Costs, lack of competition hinder fast net use

By CHRIS BARTON IT editor

New Zealand's slow uptake of fast internet access is because of a lack of competition and high usage costs, says a draft OECD report.

The report, The Development of Broadband Access in OECD Countries, ranks New Zealand 16th out of 30 OECD countries for use of fast internet.

It had with 0.27 subscribers per 100 inhabitants at the start of this year.

The leading country, South Korea, had 9.2 broadband subscribers per 100 inhabitants, followed by Canada (4.54), the United States (2.25), Austria (1.70) and the Netherlands (1.68).

Broadband internet access is likely to play an important role in generating productivity growth, says the report.



To improve use, the report says, "the most fundamental policy available to OECD governments to boost broadband access is infrastructure competition."

It also says a crucial step is opening the networks of dominant telcos to competitive forces - using policies such as local loop unbundling or line sharing



New Zealand is singled out as one of only four countries which have not passed laws requiring local loop unbundling - the removal of Telecom's monopoly on residential phone lines between homes and local exchanges.

The report says that countries that have not taken this step "risk missing the immediate additional competition this can bring to a market."

Arguments that unbundling may discourage investment in new infrastructure - the reason given by the New Zealand Government for not unbundling - have also been shown to be false, the report shows.

Huge investments are being made in countries such as the US and Germany where unbundled networks are open to competing broadband access providers.

Australia, with 80,000 broadband subscribers, was ranked 13th at the end of last year, but with unbundling under way was now well placed to quickly increase use.

Australia's experience showed that the spread of broadband services had been matched by increased competition.



New Zealand also comes in for criticism on its fast access costs.

The report points out that most Telecom fast services operate with metered rather than unlimited monthly access, unlike in most OECD countries.

Their different methods of charging sets New Zealand and Iceland from other countries, the report says.

Telecom's one unlimited service, Jetstart, ranks 29th out of 35 different broadband offerings around the world providing 5.56kbps (kilobits per second) per US dollar including set-up charges.

The most bandwidth per dollar spent is available in Sweden (33.88kbps) Canada (30.69kbps), Finland (19.52kbps), Germany (18.75kbps) and the United States (17.94kbps).

The report shows that Jetstart, which operates at 128kbps, falls below the 256kbps threshold for a service to be considered broadband. But it points out that Telecom's Jetstream metered services at speeds of up to 2Mbps (megabits per second) are among the fastest in the world. Users attaining these maximum speeds while remaining below the service's megabyte cap would get up to 51Kbps per dollar spent.

Korean users achieving the top broadband speed of 8Mbps would get 148kbps per dollar.

The report found the predominant broadband technologies were DSL (digital subscriber line) and cable modem services. Countries with competing cable and DSL networks have the fastest uptake of broadband.