This telecommunications monitoring report paints a reasonably rosy picture … What is missing is the separation of rural and urban markets
For six years now, the Commerce Commission have published their annual report on the state of the telecommunications industry in New Zealand.

A perceptive read it is not. However, it does draw out some interesting trends on the state of the nation’s telecommunications market. By separating voice from data services, and fixed line from mobile networks, some good insights are realised.  The report would be so much more valuable if rural and urban trends had also been separated out.

Annual revenues for the industry show a return to growth in 2011/12 to $5.22 billion which equates to a spend on telecoms of around $96 per person per month, a figure that I can relate to.

Separating this spend to voice and data categories, shows a clear 4-year trend of declining voice revenues offset by a more rapid increase in data revenues.

Dicing the revenue pie differently – fixed line versus mobile – reveals that since 2005/06, mobile revenues have increased 23% whilst fixed line revenues declined 5%.  If that trend continues, then a revenue cross-over from fixed line dominance to mobile dominance will occur in 2014/15.

That revenue cross-over will lead the telcos to focus more on mobile networks than fixed line networks.  They will seek to maximise mobile profits by designing the network to maximise the number of users.  The consequence of this for those rural users who are dependent on mobile networks, will be a reduction in the quality of the service.

The declining voice revenues in both fixed line and mobile networks are a consequence of the double whammy of falling voice prices and an easing in voice calling minutes across all call types.

Only broadband revenues are rising.  This is against a backdrop of falling broadband prices but rapidly increasing demand for fixed broadband lines and mobile data.

In releasing the report, Telecommunications Commissioner Dr Stephen Gale noted, “Fuelled by our ever-increasing use of smartphones and other mobile devices, New Zealanders almost doubled the amount of mobile data they used for the second year in a row. Fixed broadband data use also doubled in the last year with the average amount of data traffic per user now at 19GB per month.”

auckland-rose-tinted-glasseThis usage pattern mirrors the world-wide trend of burgeoning mobile data demand and declining voice revenues and prices.

The telecommunications market monitoring report also identifies a reduction in market concentration of the sector.  Market concentration is a measure of the competition between firms – the higher the measure, the lower the level of competition.

Since 2005/06, market concentration in New Zealand has declined for voice (by 50%), broadband (40%) and mobile (30%).  However our telecommunications markets remain more highly concentrated, and therefore less competitive, than in Australia or the UK.

Investment in telecommunications picked up only a little to $1.26 billion after peaking at $1.69 billion in 2008/09 when Telecom was operationally separated and competition in infrastructure was mooted.

This report paints a reasonably rosy picture of the state of our national telecommunication’s markets.  In separating mobile from fixed line, and voice from data markets, some valuable insights are realised.

What is missing is the separation of rural and urban markets.  Only then can we explore the impact of high market concentration, high prices and low demand on rural broadband services.  Only then will the city-centric rose-tinted view of the state of our nation’s telecom market reflect the true impact of the government’s discriminatory UFB and RBI projects.