KEY POINTS:
New Zealand's broadband pricing war has boosted uptake sharply in the past year, lifting the country's international ranking a few notches.
But most broadband users are still on slow speeds with data caps, which is limiting potential, say observers.
Between June and September last year, New Zealand's ranking for broadband uptake increased from 22nd to 19th among OECD countries, Statistics New Zealand said yesterday.
The number of broadband subscribers grew from 9 to 14.7 per 100 people for the year ended September. For the six months ended September, it rose 28.6 per cent to 611,600. The number of dial-up subscribers fell 5.1 per cent to 771,100.
The country's low OECD ranking was one of the reasons that the Government passed the Telecommunications Amendment Act to break open Telecom's network to rivals - called unbundling the local loop.
IDC telecommunications analyst Darian Bird said internet companies had been aggressively competing for broadband customers since May, when the Government announced it would unbundle Telecom.
The process will allow internet companies to place their own equipment on Telecom's network and offer a range of innovative services such as voice and video over broadband, which may substantially increase their margins.
But most subscribers were on slow-speed plans, which was limiting broadband's potential, said Bird.
"This isn't likely to change dramatically this year, which will slow down demand for things like internet telephony and video on demand."
Internet New Zealand executive director Keith Davidson anticipated that broadband would overtake dial-up in the next six months.
"Clearly improvements in pricing and plans for broadband are assisting in the increase in uptake," he said.
But progress still needed to be made for New Zealand to reach the upper half of OECD countries by 2007 and the upper quartile by 2010 - as set out in the Government's Digital Strategy, he said.
Of all broadband subscribers, 97.6 per cent have a data allowance cap on their subscription, with more than two-thirds having a cap of less than 5 gigabytes.
About 60 per cent of broadband DSL subscribers have download speeds of less than 256 kilobits per second.
The statistics also show internet companies are happier with the Government's regulatory changes.
In March 2005, 73 per cent felt the regulatory environment was a barrier to growth but that fell to 48 per cent in September 2006.
About 72 per cent of internet companies identified the strength of competition as the greatest barrier to the growth of their operations.
Communications Minister David Cunliffe said he was delighted to see the increase in broadband use.
