7. Competitors
7.1 Clear Communications Ltd
Clear Communications is equally owned by British Telecom, MCI International, Television New Zealand Ltd and Todd Corporation Ltd. Clear Communications employs approximately 1000 staff, and has invested more than $250 million in fixed assets in New Zealand.
In addition to utilising digital microwave telecommunication links owned by Broadcast Communications Ltd (a subsidiary of Television New Zealand) Clear Communications initially leased, then purchased, from NZ Rail Limited, fibre optic cables linking Auckland and Wellington. It also leases fibre optic capacity between Wellington and Christchurch from the Electricity Corporation of New Zealand. In addition, it has digital microwave links with the major provincial cities of New Zealand. It has now installed further fibre optic capacity between Wellington and Auckland to increase transmission capacity and provide route diversity. Fibre loops and duct lines have been installed in the Auckland, Wellington and Christchurch central business districts.
Clear Communications July 1997:
- has made an operating profit in the last three financial years;
- gross revenues of over $280 million in last financial year;
- 100 percent digital service;
- toll bypass service has been in operation for some 6 years, and is available to all New Zealand's telephone customers;
- 18 percent share of national tolls market;
- 20 percent share of international tolls market;
- provides a competing 0800 freephone service;
- has commenced providing business telephone service in Auckland, Wellington and Christchurch central business districts;
- 50 percent New Zealand owned;
- provides ‘dial up’ internet service access;
- emphasis on customer service.
Two separate consortia initially began separate interconnection negotiations with Telecom in December 1989, but by May 1990 had decided to merge their interest to form Clear Communications. Within six months the companies had confirmed their investment in the venture and by April 1991, Clear Communications was able to offer domestic and international toll services.
Clear Communications and Telecom agreed on 25 actual points of interconnect (POI) and 19 notional points of interconnect in 42 different localities (or separate free calling areas) throughout the country. In localities served by a notional point of interconnect, Clear's customers' toll calls are trunked to the nearest Telecom exchange with billing facilities, at which point they are physically handed over to Clear. Clear Communications is able to receive toll calls from all exchanges in Telecom's network. After conveying the call on its own toll call by-pass facilities, Clear is able to deliver that call to any telephone in New Zealand by linking back into Telecom's network at the appropriate POI.
The 1994 interconnection agreement with Telecom provided the basis for all telephone customer in New Zealand to access Clear's long distance call service. Non-code access to Clear's long distance call service is now readily available free of charge.
Clear Communications achieved approximately 22 percent of market share in the provision of domestic toll services in New Zealand by 1993-94 which has apparently reduced to about 18% in recent times, and some 20 percent for international toll services. Clear's operations have now been profitable for some years. This achievement exceeds the results attained in other countries which permit telecommunications competition, in a similar start-up period.
Initially Clear Communications relied solely on Telecom for the dispatch of its international calls, but early in 1992 it commissioned independent facilities. It has its own satellite earth receiving station in Auckland and is a member of the Tasman-2 fibre optic cable consortium linking New Zealand with Australia. It is now a member of the consortium which owns the PacRim East fibre optic cable between New Zealand and Hawaii. Telecom is also a major member of these two fibre optic cable consortiums, which own some of the most modern international transmission services in the world, and form part of a large fibre optic ring which will link most Pacific Rim countries.
In September 1994 Clear commenced providing an 0800 freephone service in competition with Telecom's offering. Prior to this it offered its own "brand" freephone service accessed via 0508. The New Zealand Telecommunications Numbering Advisory Group has agreed on the technical means of providing 0800 number portability between service providers. When this facility is introduced it will allow a customer to transfer an 0800 service number to a service provider of its choice, which can be expected to increase competitive pressures on service providers.
In September 1995 Clear reached a new heads of agreement on local service interconnection with Telecom which culminated in a formal local telephone service interconnect agreement in March 1996. This agreement also included new toll bypass interconnect arrangements. Clear has now announced the availability of its business telephone service in the Auckland, Wellington and Christchurch central business districts.
Clear launched an internet service later in 1996 and as at May 1997 had about 10,000 customers. It also provided the first commercial ATM service and has an ISDN offering.
From the consumer viewpoint, Clear Communications has been responsible for improved service and price competition in New Zealand telecommunications markets. Competition from Clear Communications has brought consumers such innovations as 24 hour customer service, automated calling card services, and direct credit account payment facilities, and it has taken the lead in many of the price innovations which have occurred since they commenced operating.
7.2 BellSouth
BellSouth NZ Ltd is a subsidiary of BellSouth International which, in turn, is the international operating subsidiary of the Atlanta, Georgia-based regional Bell Holding Company (it is not associated with the two American owners of Telecom). BellSouth paid $25 million for one of the radio spectrum bands suitable for cellular telephony, which the Government made available in 1990. Singapore Technologies, a Singapore Government investment company, through its Singapore Technologies Ventures (STV) Division, has acquired a 35% shareholding in BellSouth New Zealand.
BellSouth chose to use the digital GSM technology to provide a digital cellular telephone service. It offers many added service features, including a greater degree of call security, mobile data and fax service. BellSouth customers can use their existing phone and number in 35 countries via the international roaming feature. BellSouth has invested about $500m in establishing its network.
Early in 1993, BellSouth concluded an interconnection agreement with Telecom which permitted it to trial its network. In July 1993, it introduced its commercial service in Auckland. Commercial operation in Wellington commenced in 1994. The BellSouth network now provides coverage to about 91% of New Zealand's population.
7.3 Telstra New Zealand
In 1996 Telstra relaunched its New Zealand operation with a focus on providing virtual private networks, national and international calls, ISDN services and local access. At that time it said that consumer products would come later - possibilities being home phone, mobile phone, Internet access, pay-TV. Customers would also be able to obtain international route diversity using Telstra. A driving factor was multi-nationals business demand for consistency across national boundaries.
A full facility switch has been installed in Auckland and interconnect agreements have been reached with Telecom New Zealand and Clear. Telstra and Telecom recently reached agreement on commercial terms and conditions for the supply of number portability service.
Telstra New Zealand has now become a significant supplier of internet transmission capacity to and from New Zealand.
7.4 Trunk Mobile Radio Service
TeamTalk, launched early in 1995, offers a trunked mobile radio based service, in competition with Telecom's established Fleetlink mobile radio service. Trunk mobile service uses a two way radio system and shared radio channels to connect a mobile user with a base station. Such service is typically used by couriers, trucking companies, construction firms, film crews, and the like who need to communicate with a mobile work group in a fast, efficient manner.
TeamTalk was a joint venture Company between BCL - the majority shareholder (50%), International Wireless Corporation of California USA and Vanguard International Telecommunications of Ohio USA, which is the second largest wireless/cellular provider in the United States. BCL has announced its intention to leave the company.
7.5 Other Facility Based Service Providers
Saturn Communications is owned by the Asia/Pacific Division of United International Holdings USA and SaskTel of Canada. It is currently installing cable TV and telephone plant in the Wellington area and is currently offering cable TV services. Saturn recently reached agreement with Telecom on interconnect terms and conditions for the provision of a local telephone service, long distance calls services and other value added services and is planning to commence providing telecommunications services early in 1998. Its Wellington area roll-out is likely to be completed by the end of 1998, and it has expressed an interest in extending its services to other areas of New Zealand.
A Canadian telecommunications company SaskTel recently agreed to inject $30 million into Saturn for a 35% equity stake.
Global One and WorldxChange have concluded interconnect agreements with Telecom and provide international call originating services to niche markets in New Zealand with a focus on the Auckland area.
7.6 Other Market Developments
There are two associated developments of relevance to the domestic telecommunications market. These are the emergence of competition from private networks and resale.
Prior to the deregulation of telecommunications markets in 1989, a number of government agencies had their own private networks. The most obvious alternative network was that operated by Broadcast Communications Ltd, which now forms part of the network utilised by Clear Communications. Other significant private networks were operated by New Zealand Rail Ltd and by Transpower, both of which now carry some domestic tolls traffic. No information is collected on the level of traffic carried or the capacity available from these, and other, private networks, but it is known that the networks are used mainly for internal uses, with extra capacity primarily leased to Telecom and/or Clear, with some long distance traffic also being carried for a small number of commercial customers.
Resellers typically lease capacity (usually in a larger quantity) from existing operators, mostly Telecom, and then seek to more efficiently utilise the capacity, usually by targeting high usage customers, and also by compressing the traffic during its transmission stage, typically by using 32 kbits/s ADPCM coding. As such, resale is very much dependent on the margins between the cost of leasing and the resale price, and between the resale price and the prices of other network operators (especially Telecom). It is essentially a niche market with a higher degree of risk, especially given the frequent changes in base rates by the main network operators.
Resellers:
- Independent Telephone Network (ITN);
- TelePacific Networks;
- Datanet Communications.
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