New Zealand mobile prices, competition are OK, says Commerce Commission

Thursday, 16 May 2019

The Commerce Commission is backing off extra regulation for the mobile market, saying its preliminary findings suggest 'pricing, coverage and choice of mobile services' were trending in a positive direction for consumers.

Vodafone was quick to agree with the commission but Mark Callander, chief executive of Slingshot-owner Vocus NZ, said it was staggered that the regulator considered that the market for companies such as itself that resold mobile services was healthy.

'We've been selling mobile plans through a 'mobile virtual network operator' agreement for more than a decade now and have a grand total of 26,000 customers – and we are the largest MVNO in the country,' Callander said.

The commission's report is the result of a competition review ordered by the previous government in 2017.

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Simon Bridges, who was communications minister at the time, sent a letter to telecommunications commissioner Stephen Gale encouraging the commission to make the review a priority.

That then drew a warning from Spark managing director Simon Moutter that private investment in new 5G technology could be harmed by more mobile regulation. 

Telecommunications Commissioner Stephen Gale said Spark, Vodafone and 2degrees were all 'performing well on most measures of quality', citing research that New Zealand ranked 8th out of 88 countries for 4G speeds.

'Further, mobile service prices are generally lower than OECD averages, and consumers tell us they find it easy to compare plans and switch providers,' Gale said.

The preliminary findings are likely to come as a relief to Infratil and Canadian investment company Brookfield which agreed to pay $3.4 billion on Tuesday to buy Vodafone NZ, ahead of the competition report.

Infratil chief executive Marko Bogoievski had been braced for some changes to flow from the review, but major changes would have come as a surprise to all three telcos.

There had been suggestions that the Commerce Commission should take steps to ensure rivals to Spark, Vodafone and 2degrees were able to get wholesale access to their networks at prices set by regulators, making it more viable for other internet providers to profitably resell their services.

But Gale said he saw no need to step in at the moment.

'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,' he said.

It is that finding that Vocus NZ is contesting. 

'We were expecting the commission to realise that mobile operators have been paying mere lip service to mobile competition and to propose measures to increase competition and benefit New Zealand consumers,' Callander said. 

'Today's preliminary findings that the MVNO market is operating as it should is disgraceful.'

Callander said the fact that 99 per cent of the country's 5.5 million mobile connections were sold by the three 'mobile giants' was clear evidence that wholesale arrangements weren't working.

'Quite frankly they have missed the mark by a long, long way here,' Callander said.

Bogoievski indicated to Stuff on Tuesday that he was expecting some changes.

'You expect a regulator in a preliminary issues paper to want to promote competition which would include making some statements around the potential for MVNO entrants,' he said then.

'We have got a business case that assumes some activity in that space – it is not naive,' he said.

But Gale indicated the commission was most concerned with the impact the ownership of radio spectrum had on competition. 

'Spectrum is a key cost for the three network operators. Imbalances in spectrum holdings between operators – across all bands – can affect competition,' he said. 

'Our view is that, in its design of future spectrum allocation processes, the Ministry of Business, Innovation and Employment should have wholesale and retail competition matters at the forefront of decisions.' 

Gale said there was room for improvement in some areas.

'Prices for large data plans are noticeably higher than Australia and while mobile data use grew 69 per cent 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,' he said.

The commission has invited submissions on its findings by June 28 and expects to publish its final report by the end of September.