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"Lazy" telco rulers fail kiwi consumers

23 May 2014

The Commerce Commission has failed the longer term interests of kiwi consumers by failing to follow through on the 2006 Mobile Market review, and failing to analyse the imbalances of the 2014 mobile market.

That’s the damning view of Two Degrees founder Tex Edwards, who has called on Kiwis to look past the the Commission’s “euphoric report” highlighting short term value for consumers.

“There is currently a Subscriber Acquisition Costs (SAC) war in New Zealand and a massive corporate welfare subsidy to one of New Zealand’s most profitable companies by way of rural broadband infrastructure grants,” he says.

“The impact of these two matters hasn’t been reviewed by the Commission and therefore competition may not be sustainable.”

According to Edwards, the Commission has failed to follow through on its ground breaking Mobile Market review of 2006 which lead to a 3rd operator breaking the Global System for Mobile Communications monopoly.

“The resolution of barriers to efficient market entry by challenger networks has not been followed through by the Commission, risking the prospect of a return to the bad old days of Monopoly Club Politics in telecommunications,” he adds.

“Simply put, the Commission has failed to correctly analyse market structure and imbalances and implement promised policy, which leaves the currently level of competition unsustainable for the longer term interests of kiwi consumers and kiwi business groups.”

Edwards says the Commission made serious errors in their 2013 Mobile Market Review and these same errors were repeated by the Ministry of Business, Innovation and Employment (MBIE).

“This lead to the Minister of Telecommunications, Amy Adams, being totally misguided in her appalling allocation of spectrum and related spectrum operating conditions,” he scathes.

“This has damaged competition settings for the challenger operators which have stimulated all the value for New Zealand Inc.

“What has gone wrong is the Commission has not reviewed the relative imbalances in the market due to legacy monopoly structures and they haven’t implemented the recommendations they made in 2006.”

Edwards thinks it’s an “embarrassment” that they have not invested in specialised analysis by visiting peer country mobile markets of Sweden, Denmark, South Africa, Finland, Norway and Ireland.

In the words of Edwards, there has been:

1. No public disclosure of the taxpayers $350m subsidy to dominant operator Vodafone ,

2. No discussion of the long term impact of the SAC war to consumers

3. No action on cost of cell tower infrastructure in New Zealand

“The Commerce Commission, MBIE and Adams are intellectually lazy on their review of the structure of the market,” adds Edwards. “And have failed to benchmark the New Zealand market relative to the peer groups of OECD markets.

“Without a shake up of analysis and policy action at the Commission and MBIE, kiwis face higher mobile phone costs and a return to pricing of the GSM monopoly days of the early 2000s.”