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Greens question elimination of competition in telco market

30 October 2012

Greens question elimination of competition in telco market

The Green Party is questioning the Commerce Commission’s decision to allow two of the biggest players in the telecommunications market to merge.

“We’ve seen it in the banking sector, the insurance sector, and now it’s happening in the telco sector. Vodafone’s takeover of TelstraClear will inevitably lead to higher prices for end-users, businesses, and government,” Green Party Co-leader Dr Russel Norman said today.

The Commerce Commission has given clearance for Vodafone’s $840 million takeover of TelstraClear. Vodafone and TelstraClear are the second and third largest players in the New Zealand telecommunications market behind Telecom. The takeover includes a non-compete clause that will keep Australian telecommunications giant, Telstra, out of the New Zealand market place for an undisclosed duration.

“It’s not in the long-term interests of the New Zealand economy for our primary competition regulator to be eliminating competition in the telecommunications industry,” said Dr Norman.

“Large users of telecommunications services will be particularly affected. Where there was once three telcos competing for big contracts, now there will be only two.

“Make no mistake – Vodafone’s move is about eliminating competition. The takeover includes a specific non-compete clause that will keep Australian telecommunications giant, Telstra, out of the New Zealand market indefinitely.”

OECD data shows New Zealand’s telecommunications market is already dominated by two main players compared to places like the UK, Australia, Canada, and the USA.

“As a small market, New Zealand is particularly prone to monopolistic behaviour, eliminating competition and pushing up the prices we have to pay for basic services,” Dr Norman said.

“Telecom and Vodafone already have significant dominance in the telco market. This merger will enhance Vodafone’s ability to compete more broadly with Telecom but it will come at the cost of new entrants like 2 Degrees.

“The Commerce Commission have taken a very short-term view of competition, repeating the same mistake they made in the banking and insurance sectors leaving those markets vulnerable to anti-competitive behaviour from a few big overseas-owned companies.”

“It’s smarter to regulate to ensure we have competitive markets in the first place, rather than having to police two or three dominant players after the fact.”

OECD Communications Outlook report, 2011 (see page 59):
http://www.oecd-ilibrary.org/science-and-technology/oecd-communications-outlook_19991460;jsessionid=64bv1vnb8p3j3.delta

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