Real competition needed to broaden our horizons
Colin Jackson, INZ President, wrote the following Opinion Piece for the Dominion Post.
from http://www.stuff.co.nz/stuff/0,2106,3583245a1865,00.htmlIn
the Business Forum column last Monday, Telecom director and shareholder
Rob McLeod described the necessity of regulating the telecommunications
sector as an urban myth.
If so, it is an urban myth of wide appeal.
People who have fallen for it include IBM, the Greens, Microsoft, economist Gareth Morgan and the prime minister.
Let's look at the reasons for this delusion.
New
Zealand lags behind most developed countries in its use of broadband.
This is a stunning reversal of fortune for a country which, in the
1990s, was consistently in the top five countries in Internet use.
So,
why are we now so behind? Mr McLeod says it is because broadband uptake
is correlated with incomes, so New Zealand is getting the broadband it
deserves.
This is just plain wrong. Running the numbers – which I assume Mr McLeod has not done – shows no correlation.
The
country with the highest broadband uptake in the OECD – Korea – has one
of the lowest incomes per capita, and the reverse is true for the
United States. So that can't be the reason.
Is
it because we enjoy free local calling? Mr McLeod says so. But Canada
has free local calling and it has the second highest broadband uptake
in the OECD.
Is
it because New Zealanders don't like technology? Far from it. New
Zealand has consistently been at the forefront of adopting technology
as it becomes available.
The eftpos we use to pay for everything is a great example – it's been here for 20 years.
Back in the days when surfing the Net meant using a slow, squeaky modem, we were ahead of the game.
When broadband started to happen, it was made available in New Zealand before almost anywhere else in the world.
Since
those heady days, broadband in New Zealand has gone backward.
Artificial speed limits – in some cases, the slowest in the world –
have been imposed. Prices have failed to track the downward progress of
those overseas.
Even with the cuts and speed increases announced last week, New Zealand's broadband is slow and expensive.
The problem is price and quality.
In
countries with high uptake, broadband access is much faster than here,
and more realistically priced. This is because in those countries
consumers have a choice on who supplies their broadband.
To
achieve competition, governments have all dealt with their former
telecommunications monopolies by various forms of regulation.
Let's
be very clear about this. Competition is what drives improvements in
price and quality. New Zealand lacks meaningful competition in
broadband. We need wide and genuine competition.
It
hasn't happened so far because one company controls access to all the
wires in and out of most New Zealand homes, and its board – including
Mr McLeod – have acted entirely rationally, as they are required to do,
to make life difficult for any competitors trying to use those wires.
Mr
McLeod calls even this Clayton's competition "parasitical". The result
is that the broadband offerings available to most New Zealanders are
limited to those that Telecom is prepared to offer, and on the terms
Telecom is prepared to offer them.
In truth what we have now is no competition at all.
Mr
McLeod would like to make this debate about competition versus
regulation, the market against government, investment versus red tape.
But we have neither regulation nor competition.
In fact, we need both. The Government needs to change the rules so there is real competition in the market.
The
right regulation will lead to competition and so give New Zealand the
range of prices and service levels it needs to generate real broadband
growth.
Widely
available, open broadband is a crucial part of a modern economy, since
it is what permits further innovative services to use the Internet.
Yet
this aspect of the Internet is very threatening to telecommunications
companies because it allows competition with their phone calls and
other products.
Real competition at the network level prevents companies from stifling Internet services they don't want you to have.
New
Zealanders are getting used to the idea of free international phone
calls on the Internet, of video conferencing with their friends and
relatives around the world, and to listening to radio stations and
watching TV shows which originate on the other side of the planet.
These and future services need unfettered broadband. The rest of the world will get them even if New Zealand doesn't.
So, do we regulate for competition, or just give up and take whatever a single company decides to let us have? It's our choice.
