NECG Report Endorses Inquiry's Proposals

Centre for Research in Network Economics and Communications (CRNEC)

Telecom's economic consultants appear to have endorsed the regulatory controls proposed by the Ministerial Inquiry into Telecommunications, according to the Centre for Research in Network Economics and Communications (CRNEC) at the University of Auckland.

In a supplementary note to the Centre's report to the Ministerial Inquiry into Telecommunications, CRNEC director John Small interprets a "more narrowly defined" regime advocated by the Network Economics Consulting Group (NECG) as an implicit endorsement of the inquiry's proposals.

Dr Small's report, which updates the CRNEC estimates of the effects of the controls proposed by the Ministerial Inquiry in light of new information, was released today. It estimates the pure welfare benefits of the proposed measures at between $20m and $40m per annum. In addition end-users, including business users, are predicted to benefit by about $200m per year from lower prices.

Dr Small said the CRNEC estimates were deliberately very conservative. They had focused on the immediate net welfare benefits to consumers from lower prices. Dynamic efficiency gains from a more competitive industry had not been included in the estimates. Yet these are likely to provide even greater benefits, said Dr Small, so the total benefits of the proposed framework could be several times larger than CRNEC has estimated.

Dr Small observes that the regime framework proposed by the inquiry is already very narrow by international standards, and could only be made more so by restricting its geographical reach. Defining and working within these even narrower boundaries would increase the cost of regulating, however, and would deliver no additional benefits to offset these higher costs. This means that if a narrower regime framework would pass a cost-benefit test, as NECG suggests, the inquiry's proposals must be even better.

For further information contact: John Small 021 666 546

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