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ISCR releases Internet Competition study

6 June 2000

Prof. Lew Evans
Executive Director


ISCR releases Internet study


The Institute for the Study of Competition and Regulation (ISCR) today released a study of Internet access charges in New Zealand and Australia.

Competition is helping New Zealand consumers enjoy cheaper access to the Internet than Australians, and prices here are falling quickly, according to the ISCR report .

Lower prices appear to be spreading the Internet quickly in New Zealand, with as many as one-third more New Zealanders than Australians “on line” per capita, based on the number of Internet accounts.

Internet charges in New Zealand have fallen steeply since 1996. High users (those who are on the ’net 50 hours a month or more) have benefited the most, with their monthly charges falling to a quarter or less of the 1996 price. Prices for low-end users (10 hours a month or less) started lower and have fallen by more than half in the same period.

The study shows that Internet access in Australia is at least one-third more expensive than in New Zealand, based on exchange-rate conversion.

The reasons for the differences are not clear, but the complex way in which telecommunications is regulated in Australia is a possible cause. In Australia, a policy of “open access” to telecommunications infrastructure makes Internet bandwidth freely available. However, its price is ultimately determined by the Australian Competition and Consumer Commission. In New Zealand, the price is market-determined.

The outcomes of this study provide some support for critics of Australia’s open- access regulation, some of whom have argued that the Australian process inhibits competition and efficient provision of network infrastructure such as cables.

This study underlines the need for further research into the effects of the differing regulation styles of the two countries, because competition to provide the right quality and quantity of infrastructure is one of the critical factors in designing good regulations.


ENDS

The full study is available on the Internet at www.iscr.org.nz/research

For more information:
David Boles de Boer (025) 449 991

Figures:


Data for graph: “Average of Different User Types”
--------1996/1 1996/2 1997 1998 1999
High-end $411.29 $370.81 $191.41 $141.04 $64.86
Middle $136.31 $123.19 $78.79 $57.46 $37.15
Low-end $65.25 $58.73 $43.84 $30.02 $24.18


Internet monthly access charges
(weighted average)

Level of use Australia New Zealand
PPP NER
Low $A22 $NZ25 $NZ27 $20
Middle $A33 $NZ37 $NZ40 $27
High $A58 $NZ66 $NZ70 $38

PPP = Australian-dollar price converted to New Zealand dollars using OECD’s purchasing power parity measure ($NZ1= $A0.88)

NER = Australian-dollar price using nominal exchange rate ($NZ1= $A0.83)
Weighted average adjusts price according to the market share of each provider.


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