Report finds NZ ISDN prices comparatively high

A report on ISDN pricing seems likely to provide ammunition to critics of the government's telecommunications policy as the election campaign begins.

A new report on ISDN pricing seems likely to provide powerful ammunition to critics of the government’s telecommunications policy just as the election campaign begins.

The report, commissioned by the Ministry of Commerce’s information technology advisory group (ITAG) and carried out by consultants Dean Drake and Liz Taylor, backs up long-standing business grumbles about the cost of ISDN.

The study compares New Zealand ISDN prices with those of Australia, the United Kingdom, the United States, Finland and Sweden, and shows that prices here are much higher than those in the other countries, with the partial exception of Australia.

New Zealand prices for national and international high-usage applications are nearly double the average of all six countries.

Local, low usage applications are slightly more than two-thirds the average, local high-usage are around the middle, and national and international low-usage are about half as much again on the average.

“At the low-use end the charges are dominated by the relatively high access fee of $120 to $150 per month, and at the high end by the usage charges,” the report says.

If it’s any consolation, the Australians are in much the same boat.

“With the exception of long-distance charges from the United Kingdom, both New Zealand and Australian charges are significantly greater than the other countries studied,” the report concludes.

Communications Minister Maurice Williamson is asking Telecom to explain why prices are so high. “There may be some good reasons; for example, economies of scale, terrain or such like,” he says. Williamson describes it as “premature” to consider whether the government might take action using, for example, the price control provisions of the Commerce Act.

The report was commissioned after a number of companies, working through ITAG, raised the issue of ISDN prices here being out of kilter with overseas.

Prices for ISDN, a service supplied only by Telecom thus far--although other telcos are expected to offer it within the year--have been a long-standing sore point with local businesses. Telecom last dropped its prices a year ago, by more than a quarter in some cases, but this was still met with a “too little” response from users.

Suggestions that the company is in the process of lowering its prices again, in the wake of the report, have been denied by Telecom.

“We don’t have any plans to drop prices in the near future,” says Arjen Maarleveld, Telecom’s product manager for computer connections. “Obviously as we build up more users there comes a point when our per-user costs go down, and that was part of what made it possible to lower prices last September. When it gets to that point again we’ll review it.”

The company is taking issue with the report’s findings, saying that some of the comparisons made are not accurate. “Some of the scenarios contain comparative errors. Our approach is much more straightforward than for many other countries. We don’t charge incremental fees, we charge standard local calling rates, while other countries charge more expensive toll rates for ISDN, and also differentials for voice and data.

Another important difference is local call charging. New Zealand has one of the largest local calling areas of almost any country, says Maarleveld.

“Telecom isn’t the cheapest in ISDN--we’re not contesting that fact,” he says, but this is because of the costs associated with New Zealand’s geography, plus its size and population base.

And he says that, particularly since the prices were cut, the uptake of ISDN is high enough to indicate most businesses are prepared to pay current charges.

Telecommunications Users’ Association chairman Derek LeDayne has welcomed the report, noting that a number of the association’s members have long had concerns about the pricing structure. However, of greater concern is the reliability of the service, he says.

“Historically it’s been unreliable and that has been a greater impediment than pricing. If it doesn’t work we don’t want to use it.” He believes, however, that the service is starting to improve.

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