The government's decision on how to respond to the telecommunications inquiry may be influenced not only by thoughts of Telecom's share price, but by new research that suggests the current regulatory regime has delivered New Zealand a knowledge economy advantage.
Finance Minister Michael Cullen unnerved proponents of telecommunications regulation last week when he said that the government was not sold on the idea of industry-specific regulation and other elements of the telecommunications inquiry's final report.
Cullen's comments were largely seen as a response to an eight-cent drop in Telecom's share price after the inquiry's report was released but the government's enthusiasm for regulation may also have been tempered by a study published last week by the Victoria University-based Institute for the Study of Competition and Regulation.
The background paper, 'The State of E-Zealand', is part of independent research contracted by the Ministry of Economic Development prior to the Government’s e-commerce summit next month.
The paper says New Zealand outstrips Australia by most measures, that some Internet access packages here are even cheaper than the equivalent in the US and that New Zealand has the fourth-highest ratio of secure Internet servers to population in the world.
It also implies that we already have the most important piece of regulation already in place: unmetered local calling under the provisions of the Kiwi Share.
One of the researchers, Bronwyn Howell, says free local calling "has certainly been one of the most significant facilitators of electronic commerce, because it's put no barriers in the way of people staying on the Net as long as they need to get what they want. And it also means our uptake of content is different.
"If you're downloading large amounts of data you'll be quite happy to sit around and wait for half an hour for it to come through, but if you're paying by the minute you might be quite happy to have the no-frills version. That must have an impact on the development of content."
The paper largely re-examines published research – including the OECD figures on telecommunications costs that Clear has used to berate Telecom and the current regime. Even New Zealand's business telecommunications costs – which the OECD reckoned to be amongst the highest – may have been overstated by the way the OECD assessed bundles of services, says Howell.
Howell says that the policy implications of the paper lie in the fact that "we've gotten to this this world-leading position with whatever regulatory regimes and whatever conditions around the infrastructure that we've had over the last five years. We have to work out which parts of that infrastructure have got us there.
"And clearly, telecommunications is a big one. It facilitates Eft-Pos and Internet and if all these things are humming and the costs and benefits are good enough to have this level of uptake then we have to conclude that this infrastructure has a key role to play. And tinkering with anything around that infrastructure potentially imperils the position we've reached."
"We're not sure at this stage exactly which of those things contribute. Obviously free local calling is a significant one, but we don't know what the others are. So do we tinker and risk the whole thing falling in a heap or do we stop and think about what these sorts of issues are going do?"
The State of E-Zealand is available in PDF form from:
http://www.iscr.org.nz/navigation/research.html (click browse all documents)