Kiwis paying too much for fixed-line phone calls, regulator says

Tuesday 9th November 2010 2 Comments

New Zealanders are paying an average of 26% more for telephone calls from landlines than in other developed countries, according to the Commerce Commission.

The regulator said New Zealand’s high monthly line rental charged by Telecom, the country’s only operator with a nationwide network, led to the country’s poor ranking among Organisation for Economic Cooperation and Development countries.

The comparison of fixed monthly rental becomes “slightly” better when a caller made a large number of calls.

But the lack of infrastructure-based competition put “little constraint on Telecom’s ability to increase its monthly line rental” which consistently increased with the rate of inflation.

“Having no alternative to a plan with a fixed price for unlimited local calls favours those consumers who make a lot of local calls and disadvantages those who make a few,” said Ross Patterson, Telecommunications Commissioner, in a statement. “Consumers making few monthly calls effectively cross-subsidise consumers who make a large number of calls.”

A guarantee of free local calls has been fundamental to the way Telecom is regulated since its privatisation, almost 20 years ago.

Telecom has long complained that this constrains how it can charge for landline phone connections.

Telecom was not in a position to comment when approached this morning.

Over the past five years, Telecom has come under increasing pressure to drop its prices for mobile services and broadband, leading to heightened regulatory controls on the phone company, including an enforced operational separation.

Telecom is looking at a structural separation, where it will carve out its network business into a new company in a bid to tap government funds to roll-out fibre for high-speed internet nationwide.

New Zealand ranks 33 out of 34 OECD countries for low-usage fixed-line pricing, 29^th for medium usage, and 23^rd for high usage, while business usage ranks 19^th. By and large, that’s better than Australia, which ranks 30^th, 33^rd, 34^th and 34th respectively.

Australia has similar infrastructure dominance with Telstra.

The regulator said mobile pricing was high for medium and high users, though low-volume users faced cheaper prices than the international norm.

“The entry of 2degrees in the mobile market has had a significant impact in terms of consumer choice and competitive offerings” and has tariffs “significantly lower than that offered by Vodafone and Telecom,” the report said.

Broadband prices for low and medium usage was broadly in line with international norms, though “significantly higher” for high-volume usage. The broadband comparison was only from five countries.

Shares in Telecom and Telstra were unchanged at $2.08 and $3.42 in trading today on the NZX today.

Businesswire.co.nz

Comments from our readers

On 9 November 2010 at 12:19 pm John said:

I spend a lot of time living in France. The package for the telephone, broadband, and countless tv channels is just under 30euros/month! without the tv component it is 20euro's/month. The broadband has no cap or limitation on it and the wifi has a speed 35% faster than a telecom lan connection! The telephone involves free calls within France; to 52 other european countries; to the USA, Canada and Mexico..i.e. free calls unlimited! And there is no line rental on the telephone connection!!!! Wake up New Zealand...and Australia. Even in Asia I can use a smart phone skype enabled from countless free wifi spots at no charge and thereby bypass 3g charges which are lower than in NZ...but lo and behold there is no such network of wifi spots in Godzown thereby forcing users of such now necessary mobile computers to pay again the exorbitant mobile phone charges....no wonder new business is leaving and the smart people stay away!

On 10 November 2010 at 8:43 am Luke said:

What are we doing about it - for a long time now we have been hearing that this is an issue.....stop being complacent and get on with improvement.