Report: NZ phone line costs highest in OECD

Photo / Thinkstock

Kiwis who make only a handful of calls from their home line a month are paying the highest line rental in the OECD, because of a lack of competition in the market, a new study shows.

The Commerce Commission has today released a report which benchmarks fixed line and mobile services against international prices.

It showed the high cost of owning a fixed line phone, which had the effect of making "free calling" expensive for low users, had driven the poor ranking.

Consumers who were making 20 or fewer calls from their home phone line were paying the highest line rental in the OECD.

Consumers who were making few monthly calls were effectively 'cross-subsidising' those who made a large number of calls, telecommunications commission Ross Patterson said.

"Having no alternative to a plan with a fixed price for unlimited local calls favours those consumers who make a lot of local calls and disadvantages those who make a few," he said.

Telecom is the only operator with a nationwide fixed-line access network in New Zealand and is required to offer 'free' local calling for all residential customers.

It is also subject to a price cap which means it can't increase its standard residential line rental by any more than the rate of inflation each year.

However a lack of infrastructure-based competition and wholesale pricing set at a discount to retail, meant there was little incentive for Telecom to hold monthly line rental charges or offer alternative plan types.

Therefore, the standard residential line rental had consistently increased each year in line with the rate of inflation, the commission said.

New Zealand is generally ranked in the bottom third of the OECD for fixed-line voice usage baskets.

It ranks 33 out of 34 OECD countries for low-usage fixed-line pricing, 29th for medium usage, 23rd for high usage, while business usage ranks 19th.

The high cost of phoning a mobile phone from a landline number had also contributed to New Zealand's poor ranking in the benchmarking, the commission said.

The report also looked at the price of broadband services in New Zealand, compared to prices in Australia, the UK, Norway and Sweden.

The report found the cost of broadband for low and medium users was in line with that observed in other countries which were benchmarked by the commission.

"High users, however face a significantly higher price in New Zealand compared to similarly developed counties," the report said.

While it was often argued that New Zealand's geographical isolation and the cost of international bandwidth was causing New Zealand's higher prices, the report notes that Australia faces a similar issue, yet prices in Australia are significantly lower than New Zealand for high users.

The report also indicates that the price of mobile broadband is high across all levels of usage, and significantly higher in the high use basket (over 8 GB) where New Zealand prices are almost triple those of the cheapest country, Sweden.

New Zealand consumers pay significantly more than Australia for mobile voice and SMS plans for medium and high usage, the report said.

"In particular, for the OECD's 300 calls per month mobile basket the cheapest price for Australia is less than half that for New Zealand," the report said.

The report found Australia was cheaper than New Zealand in every mobile usage basket and for the 200MB basket the price in New Zealand is almost double that in Australia.

For fixed line broadband, New Zealand is cheaper than Australia for low and medium usage (2GB and 10GB), but significantly (31 per cent) more expensive for high usage (40GB plus).