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 the commercial and regulatory environment needs to encourage 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 to help develop rules that apply to 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.
The entry of 2degrees into the market in August 2009 has made a significant impact on the market. In March 2011 2degrees announced they had gained a customer base of 580,000 connections, representing approximately eight percent of the market. They continue to expand their network coverage from their launch footprint of Auckland, Wellington, Christchurch and Queenstown. As they expand their network coverage 2degrees relies upon Vodafone's network to support their customers through a roaming arrangement.
Source: Commerce Commission
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 a number of MVNOs operating in the New Zealand market, the largest of which was TelstraClear. Other MVNOs include Orcon, Slingshot and Callplus. The launch of 2degrees and the introduction of Telecom's 'XT' network meant that for the first time, many customers were 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.
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 an increase in the number of people transferring their existing phone number between mobile providers.
Source: TCF
The Commerce Commission publishes an annual Telecommunications Monitoring Report containing more data on the performance of the New Zealand market.
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.
In August 2010, the Minister of Communications announced his intention to regulate Mobile Termination Rates. His decision followed a Commerce Commission investigation, initiated in 2008 to explore whether mobile network operators like Vodafone were charging termination rates that were too high.
In May 2011 the Commerce Commission lowered MTRs from 17.7 cents per minute to less than 4 cents by 1 April 2012, with further reductions until 2014. Termination rates for text messages dropped to 0.06 cents from 6 May 2011.
The Commerce Commission's regulated pricing is below the cost Vodafone believes it incurs to terminate a call on its network. Below-cost pricing is potentially bad for investment in the telecommunications sector and could, in the long term, impact competition through dampening innovation and technology differentiation. The Commerce Commission's decision will have significant implications for Vodafone's revenue. The Commission's proposed cost based rate of 4.68 cpm for 2011 will have a significant impact on Vodafone's revenues for the year ahead.
A further area for potential Commerce Commission investigation is the volume of usage between an operator's customer base, compared to volume of traffic to other networks. This disparity is encouraged with special pricing plans with differentiated pricing for calling phones within the user's network (so called "on net"). The Commission is concerned that an imbalance in pricing on and off-network could pose barriers to new entrants.
As part of the MTR process the Commerce Commission indicated they could pose some sort of retail price regulation to prohibit certain forms of on-net pricing if the Commerce Commission does not observe changes in volumes.
The RBI will be funded by $50 million of Government funding, and another $250 million collected from the Telecommunications industry through the Telecommunications Development Levy. The Government's objectives for the Rural Broadband Initiative (RBI) are to:
The Vodafone RBI coverage will extend rural broadband to 80% of rural homes, providing access to the Vodafone rural broadband service.
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, conducted a tender process to select partners for the Government in the UFB initiative.
Telecom NZ, North Power, Ultrafast Broadband Limited and Enable Networks have been selected as preferred partners. Telecom NZ's participation in the project is conditional on it structurally separating its network and wholesale business from its retail operations. Details of Telecom's separation will be unveiled in the coming year.
