the top quartile of the OECD performance.
Price in US$PPP per Month, excluding Tax, for a Business Grade (ADSL) Broadband Access Service in 17 OECD Countries
→ Full size version of "Price in US$PPP per Month, excluding Tax, for a Business Grade (ADSL) Broadband Access Service in 17 OECD Countries" [22 KB GIF file]
Broadband Services Included Data Cap
12. For a given connection speed, broadband service pricing comprises a contribution to the fixed cost of access and a contribution to the data usage. The two common usage charges are either a single charge for an unlimited amount of data or a charge for a fixed maximum amount of data after which a charge is levied for data in excess of the cap. Some service providers limit the speed (for example to dial-up speeds) when the data cap is exceeded.
13. The OECD countries listed in the following table either do not offer a widely available uncapped broadband service offering or offer a high included data option with speed limiting where the cap is exceeded. The table lists the applicable excess data fee where the data cap is exceeded.
| Country | Price of excess MB in NZ cents |
| Australia | ~15* |
| Canada | ~0.9 |
| Iceland | ~6# |
| Ireland | ~6 |
| New Zealand (residential) | 4.4* |
| New Zealand (business) | 9-18 |
| Portugal | ~3 |
Conclusions
14. Broadband Internet access service uptake in New Zealand at 2.9 lines per 100 population is amongst the lowest in OECD countries where broadband is being actively promoted.
15. For typical residential user's broadband data usage, the price of residential broadband service compares well with the OECD average.22 The price would have to reduce by ~23% to be placed within the first quartile of OECD performance. However, the prices of broadband access plans that include higher data usage (i.e. above that used by typical residential users) are significantly above the OECD average.
16. The price of business user broadband service for medium and heavy users is significantly above those in the other OECD countries. The main factor underlying high pricing appears to be the high per megabyte data transmission charge, which is typically two to four times the residential user's excess data charge.
17. As broadband access uptake improves and the capability to support advanced telecommunication services such voice over IP and video conferencing develops, it will be important to benchmark New Zealand's performance relative to other OECD countries in delivering such new services.
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