Peter Nowak: Broadband ranking not the true story

Telecom and the Government have put a positive spin on New Zealand's woeful global ranking in broadband penetration, and both are painting a rosy picture of future rankings.

But the fact is they're spinning numbers that are fundamentally wrong, and the country's ranking isn't likely to improve much under current plans.

New Zealand again ranked 22nd out of 30 in the OECD statistics published last week, unchanged from last year, but company and Government officials said the survey revealed some encouraging trends.

The OECD reported that worldwide broadband growth was rapid in 2004, increasing 41 per cent on average. An additional 34.1 million subscribers came on board last year, bringing the global total to 118 million.

Telecom says it added about 110,000 subscribers in 2004, bringing New Zealand's total to 191,695. That took the annual rate of increase to more than 80 per cent, or twice the OECD average, Telecom says. If that statistic is used to project our position, New Zealand will end up 13th on the list next year.

Information Technology and Communications Minister David Cunliffe also used that statistic, and said in a statement that growth was "very positive" and "heading in the right direction".

But the problem is that OECD rankings don't rate countries on percentage growth; they instead more accurately measure the number of broadband subscribers per 100 inhabitants. NZ scored 4.7 subscribers per 100 inhabitants, up from 2.6 in 2003. This 2.1 increase was below the norm - OECD countries added an average of 2.8 subscribers.

That average was dragged down by the true bottom feeders, such as Greece, Turkey and Mexico, where broadband is virtually non-existent. Only two countries not in the bottom 10 grew slower than New Zealand - world leader South Korea, and 15th- placed Austria. Broadband is fairly mature in South Korea and it's unlikely to see any more real growth, so New Zealanders must obviously take comfort in knowing that in the developed world, Austria seems just as backwards as we are when it comes to adopting broadband.

Telecom said part of the reason for this lag is that subscriptions here really only took off in the last quarter of 2004, because of a change in pricing. The company added 51,190 subscribers in the fourth quarter, or almost half its total for the year. That pace has continued into 2005, with an additional 52,980 subscribers signed up in the first quarter.

Telecom is thus well on the way to its goal of 250,000 subscribers by the end of the year, and says New Zealand's ranking for 2005 should improve.

"If we can continue the same percentage growth rates that we've been sustaining now for about nine months, and there's every sign that we will, and we continue to grow at double the OECD rate, then the mathematics would obviously mean we're going to move up those rankings," said Bruce Parkes, Telecom's general manager of government and industry relations.

But Telecom is just juggling numbers, and the mathematics don't actually bear out this prediction. If the company achieves its 250,000 goal, New Zealand would have approximately 16 subscribers per 100 inhabitants - good enough to put it in sixth place in the current rankings.

But that doesn't take into account growth in other countries. If each country grows at the same rate as it did in 2004, the Netherlands will overtake South Korea as the world leader - as the OECD is predicting - and New Zealand will end up in 22nd place again. The OECD also reports that New Zealand was not alone in experiencing a growth spike in the fourth quarter. A total of 7.9 million new subscribers were added worldwide in the third quarter, while the fourth quarter saw an 11 per cent increase, with 11.4 million added.

That's a scary figure, because it means New Zealand could fall even further behind. Indeed, Australia - which sits just above us in 21st place - is pulling further away and could jump to the 18th spot next year. Ireland, the only real developed country to rank below us at 24th, is also growing faster than New Zealand and could pull ahead in as little as two years.

So what's the answer? The Telecommunications Users Association of New Zealand has said Telecom's goal of 250,000 subscribers - or 16 per cent of the country - by the end of this year is too soft. When the world leaders will all be boasting around 25 per cent next year, and with Cunliffe wanting to be in the upper quartile by 2010, TUANZ couldn't be more right. That goal must be much higher - closer to one million.

The solution is starting to sound a bit like a broken record, but definitely bears repeating. Unbundling the bitstream service through regulation so that true competition can take place is the first step. Better service and lower prices will follow. Only then can we talk about stepping out of the cellar.