The Commerce Commission has today released the preliminary findings of its study into New Zealand’s mobile services market.

Telecommunications Commissioner Dr Stephen Gale said competition indicators such as pricing, coverage and choice of mobile services were trending in a positive direction for consumers.

“We have three established mobile network operators in New Zealand and all are performing well on most measures of quality. According to Opensignal, New Zealand currently ranks 8th out of 88 countries for 4G speed. Further, mobile service prices are generally lower than OECD averages, and consumers tell us they find it easy to compare plans and switch providers,” Dr Gale said.

“However, there is room for improvement in some areas. Prices for large data plans are noticeably higher than Australia and while mobile data use grew 69% last year, reliable 4G coverage is not so widespread. Information on performance measures like call dropping rates and coverage gaps is also hard to find.” 

The study found that while consumers consider switching providers to be a reasonably simple process, there is currently some inertia when it comes to switching. The Commission has begun further work to better understand the impact of this inertia on consumers.

Dr Gale said the key challenge for competition in the future is the allocation of spectrum.

“Spectrum is a key cost for the three network operators: Vodafone, Spark, and 2Degrees. Imbalances in spectrum holdings between operators – across all bands – can affect competition. Our view is that, in its design of future spectrum allocation processes, MBIE should have wholesale and retail competition matters at the forefront of decisions.”

Competition is emerging for network operators to sell wholesale services. This allows ‘virtual’ operators such as Vocus and The Warehouse to sell mobile services to consumers, without having to build their own mobile network.

“We see no need to regulate at this stage but will keep an eye on the ability of new ‘virtual’ operators to access wholesale services. We expect more spectrum and consumer engagement will help this market to develop where it is commercially viable,” Dr Gale said.

“Overall the study found that consumers are more satisfied with mobile than with fixed line services, but there is still room to improve. We will continue to focus on consumers as part of our telco retail service quality work.”

The Commission is inviting submissions on the preliminary findings by 28 June 2019. A copy of the report can be found here and an infographic detailing key findings is here.

The Commission has also released several expert reports alongside its preliminary findings. These were commissioned as part of the study and include reports on the ‘virtual’ operator landscape globally and locally, and a view of the global industry trends relevant to mobile services.

Background

Section 9A of the Telecommunications Act requires the Commission to monitor competition in, or development and performance of, telecommunications markets in New Zealand. Under the Act, we can conduct studies into any matters relating to the telecommunications industry or the long-term benefit of consumers of telecommunications services. The findings of a section 9A study may lead us to consider whether any regulatory changes may be appropriate. Further investigations may include considering the amendment, removal or introduction of regulation.

We expect to publish our final findings on the Mobile Market Study on 30 September 2019.

Spectrum allocation

The Ministry of Business, Innovation and Employment’s (MBIE) business unit Radio Spectrum Management (RSM) is responsible for efficiently and effectively managing the radio spectrum in New Zealand. This includes allocating rights for the use of the spectrum and enforcing compliance with the requirements to ensure legitimate users are able to enjoy their rights.

Spectrum acquisitions are subject to s47 of the Commerce Act 1986, meaning that the Commission may become involved in assessing the competition implications of any given spectrum acquisition.

MVNOs

MVNOs (Mobile Virtual Network Operators) are operators that provide mobile services but generally do not own licenced radio spectrum or much of the physical infrastructure needed. Instead they rely on buying services from an operator with a full mobile network. The amount of control an MVNO has to change the services it offers to consumers will vary according to the nature of its agreement with its host mobile network.

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