The thing that stands out the most is that telco competition in rural areas is key to our future national ranking in the information society
The average cost of our telephone services, mobile calling and fixed broadband services are amongst the more expensive in the world according to an International Telecommunications Union (ITU) report.  Combined, they rank us at 48th (out of 161 countries) on the price scale, similar to Estonia and Poland.  Australia comes in at 29th, similar to the United Kingdom and France.

ITU MIS 2012 reportLast week, Rural Connect looked at the 2012 ITU report “Measuring the Information Society”.  The ITU are charged with improving the availability and affordability of communications systems and services and, as a means of achieving this, rank countries by two measures.

New Zealand ranks particularly highly against the availability measure (the ICT Development Index or IDI) in terms of our Access to, Use of and Skills in, ICT.

However, against the affordability measure (ICT Price Basket or IPB), we perform less well. To see the reason why, we need to drill down in to the various sub-indices used in the study.

The IPB looks at baskets of prices covering fixed telephone, mobile cellular and fixed broadband services.  By normalising prices against Gross National Income per capita, comparisons on affordability can be assessed.

In the first sub-basket of prices, fixed telephone services, New Zealand is ranked as the 67th most expensive country and is around 75% more expensive than Australia (ranked at 36th).

This is primarily because our free local calling requires a high fixed-cost monthly subscription charge.  In this aspect, New Zealand is the most expensive in the world (20% greater than second-ranked Canada).

Whilst this cost is offset by having free local calls, the measure indicates that trading fixed monthly subscription costs against the variable cost of local calls, results in an overall service that is more expensive for the average user.

Three telephony trends will change this – the number of call-minutes is declining, traditional telephone lines are increasingly being replaced with mobile services and calls using internet-based telephony is on the increase.

The combination of these trends favours people living in urban areas.  Rural areas too frequently have poorer mobile coverage and strong competition in urban areas is resulting in unlimited national calls being bundled in to broadband packages.  Such bundling is not often available to rural people because the lack of strong competition means that the ISPs do not have to offer them.

The second sub-basket of prices is for fixed broadband services.  Here, New Zealand is ranked as the 121st most expensive country(compared to Australia at 139th).

This measure is not so reliable as price competition and new technology means that the analysis dates very quickly.

With our national broadband penetration rate nearing saturation, ISP growth is not about attracting new Internet consumers.  Instead, strong competition amongst urban ISPs has seen significant price falls and greater bundling of services to entice existing customers to transfer.

This is the opposite to what is happening in rural areas where competition is weak, enabling Vodafone to increase the price of it’s new rural broadband service by 22% mid-year.

The reasons for New Zealand’s poor performance in the ITU’s IPB measure is even more pronounced in the mobile calling rates.  Whether calls are on-net, off-net, or to landlines, peak or off-peak, our per-minute rates rank us in the top five most expensive countries.  New mobile operator 2Degrees is bringing prices down so our ranking on this measure will change in the future.

The thing that stands out the most is that telco competition in rural areas is key to our future national ranking in the information society.