Executive Summary
This report assesses the recent comparative performance of the New Zealand telecommunications services market in respect of the prices for key telecommunications services and the uptake of key broadband services.
Although there are some limited services on which New Zealand compares favourably with other OECD countries, in general there is a significant gap between New Zealand pricing performance and that of countries in the top half of the OECD. There is significant potential to improve relative performance.
Comparative performance was assessed by benchmarking retail prices with those in other OECD countries by use of standard OECD benchmark methodologies or where these are unavailable, through the use of an appropriate comparison methodology. With the exception of broadband services, February 2005 Teligen pricing data was used. Telecom recently advised the Ministry that the Teligen information, on which this report is based had been updated by Teligen in May 2005 to take into account Telecom optional pricing plans. That updated data (August 2005) and its effect on rankings are appended.
Fixed Telephone Service Relative Performance
The key conclusions are:
- New Zealand's relative performance for fixed network residential and business telephone services ranked in the third quartile of OECD countries (February 2005 data). The ranking is similar to relative performance ranking in recent years. However, there was a small relative performance improvement when August 2005 data was taken into account.
- Residential user fixed telephone service relative performance was ranked in the top quartile of the OECD when a non-standard residential user comparison basket was used to take into account New Zealand's high level of residential user local calling including local dial-up Internet usage.
- The price of residential user fixed to mobile calls was ranked in the bottom quartile of OECD relative performance and the price of business fixed to mobile user calls was ranked in the third quartile.
The following table summarises New Zealand's comparative pricing performance for fixed telephone services:
February 2005 Data | % of OECD average price | OECD ranking (out of 30) | Price reduction to rank in OECD 2Q |
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| Fixed line telephone services |
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| Residential, OECD standard method | 117% | 22nd | 24% |
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| Business, OECD standard method | 110% | 23rd | 28% |
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| Residential, non-standard method | 71% | 5th | none |
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| Fixed to mobile calls |
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| Residential, calls only | 165% | 28th | 49% |
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| Business, calls only | 109% | 20th | 20% |
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August 2005 Data | % of OECD average price | OECD ranking (out of 30) | Price reduction to rank in OECD 2Q |
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| Fixed line telephone services |
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| Residential, OECD standard method | 99.2 | 18th | 8.3% |
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| Business, OECD standard method | 95.9 | 18th | 12.7% |
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Cellular Telephone Service Relative Performance
The key conclusion is that comparative cellular service pricing performance ranked in the bottom quartile of OECD performance.
The following table summarises relative performance:
| | % of OECD average price | OECD ranking (out of 30) | Price reduction to rank in OECD 2Q |
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| OECD high user | 174% | 29 | 44% |
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| OECD medium user | 172% | 30 | 42% |
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| OECD low user | 127% | 23 | 17% |
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Broadband Internet Access Service Relative Performance
The key conclusions are:
- New Zealand has good (terrestrial based) broadband access availability (over 95% of dwellings) which compares favourably with other OECD countries.
- Broadband uptake in New Zealand (as at December 2004) is still low relative to other OECD countries at 4.7 lines per 100 population (10.9% of households), compared with the OECD average of 10.1 lines per 100 population (21.2% of households).
- Upstream broadband link speed issues aside, the pricing performance of residential broadband services is on a par with those in the top half of OECD relative performance.
- In general, business broadband access pricing is high relative to most other OECD countries and the recent introduction of a lower speed upstream link "business service option" by Telecom does not significantly improve relative performance.
- There is broadband infrastructure competition in some areas. Cable TV, wireless, and fibre infrastructure based alternative broadband services are available to residential and small business users in some areas, possibly upwards of 20% of households. Alternative broadband services based on bitstream unbundling are now becoming available.
The following table summarises broadband service relative pricing performance:
| | OECD ranking
(out of 29) | Price reduction to rank in OECD 2Q |
|---|
| Residential broadband (entry level) | 6th | n.a. |
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| Residential broadband - standard | 11th | n.a. |
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| Business broadband access (128 kbps / 2 Mbps) | 21st | 26% |
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| Business broadband access (512 kbps / 2 Mbps) | 28th | 75% |
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Data Service Relative Performance
The key conclusions are:
- slower speed (64 kbps data service) leased line prices ranked in the bottom quartile of OECD country relative performance;
- higher speed (2 Mbps data service) leased line prices ranked in the top quartile of OECD country relative performance.
The following table summarises data service relative pricing performance:
| | % of OECD average price | OECD ranking (out of 26) | Price reduction to rank in OECD 2Q |
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| Low speed data (64 kbps links) | 139% | 21st | 34% |
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| High speed data (~2 Mbps links) | 60% | 6th | n.a. |
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Advanced Broadband Services
Advanced residential and small business user broadband telecommunications services with an extensive geographic coverage are now being progressively rolled out in a number of OECD countries.
Telecom New Zealand is trialling residential user broadband based VoIP service, and has indicated that it plans to provide a range of advanced broadband services to some residential users by early 2007 as part of the first phase of its residential telephone network service replacement.
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