As a telecommunications provider, Vodafone's economic impact extends far beyond its direct financial contribution to the economy.
Telecommunications products and services act as an economic enabler, facilitating coordination of people and resources, breaking down geographic isolation, increasing innovation and boosting productivity.
To maximise these benefits a balance in the commercial and regulatory environment is required that encourages private investment in infrastructure, while also fostering competition to drive innovation and value for consumers. To ensure this balance Vodafone works with other members of the telecommunications industry, the Government and various government agencies on different aspects of the New Zealand regulatory environment.
The shared aim is to foster a marketplace which delivers great value, world-class telecommunications services to all New Zealanders.
Over the past year the launch of new network-enabled competitors and more mobile virtual network operators competing in the market has meant an increasingly competitive mobile marketplace.
The entry of 2degrees into the market is the most significant of these changes. The launch of their Prepay plan in August 2009 has made a significant impact on the market, with the Commerce Commission reporting that they had achieved a four percent market share within the first six months of operation. 2degrees operates its own network in Auckland, Wellington, Christchurch and Queenstown. Outside these areas it relies upon Vodafone's network to support their customers through a roaming arrangement.
Telecom's launch of its WCDMA-based XT Network in May 2009 has also enhanced the competitiveness of the mobile market. WCDMA is based on GSM technology - the same mobile technology "family" used by Vodafone New Zealand and 2degrees. This means that for the first time, many customers are able to keep the same phone when switching between mobile service providers, increasing customers' ability to shop around for the best deals and pricing. Telecom still operates their legacy CDMA network, though they intend to shut this network down in 2012.
Providers need not have their own network in order to compete in the mobile market. Both Vodafone and Telecom support Mobile Virtual Network Operators (MVNOs) - companies that use another company's network in order to provide services to their customers. At the end of the financial year there were eight MVNOs operating in the New Zealand market:
MVNOs on the Vodafone Network:
MVNOs on the Telecom Network:
There is evidence customers are taking advantage of the increased choice and competition in the market by switching between providers more than ever before. The number portability statistics show the number of people transferring their existing phone number between mobile providers. The statistics show that the entry of 2degrees and the launch of Telecom's XT network have significantly increased the number of customers porting between providers, with numbers increasing from approximately 3000 a month to over 10,000.
Vodafone has maintained its commitment to remain in the cheaper half of the OECD mobile pricing benchmarks. At the end of 2009 we ranked in the cheaper half of the 30 OECD countries across all baskets measuring light, moderate and heavy users of mobile services. Vodafone also continues to rank below the OECD pricing average for those user baskets.
As of November 2009, the best value plans in New Zealand as measured by the OECD were all offered by Vodafone, and were:
The OECD reviewed its bechmarking in November 2009, and will be reporting against new benchmarks from 2010 onward. Vodafone is working with the industry and the Commerce Commission to develop an extension to the benchmarking methodology that is more relevant to New Zealand customers.
Mobile Termination Rates (MTRs) are the charges levied between operators when terminating calls on a mobile network. For example, they make up part of the cost of a call from a fixed line telephone to a mobile phone. The Commerce Commission initiated the current investigation into these rates in 2008, following an earlier investigation on this issue that commenced in 2004, to explore whether mobile network operators like Vodafone were charging termination rates that were too high.
Vodafone's preference is for market-led solutions. We proposed an industry-led binding undertaking that would have lowered these termination rates without the need for Government intervention and regulation.
Since the end of the financial year, in August 2010, the Minister of Communications has announced his intention to regulate MTRs. We are disappointed with this decision. We will work in cooperation with the Commerce Commission to determine a fair and accurate price to regulate termination that balances the various interests appropriately.
In the past year there have been significant changes in telecommunications policy.
Through the UltraFast Broadband Initiative (UFB), the government will be investing up to $1.35 billion in open-access, dark-fibre infrastructure to accelerate the roll-out of ultra-fast broadband to 75 percent of New Zealanders over ten years. The design of this initiative was finalised in September 2009, with the government confirming its goal to provide downlink speeds of up to 100 Mbps and uplink speeds of up to 50 Mbps in the target areas. The Government, via Crown Fibre Holdings, is currently considering the tenders of potential partners for the build of these fibre networks in the candidate areas. Vodafone is particularly interested in this initiative, as it will provide next generation fibre connections to New Zealand homes, that will allow us to offer a wholly new set of products and services.
As a complementary initiative, the Government has also committed to enhancing rural telecommunications through the Rural Broadband Initiative (RBI). This initiative was also confirmed in September 2009.
The Government's objectives for the RBI are to:
The RBI will be funded by $50 million of Government funding, and another $250 million collected from the Telecommunications industry through the Telecommunciations Development Levy.
The introduction of the RBI, and its funding mechanism in the TDL, has given the Government cause to reconsider the need for and design of the legacy Telecommunications Service Obligations (TSO). The TSO framework has two essential features:
Vodafone has long objected to the design of the TSO obligations, in that they require competitors of Telecom to pay millions of dollars to Telecom to support supposedly "commercially non-viable" customers in rural areas, despite the fact that many of these customers are covered by alternative networks. Further, under the design of the TSO Telecom has no obligation to spend the money it receives on improving its rural network. This is despite the fact that the payment of TSO charges comes with the real opportunity cost of limiting Telecom's competitors' ability to invest in and improve their own networks in rural areas.
However, under the changes to the TSO announced in 2009, Telecom will no longer be able to request subsidy from the rest of the industry unless it can prove that the entirety of its delivery of TSO services over its fixed network is operating at a loss and is commercially non-viable, rather than the rural portions of that network alone. Vodafone supports these changes.