Vocus has delivered a blistering attack on the Commerce Commission’s preliminary views on competition in the mobile market, issued on 16 May, branding it “disgraceful”.
Vocus said it was staggered that the Commerce Commission considered the wholesale mobile market to be healthy and showing effective competition from MVNOs.
After listing features of the MVNO market the commission’s report concluded: “We do not consider MVNO access regulation to be appropriate at this time. There would need to be greater evidence of market failure to justify wholesale access regulation.”
Vocus New Zealand CEO Mark Callander said the company had been selling mobile plans through an MVNO for more than a decade and the largest MVNO in the country but had managed to achieve only 26,000 customers.
“We were expecting the Commission to realise that mobile operators have been paying mere lip service to mobile competition and to propose measures to increase competition and benefit New Zealand consumers,” he said. “Today’s preliminary findings that the MVNO market is operating as it should is disgraceful.”
Callander said the fact that 99 percent of the almost 5.5 million mobile connections in New Zealand were sold directly by the three mobile network operators was clear evidence the MVNO market was not functioning.
He said Vocus had presented this view strongly to the Commission, but had been ignored. “Quite frankly they have missed the mark by a long, long way here,” he said.
Vocus says the Commerce Commission needs to regulate MVNO services so that MVNOs have a real opportunity to establish, gain scale and become competitive.
It says a framework for regulation of mobile services needs to be established, and in the absence of regulation, any change in MVNO service provision is unlikely to happen in the next five to 10 years, denying New Zealand’s mobile customers the innovation and price advantages associated with a competitive market.
Consultants flag poor MVNO prospects
The commission’s own study of the MVNO market, commissioned from Red Dawn Consulting was also not very optimistic about the MVNO market, saying it had limited scope for growth and was unlikely to sustain a large number of MVNOs or a high proportion of MVNO subscribers.
“The market’s low capacity to scale, combined with MNOs’ high bargaining power on wholesale prices, predicts low profitability for any individual MVNO,” it said.
It added that this inherent disadvantage “could be offset by a high degree of service differentiation, with likely success rates in the bundled or retail MVNO segments, as demonstrated by existing players.”
Vocus a lone voice of dissent
Vocus’ views are in stark contrast to those of other parties who gave generally favourable reviews on the paper.
TUANZ said the review recognised that the market is generally headed in the right direction, and this reflected feedback from a recent member survey on the topic. However, it also flagged a less than satisfactory MVNO market.
“Our members have indicated to us that whilst they are comfortable with the current range of providers, they would be keen to see further targeted options,” TUANZ said.
“In Australia we see one million connections being provided by MVNOs or wholesalers rather than the MNOs themselves, and while this is only three percent of the total market, they do represent over 29 percent of the prepaid market.
“We will respond to the Commission's report asking them to be vigilant and keep a very close eye on developments over the next short period before making their final decisions on whether there is a need for some form of regulatory reform in this market.”
Vodafone said the NZ mobile market was competitive and healthy, with retail prices well below OECD averages, 98.5 percent population coverage, committed investment to extend coverage further, three national competing networks, and 5G on the horizon that would deliver even more innovation and competition in the market.
(It did not explain why or how 5G would increase competition).
Spark New Zealand was also happy with the commission’s preliminary findings. Spark GM for regulation John Wesley Smith said they confirmed that competition indicators such as pricing, coverage and choice of mobile services were trending in a positive direction for consumers.
“This reflects what we see and experience in the market – that competition is working well,” he said.