Is our telecommunications industry really competitive?

 One of the main goals of TUANZ is to encourage competition in the market place. Why? Because more competition means more choice, a better range of products and services and better prices.

So how do we measure competition? The Commerce Commission measures it by looking at the number of customers each provider has.

That’s OK but doesn’t really tell the whole story. Better to look at the revenue share each company has to determine just how the market is shaking out.

In mobile, that means we have two giants (Vodafone and Telecom) and a minnow (2Degrees) and a raft of also ran virtual operators that have a minute market share.

In landline broadband, that means we have two giants (Vodafone and Telecom) a small number of minnows (Orcon, CallPlus and Snap) and then the rest, mostly niche players and resellers of service.

IDC Research has released its annual telco report (oddly not available online in any form that I can find) which shows a flat to slightly declining market across the board with no sign of relief for many years to come.

In addition, despite increased demand for broadband services, revenue shrank slightly and looks set to continue on that path for some time.

In the mobile space there’s little better news for telcos. Telecom’s shut down of the CDMA network, says IDC, means it is now the third place mobile operator by number of customers, but still number two in terms of revenue.

Yet the telco market is as vibrant as we’ve seen in many years. Multiple players, differentiation, all the things that appeal to a wider range of customers and prices to match.

So is the market working or isn’t it?

In mobile we are starting to see competition at its finest. Infrastructure-based competition is the best we, as customers, can ask for and we have two national networks and a third on the way.

What’s important in this space is that we make sure we continue to have three viable networks, which is why the idea that the government can settle for only two players in the 700MHz auction is unacceptable to us. We need three or we settle back into a cosy duopoly with all that entails.

Currently the mobile market isn’t working quite as well as we’d like. New entrant 2Degrees is still fighting for revenue market share and the dominant players are learning to respond more rapidly to the changing nature of the market. The new $19 price point is a great example of this – unthinkable a few years ago and now hotly contested.

In the fixed-line market we really do see very little differentiation between ISPs. Certainly there is some – mostly relating to the thorny issue of content provision – but for the most part we have monthly plans with an “all your line can handle” speed and a relatively low data cap. You can find some competition at a structural level with Vodafone’s recently purchased cable network and from the fixed-wireless providers and unbundlers, but for the most part it’s any colour you like so long as it’s black.

That’s only going to get worse as we move to the UFB, where all inputs are more or less identical, unless the retail service providers recognise the problem and go out of their way to shake things up.

As we’ve said before, telcos spend a huge amount of money on central city offices, on marketing teams and sales managers and on retail outlets. You’d think they were selling high-end cars, yet their business model will shortly be closer to that of the electricity companies and their business costs should move in that direction as well.

The trick for customers will be to shop around. I know that sounds easy but the inertia that we see all too often in the market is an ugly and pervasive thing.

Don’t just settle for what’s familiar, really consider your needs and what you want from a telco and see what else there is in the market.

We need to support and encourage those players that are dynamic, that are offering new and interesting choices and are really trying to win our business. They tend to be the smaller players (they’re far more willing to try something new in this industry) and oddly, they’re the very ones that are most at risk from the copper tax. They’ve invested in new technology, they’ve tried to shake things up and now they’re facing increased input costs at a time when they’re yet to reap the rewards of increased revenue.

Without them in the industry we’ll all be worse off.