Abstract:
This report suggests that the telecommunications market in New Zealand is surprisingly mature. We infer that the potential for growth is limited. There has been negligible growth in any of the number of fixed lines either business or residential since 2000. The number of residential lines is growing only in proportion to the number of households indicating that household penetration is now saturated. Business line connections have been constant since approximately August 1999 although there is evidence of substitution away from Public Switched Telephone Network (PSTN) connections towards Independently Switched Digital Network (ISDN) connections in this market. ISDN is predominantly used for voice access by New Zealand businesses with less than 0.1% of connections being used for data communications in January 2002.While the number of mobile connections has been increasing the total volume of voice-based telephony traffic (local and long distance fixed line and mobile) has settled at a constant level. Diffusion of mobile telephony sits at approximately 75% of the population over 10 years of age and while still growing the rate of growth appears to be slowing implying that this technology is close to saturation as well. Average usage per mobile account is declining indicating that the connection growth that is being recorded is related to users with lower than average demand for the service.The data offer significant evidence of substitution between technologies (fixed line to mobile) for voice traffic. Thus the presumption that mobile and fixed line telephony are separate markets must be questioned. This is particularly evident in the residential market; as the evidence supporting substitution coincides with the introduction of prepay accounts which have been targeted at residential consumers.The only telephony volume to show significant growth is that of dial-up Internet traffic. However even this traffic is showing signs of slowing both on measures of volume per fixed line and volume per Internet Service Provider (ISP) account. Diffusion of this technology is also widespread with nearly 60% of households having connections. Thus this technology may also be approaching maturity in the New Zealand market as with mobile technology new connections represent users with lower than average demand. Whilst there is some evidence of substitution of dial-up Internet access technology with DSL in the business market in the residential market substitution still appears to be dominated by learning effects associated with the applications that consumers use and the individual valuation of time.
