Fixed Telephone Network Service Performance
Relative Performance
5. The following table summarises New Zealand's comparative pricing performance for fixed telephone services relative to other OECD countries:3
| | Call minutes per month | % of OECD average price | Per annum spend, NZD | OECD ranking
(out of 30) | Price reduction to rank in OECD |
|---|
| local | nat | mob | 1Q | 2Q |
|---|
| Fixed line (access and call charges) |
|---|
| Residential, OECD standard | 296 | 66 | 20 | 117% | $752 | 22nd | 30% | 24% |
|---|
| Business, OECD standard | 882 | 168 | 105 | 110% | $1,821 | 23rd | 43% | 28% |
|---|
| Residential, New Zealand special | ~1100 / 296 | 66 | 20 | 71% | $752 | 5th | none |
|---|
| Residential, access only | - | - | - | 143% | $427 | 28th | 48% | 36% |
|---|
| Fixed to mobile (call charges only) |
|---|
| Residential, calls only | - | - | 20 | 165% | $170 | 28th | 64% | 49% |
|---|
| Business, calls only | - | - | 60 | 109% | $302 | 20th | 41% | 20% |
|---|
6. Using the standard OECD baskets for fixed network telephone services, for residential New Zealand is ranked 22nd out of 30, and for business it is ranked 23rd. This measure ranks New Zealand's fixed telephone service pricing in the third quartile of OECD countries relative performance.
7. Note: shortly before the report was released Telecom informed the Ministry that the February 2005 Teligen information, on which this report is based, had been updated by Teligen in May to include Telecom optional pricing plans available in December 2004. That updated data (August 2005) and its likely effect on rankings are appended, and in general show an improvement in the New Zealand rankings for residential and business fixed network telephone services. The ranking improved to 18th out of 30 for both residential and business fixed telephone service.
8. New Zealand has substantially higher residential local call usage than the standard OECD comparison basket, because of the free local call option and the extensive use of this option for dial-up Internet access. When the OECD residential basket of telephone services is modified to take the high local call usage into account, New Zealand's relative pricing performance ranks fifth in the OECD.
9. In addition, New Zealand is one of a small number of OECD countries where residential telephone users have capped price calling options, such as Telecom's Anytime plans and other options that provide capped pricing of national and international calls.
10. The business telephone service price used in the comparison did not take into account lower prices in some areas, such as central business districts, where there is competitive provision of business access service for larger business users.4
11. The average price of residential fixed to mobile calling is significantly higher in New Zealand than the OECD average and relative performance was near the bottom of the OECD. Relative pricing would have to reduce by ~50% to rank in the top half of the OECD.
12. The average price of business fixed to mobile calls was ranked in the third quartile of the OECD. Relative pricing would have to reduce by ~20% to rank in the top half of the OECD.
OECD Country Residential Telephone Service Plan Ranking, February 2005 Data (Excludes International and Fixed to Mobile Calls)
→ Larger version of "OECD Country Residential Telephone Service Plan Ranking, February 2005 Data (Excludes International and Fixed to Mobile Calls)" [35 KB GIF file]
Alternative Residential Telephone Service Providers
13. TelstraClear provides residential telephone service in Wellington, Kapiti and Christchurch, by means of its own access network infrastructure. The standard price at 1 October 2005 will be $31.95. It is understood that TelstraClear has some 62,000 customers in these areas.5 TelstraClear resells Telecom's residential telephone service in areas where it does not have infrastructure with a focus on users who have a high long distance call usage.
14. On 13 September 2005 Woosh launched its wireless-based combined local telephone and broadband access service in Auckland. The service is aimed at residential and small business users and the base offering of one telephone line and a 200 MB data plan is priced at $54.95 per month.6 Rollout in Wellington, Christchurch and Southland will follow later in 2005.
15. The service provides: free local calls for both residential and businesses; free regional calls between Woosh phone numbers; 10 cents per minute (cpm) national calls to any landline number in New Zealand; and 45 cpm landline to mobile calls to any New Zealand mobile number. The base offering includes voicemail, number-withhold, and caller display for no extra charge.
Optional "Smart Services"
16. It is likely that as competition develops a range of "smart services" will be increasingly offered by service suppliers to differentiate their service offerings. The following is a limited "snap shot" of some "smart services" that are available in New Zealand and one offering available from a US service provider.
17. Telecom New Zealand provides a range of optional calling features for an additional charge. Telecom says that its most popular smartphone services are: Caller Display, Call Diversion, Call Minder, CallTrack, Call Waiting, Faxability, and 3 Way Calls. Other available charged smart services are: Call Restriction, Customerlink (or call redirect), Direct Connect from 018, Dual Number, Hotline, Quick Dial and Reminder Call.
18. Telecom's Smartphone services are typically priced at $2.50 or $3.95 a month each. Call Minder is $7.00 a month. Discounts for a bundled package of smart services are not available.
19. Service providers in some OECD countries provide a wide range of smart services at a bundled packaged price. For example, subject to local availability, BellSouth in the US offers the following smart services for a package price of ~US$5 per month over a more basic service offering:
- Caller ID
- Call Waiting (includes display of caller ID name and number)
- Call Return
- Three-Way Calling
- Repeat Dialling
- Call Forwarding or Remote Access to Call Forwarding
- Call Block
- Anonymous Call Rejection (diverted to recorded message)
- Speed Dial
- Call Tracing (after two confirmed traces, the Annoyance Call Center will work with law enforcement authorities to end the annoying calls)
- BellSouth Call Selector (preferred call identification)
- RingMaster® Service - additional numbers with distinctive ring
- Preferred Call Forwarding
20. It is not practical to benchmark Smartphone features and pricing across OECD countries. Further, the comparative uptake of such services in OECD countries is unknown. Although they add value or otherwise enhance the use of an essential communication tool there is not a compelling case for benchmarking relative performance. However, there is a case for monitoring developments.
21. In the future it is possible that alternative competitive offerings with a national reach will develop based on VoIP7 technology via high quality broadband links, wireless or fibre based access links. When such alternative offerings become available it is likely that they will spur competition in Smartphone services. It is notable that the recently announced Woosh telephone service offering provides two smart service features for no extra charge. The Telecom price for the equivalent of these two features would be $9.50 per month.
Other Factors
22. The following factors should be borne in mind when considering relative performance issues:
- there is no infrastructure based alternative supplier of residential telephone service with a national reach;
- there is limited infrastructure-based competitive provision of residential telephone service by TelstraClear in parts of Wellington, Kapiti and Christchurch;
- the price of residential telephone service is capped, in real terms, under the local telephone service TSO provisions;
- TelstraClear commenced reselling Telecom's residential telephone service in November 2004 under a regulated wholesaling agreement. The agreement is applicable in areas where TelstraClear does not have access line infrastructure. TelstraClear had signed up 50,000 customers by June 2005. However, following conclusion of a strategic review, on 26 September 2005 TelstraClear announced that it will not offer resale services in some areas and that it will focus on providing the service to users with substantial long distance call usage;
- there is infrastructure-based alternative supply of business telephone service by TelstraClear in larger central business districts;
- there is limited infrastructure based competitive provision of residential and small business telephone service by Woosh in parts of Auckland.
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