Telecommunications market monitoring report for 2008 released by Commerce Commission
14 April 2009
The Commerce Commission has released its 2008 telecommunications monitoring report analysing the state of New Zealand telecommunications markets.
Telecommunications Branch Director Osmond Borthwick said the report shows that there were signs of increasing competition during 2008 in fixed line markets.
Mr 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."
Approximately $1.5 billion was spent on telecommunications related capital investment in the 2007/08 financial year, much of it by Telecom to replace existing assets, but also by NZ Communications in rolling out the first stage of their mobile network.
The key findings from the report include:
- Average calling prices continued to fall in 2008, although list prices have not shown much movement. Better deals for consumers have largely emerged in the form of new bundled offers, often incorporating calling, line rental and broadband. These offers are most competitively priced in Auckland, where exchanges have been unbundled allowing other providers to offer fixed line services, and in Wellington and Christchurch where there is infrastructure competition from TelstraClear.
- The broadband market continued to grow strongly through most of 2008. Telecom lost a further 7 per cent of the retail broadband market, and its share of the market is now 57 per cent. Total broadband connections, including fixed wireless connections, reached 915,000 by 31 December 2008.
- The latest statistics comparing the total number of broadband connections in New Zealand with the rest of the OECD are for 30 June 2008. The OECD estimated there to be 20.4 broadband subscribers per 100 population in New Zealand, which is 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. Apart from two inner-city Wellington exchanges all of the exchanges unbundled to date have been in Auckland.
- Backhaul is an important component in the supply of broadband and competition in the provision of backhaul services is 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 Commission's assessment of competition on UCLL backhaul links determined that Telecom now faced competition in 37 out of 57 primary UCLL 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 general quality of broadband services as tested from central sites improved over 2008 with major ISPs investing in extra network capacity. Nearly 60 per cent of DSL lines have now been upgraded to ADSL2+ which can improve broadband performance for consumers with compatible modems.
- Despite some positive developments in the mobile services market, the competitive environment remains relatively unchanged from previous years. The entry of a third operator, NZ Communications, into the market and Telecom's launch of its new 3G network later in 2009 are likely to drive further competition in the mobile market.
- Mobile phone usage continues to increase. By 30 September 2008, mobile phone penetration had reached 108 per cent of the population. 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, are now clearly available to mobile users. Consequently these plans have 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 percent.
- However, New Zealand's mobile calling volumes as a percentage of total calling volumes still remain low by international standards, making up only one quarter of total calling minutes compared to at least one third to one half in comparable countries.
The 2008 report is available on the Commission's website www.comcom.govt.nz under Regulated Industries/Telecommunications/Market Monitoring/Monitoring and Reporting.
The sector monitoring provision of the Telecommunications Act 2001 came into force on 22 December 2006. The relevant section states:
9A Functions of Commission in relation to sector monitoring and information dissemination
(1) In addition to the other functions conferred on the Commission by this Act, the Commission-
(a) must monitor competition in telecommunications markets and the performance and development of telecommunications markets; and
(b) may conduct inquiries, reviews, and studies (including international benchmarking) into any matter relating to the telecommunications industry or the long-term benefit of end-users of telecommunications services within New Zealand; and
(c) must make available reports, summaries, and information about the things referred to in paragraphs (a) and (b).
(2) The function in subsection (1)(c) does not require the Commission to release all documents that the Commission produces or acquires under this section.
Local loop: the 'unbundled copper local loop network service' (local loop) refers to the service that enables access to, and interconnection with, Telecom's copper local loop network. It allows telecommunications companies to supply voice and broadband services to retail customers without the need to replicate the local loop.
Digital Subscriber Line (DSL) is a data communications technology that allows broadband to be delivered over a copper line. ADSL1 is an early standard, with maximum download speeds capped at 8Mbps and typical rates below 5Mbps. ADSL2+ is a newer, and faster standard that can deliver a theoretical top download speed of up to 24Mbps, with users typically experiencing between 8Mbps and 15Mbps. However ADSL2+ performance is highly dependent on how far the signal has to travel over the copper connection to the home - the greater the distance, the slower the speed. Other factors like the nature of the broadband plan, the modem, the quality of computer and home wiring also affect the user's experience.