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New Zealand - Market Intelligence Report
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Market Intelligence Reports provide an invaluable mix of vital market data and background information, including telecoms regulation. The New Zealand telecommunications market is arguably one of the most liberalised in the world, with no statutory or legal barriers to entry. Since 1989, any entity with at least 10 customers has been able to register as a network operator. However, there are still relatively few operators in the market and it seems that new entrants have found it very difficult, not to mention downright expensive, to establish network interconnection agreements with the incumbent, Telecom Corporation of New Zealand (TCNZ, or Telecom). The most potent threat to TCNZ is TelstraClear, a wholly-owned subsidiary of Telstra of Australia. This company owns an extensive national fibre-optic backbone and has licences to build and operate wireless local loop (WLL) and local multipoint distribution service (LMDS) platforms that deliver services directly to customers, but with no legislation in place requiring the incumbent to open access to its local loop, TelstraClear has been unable to grow as fast as it might wish. The same situation now faces New Zealand's remaining new entrants and has had the effect of limiting the roll-out of new networks, including those based on broadband technologies. TelstraClear has also held licences for cellular and third-generation (3G) mobile telecommunications services, but has elected not to enter this market. A review of the Telecommunications Act of 2001 was initiated in 2004, carried on through 2005, and culminated in the introduction to Parliament of the Telecommunications Amendment Bill in June 2006. The bill was designed to implement the Labour government's pledge to deliver faster, better broadband Internet access, as unveiled in a pre-budget telecommunications stock-take package in May. In November 2006, a New Zealand government select committee recommended a number of changes aimed at breaking TCNZ's dominance of the telecommunications market. The committee was recommending TCNZ divide its operations into separate divisions in a bid to force the operator to give competitors equal access to its fixed lines, through the implementation of local loop unbundling. The proposed divisions are network access, wholesale and retail. There was speculation the committee would go further, recommending Telecom would have to sell the split-off operations. However, the committee report said operational separation should not include a requirement that the units be sold off as well. The bill was passed in December 2006, becoming the Telecommunications Amendment Act (No. 2) 2006. As a result of the legislation, TCNZ is now required to offer unbundled access to its local loop in the form of full access on a cost basis. The Act provides for the proposed initial access price for LLU to be benchmarked against prices for similar services in comparable countries that use a forward-looking cost-based pricing methodology. This determination process will give broad discretion to the regulator. The Act also requires TCNZ to offer its wholesale customers 'naked' digital subscriber lines (a DSL connection without an accompanying fixed line service). Availability of naked DSL is likely to increase substitution of fixed voice access services with mobile services and VoIP services. With TelstraClear unwilling to invest in cellular or 3G (indeed, the company is now in the process of scaling back its New Zealand operations), hopes of breaking the TCNZ/Vodafone New Zealand duopoly in the mobile telephony market rested with 3G licensee, Econet Wireless. Although that company has said on several occasions it was close to commencing work on building its network - even going so far as to hire Huawei Technologies as its technology supplier - changes in the ownership and management of Econet Wireless have resulted in the company reviewing the business and regulatory climate pending a final decision on whether or not to proceed. It looks increasingly likely that Econet Wireless will follow TelstraClear's lead in backing out of New Zealand.
This Market Intelligence Report was produced as part of
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