Phone competition improving, says Commerce Commission

Mobile phone competition is not improving as fast as fixed line services, says the Commerce Commission

Signs of increasing competition were seen in fixed line telecommunications markets in 2008, but the competitive environment for mobile services was relatively unchanged from previous years, the Commerce Commission says.

The commission released its 2008 telecommunications monitoring report today.

Commission telecommunications branch director Osmond Borthwick said 2008 was another year of positive change for New Zealand telecommunications markets with the successful introduction of local loop unbundling and strong growth in the broadband market.

About $US1.5 billion was spent on telecommunications-related capital investment in the 2007/08 financial year, he said.

Much of that was by Telecom to replace existing assets, but there was also spending by NZ Communications in rolling out the first stage of that company's mobile network.

The report showed signs of increasing competition during 2008 in fixed line markets, said Borthwick.

Fixed line average calling prices continued to fall in 2008, although list prices had not shown much movement.

Better deals for consumers largely emerged in the form of new bundled offers, often incorporating calling, line rental and broadband, the report said.

Those offers were most competitively priced in Auckland, where exchanges had been unbundled allowing other providers to offer fixed line services, and in Wellington and Christchurch where TelstraClear provided infrastructure competition.

The broadband market continued to grow strongly through most of 2008, as Telecom lost a further 7 per cent of the retail broadband market, with its share of the market now 57 per cent.

Total broadband connections, including fixed wireless connections, reached 915,000 by the end of December, the report said.

La test OECD figures, for June 30 2008, estimated there were 20.4 broadband subscribers per 100 population in this country.

That was 96 per cent of the OECD average, giving New Zealand a ranking of 19 out of 30 in the OECD.

Unbundling showed strong growth in the second half of 2008, with around 25,000 lines unbundled by the end of 2008, the report said.

Apart from two inner-city Wellington exchanges all of the exchanges unbundled to date were in Auckland.

Backhaul - the final link connecting competitors to Telecom's local loop - was an important component in the supply of broadband, and competition in the provision of backhaul services was growing.

In particular, FX Networks continued to expand its North Island fibre network and Vector Communications recently expanded its Auckland fibre network and entered into an agreement with Vodafone to provide backhaul services to 41 Auckland exchanges, the report said.

The commission assessed Telecom now faced competition in 37 out of 57 primary unbundled copper local loop backhaul links from local exchanges.

Significant reductions in the price of international backhaul were observed, possibly in response to emerging proposals for a competing international backhaul link, the commission said.

The general quality of broadband services as tested from central sites improved over 2008 with major internet service providers investing in extra network capacity.

In the mobile services market, the competitive environment remained relatively unchanged from previous years, despite some positive developments, the commission said.

The entry of a third operator, NZ Communications, into the market and Telecom's launch of its new 3G network later in 2009 were likely to drive further competition in the mobile market.

By the end of September, mobile phone penetration had reached 108 per cent of the population, while mobile calling minutes increased by 16 per cent for the 2007/08 financial year.

Vodafone's Base plans, formerly excluded from the commission's monitoring reports, were now clearly available to mobile users.

As a result those plans had now been included in the OECD benchmarking of New Zealand's mobile calling plans.

Their inclusion significantly improves the average New Zealand performance across all baskets from 127 per cent of the OECD average cost to 84 per cent, the commission said.

Despite that, New Zealand's mobile calling volumes as a percentage of total calling volumes remained low by international standards, making up a quarter of total calling minutes compared to at least a third to a half in comparable countries.

- NZPA