Competition, Regulation and Broadband Diffusion in New Zealand

Abstract

New Zealand offers a through-provoking case study of the effects of different competition and regulatory policies on broadband diffusion rates. Despite having one of the highest rates of Internet connection and usage in the OECD, widely available broadband infrastructure, and low broadband prices, broadband uptake per capita languishes in the bottom third of the OECD. While low uptake has typically been attributed to competition and regulatory factors associated with New Zealand’s ‘light-handed’ regulatory regime, this chapter proposes that a more credible explanation lies in a combination of New Zealand’s legacy of demand-side regulations, in particular the retail tariff options for voice telephony, and the limited value being derived by New Zealand residential consumers from the small range and narrow adoption of applications used currently that necessitate broadband connections. The New Zealand case illustrates the effect that legacy regulations can have on both the diffusion of new technologies per se and the choices made by consumers between different generational variants within that technology. The case indicates a need for more research on the effect of telecommunications industry regulations on demand-side uptake factors.

From Competition to Regulation: New Zealand Telecommunications Sector Performance 1987-2007

“…Figure 5 shows that whilst New Zealand's revenues as a proportion of geographic and technological constraints this is unlikely to be exceeded). Moreover, the base level product installed was a fast 2Mbps service, with 128kbps and 256kbps products being installed only when firstly consumer preferences and secondly government purchasing requirements for subsidised rural connection programmes demanded them (Howell, 2003).…”

“…Whilst there was no 'Kiwi Share' obligation to do so, Telecom offered ADSL services nationwide at the identical tariffs, independent of the different costs or differing extent of local competition. Whilst satellite was the early price leader, the prices for all of the technologies (when accounting for speed and other differentiating factors) have converged to very similar levels nationwide, irrespective of the provider identity or actual market presence (Howell, 2003).…”

“…The result was a highly competitive ISP market, with low ISP charges and free PSTN access. Boles de Boer, Enright & Evans (2000) note that New Zealand ISP charges were between 13% and 30% lower than Australian charges at the time, despite New Zealand having only one third of the number of 18 See Howell (2007;2008b) for a full discussion.…”

“…Nonetheless, the country's broadband uptake has been low by OECD standards (Howell, 2003;. Since 2000, however, there has been a sea-change in the New Zealand approach to telecommunications regulation.…”

Catching Up in Broadband Regressions: Does Local Loop Unbundling Really Lead to Material Increases in OECD Broadband Uptake?

“…(Howell & Obren, 2002;Howell, 2008). These factors lead to the emergence of a time-based S-shaped diffusion curve for broadband (Figure 1).…”