No need for mobile regulation as yet

The problem is not a lack of regulation; it is a lack of money

I am not convinced there is a strong argument in favour of regulating the mobile side of the telecommunications industry.

The government is conducting a stocktake of the mobile sector to find out why there is so little competition in New Zealand’s mobile market. That’s a reasonable thing for a government to do and it also dovetails nicely with the recent stocktake of the fixed-line industry. However, the two markets face different challenges and are also at different stages of their growth cycle, which means we could end up regulating a market that doesn’t necessarily need it.

The issues besetting the fixed-line world were quite clear cut. It didn’t matter what the problem was, Telecom was at the heart of it. Telecom owns the only national network in a completely deregulated market and was allowed to fight any decision made regarding it in court if it so chose. When Telecom was offered a carrot, in the form of light-handed regulation, it ignored the opportunity this represented, so forcing the government to act as it has in going for the unbundling option.

While the fixed-line market was stagnant with low growth, the mobile market is quite different.

In this market there are two competing networks. There is huge uptake of mobile phones and services, and mobile operators compete against each other, albeit, as the Telecommunications Commissioner points out, more in terms of marketing than actual services. We also have a regulatory environment that has not been tested.

The limits of the current Telecommunications Act have been tested repeatedly by TelstraClear, Ihug, CallPlus and others. Players in the mobile sector have had exactly the same opportunity to put forward their case and have, repeatedly, chosen not to do so.

TelstraClear came close to building its own network, so we’re told, but instead, presumably, settled for a better resale agreement with Vodafone. That’s a commercial outcome.

If TelstraClear wasn’t happy about it, it could have plunked down its cash and demanded a regulated solution.

Econet Wireless has repeatedly called for tougher regulation but, to date, has not made much use of the present regulatory solutions on offer.

The problem with the mobile market is not a lack of regulation; it’s a lack of money. The law is quite clear — if you want access to a competitor’s network you have to prove yourself willing to build your own.

First, a new player must build-out a certain amount of its own network — 10% of the area in which the New Zealand population normally lives or works. Then it must provide the Commerce Commission with its plans for a national network build. Only then is it allowed to seek regulated access to a competitor’s infrastructure, on the understanding that this is a temporary solution until such time as it builds its own.

This is a good solution, one that could work if only the new competitors would actually try it out for size. That they haven’t isn’t the fault of regulation, it’s the fault of the competitors themselves.

It’s appropriate that new entrants to the mobile market prove their willingness to do more than simply piggyback off existing investment. This is a new market, barely a decade old. The costs involved are immense and the current players aren’t so far ahead of the rest of the field that a determined operator couldn’t come in and take market share away from either Telecom or Vodafone. Asking the government to intervene at the moment is simply asking for trouble.

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