Comcom detects signs of competition

Broadband competition is healthy, says telco watchdog

The Commerce Commission's first annual telecommunications monitoring report, released today, shows signs of increasing competition.

Surprisingly for some, the report finds healthy competition in the contentious broadband market and prices that compare favourably with other similar markets.

Telecommunications Commissioner Ross Patterson says in a statement that increasing competition arrived in most parts of the telecommunications market analysed in 2007, with average retail prices falling over all sectors, apart from monthly line rentals.

"The Commission's monitoring of telecommunications markets has revealed improvements in New Zealand's performance, partly in response to the recent regulatory reforms," Patterson says.

"However, many key markets are still characterised by limited competition. The Commission's telecommunications strategy is designed to increase competition in these markets with targeted intervention, and to ensure that competition is sustainable in the longer term," he says.

The Commerce Commission anticipates the rollout of the unbundled local loop will accelerate improvements in competition with flow-on benefits to consumers, Patterson says.

The report finds:

• Mobile phone usage is continuing to increase. Mobile connections rose by 12%. By December 31, 2007, mobile penetration had reached 104%. Mobile calling minutes increased by 15% for the 2006/07 financial year, although average mobile calling per user remains relatively low by international standards.

• The introduction of new calling plans has benefited some mobile users, particularly through cheaper calls to selected users on the same network, but OECD benchmarking indicates others are still paying high prices by international standards.

• There was considerable progress towards new entry in the mobile market, with NZ Communications (formerly Econet) starting to build its own network and signing a roaming agreement with Vodafone NZ. However, there was slow progress with mobile co-location. In addition, mobile-to-mobile termination rates for calls and texts appear to be above cost, which may hinder the development of competition in the mobile market.

• While calling prices are reducing in the fixed line market, Telecom's standard residential plans did not rate well in OECD benchmarking and slipped in ranking over the year. This was largely due to the annual rise in the monthly line rental, and the relatively high cost of fixed-to-mobile calls, which make up an estimated 44% of calling costs for both households and businesses.

• The price of residential broadband services in New Zealand compares favourably to that in other similarly developed countries, with prices for low, medium and higher users all ranking in the top third of the plans surveyed.

• The broadband market continued to grow strongly, and by September 2007 had passed an important milestone of broadband surpassing dial-up as the most common means of connecting with the internet. There is healthy competition, with Telecom retailing around 60% of all broadband connections.

• In the retail market for broadband over phone lines, Telecom's competitors' share of the growth in connections rose to over 70% for the final quarter of the year.

The Commission says telecommunications markets are likely to start to show further gains in competitiveness in 2008 with the implementation of local loop unbundling and the entry of a third mobile network operator.

The 2007 report is available on the Commission's website: under Industry Regulation/Telecommunications/MonitoringandReporting.

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