Key Points:

Industry investment drove continuous improvement in New Zealand's national broadband performance during the past six months, a report prepared for the Commerce Commission says.

It found New Zealand was ranked as one of the world's fastest-growing broadband markets, with the sixth highest broadband penetration growth in the world.

Total broadband penetration was 20.4 per 100 inhabitants, bringing this country almost into line with the Organisation for Economic Co-operation and Development average of 21 for the first time.

In the past two years this country's broadband penetration had increased 8.8 points, or 76 per cent, from 11.5 in June 2006. It was now just a few points behind Australia at 23.5, and on a par with Italy and Spain.

But the rate of broadband adoption was showing signs of moderating, the September quarter report on broadband quality said.

Commissioned from broadband measurement consultancy Epitiro and ICT analysts IDC, the report examines the quality of broadband service provided by internet service providers (ISPs).

An index that measures broadband quality rose 12 per cent in the September quarter, following a 22 per cent increase in the June quarter - putting this country on a par with Britain.

Quality is evaluated on eight parameters such as email, browsing, gaming and viewing video, measuring 12 ISPs every 15 minutes across 11 sites in Auckland, Hamilton, Wellington, Christchurch and Dunedin.

A steady 4 per cent overall improvement was found in key broadband metrics in the quarter, particularly those affecting users' browsing and email experiences, the report said.

That was a result of investment in areas such as caching, increased international capacity, and exchange upgrades, the report said.

Web pages were often stored on servers overseas, which could take time to retrieve and had expensive international transit costs. By storing or "caching" content on New Zealand-based servers, a carrier could improve the retrieval speed and reduce the amount and cost of international traffic.

The five largest ISPs - Telecom, Vodafone, TelstraClear, Orcon and Slingshot - posted increases of between 12 per cent and 39 per cent in their city index scores, with strongest performances in the main city centres. That reflected ongoing upgrade and network re-architecture programmes.

Other smaller ISPs underperformed the market average with a slower 6 per cent improvement, with considerable variation between service providers.

An increasing challenge for service providers was managing demand and traffic growth, as improved broadband access led to pressure at other points in the network.

Reports of a seven to eightfold increase in streaming media, such as YouTube, was making investment in technologies such as local caching and international capacity critical for managing both performance and costs, the report said.

That was putting particular pressure on smaller service providers that lacked the scale and resources to upgrade their network capability.