Saturday, April 20, 2024

Telco report shows rural Kiwis paying more for less

The Commerce Commission’s 2022 Annual Telecommunications Monitoring Report released today shines a spotlight on rural services for the first time – highlighting that Kiwis in rural areas are likely to have more expensive and significantly lower performing broadband services compared with urban areas.

Over the past 16 years, the Report has used national averages which give a useful snapshot for the nation as a whole, but the Commission is now turning its attention to the experience of the 13% of New Zealanders who live outside the national fibre footprint.

While the options for rural consumers are increasing, Telecommunications Commissioner, Tristan Gilbertson, says the Commission’s data reveals a clear disparity in performance and cost between urban and rural areas.

“If you live in a rural area, your basic copper connection (averaging 9 Mbps) will cost you about the same as what someone in the main centres pays for a 300 Mbps fibre plan,” he said.

Rural connectivity now has its own chapter in the Report, alongside urban and mobile, with each looking at market structure, the levels of wholesale and retail pricing, through to consumer affordability and satisfaction.

The Report shows that copper and 4G wireless broadband services are on average slower and more expensive than they are in urban areas – with rural broadband also being more likely to come with data caps when the rest of the country has moved to unlimited data plans.

“We’ve seen these cost and performance differences drive a real shift in rural consumer choice over the past year. Copper connections, the historic backbone of rural connectivity, have fallen below 50% of all rural connections and the technology balance has shifted to wireless, with satellite being the fastest growing technology,” said Mr Gilbertson.

He said satellite connections have increased from 1,900 to 12,000 over the past year and now account for around 5% of all rural broadband connections – one of the highest per capita connection rates in the OECD. 

“Starlink has been a real game changer, delivering average download speeds of over 100 Mbps, and giving rural consumers more choice than they have had before. It is clearly tapping into strong latent demand for a high-speed service that is more comparable to the urban experience.”

Despite these changes, Mr Gilbertson says that affordability is still an issue, with rural consumers paying more, and getting less, than their urban counterparts.

“If you’re in an urban area, you can get a high-performing Fibre 300 plan at a cost of between 1.1 – 1.7% of the average household income. But if you’re in a rural area, that same level of spend will only get a basic copper connection, while a service that is closer to the urban experience, like Starlink, will cost around 2 – 3% of the average household income.” 

Going forward, Mr Gilbertson says he expects competitive intensity to increase in rural areas through ongoing disruption by satellite providers, Government requirements to expand Rural Broadband Initiative capabilities, and incentives to roll out fibre to more of the country.  

“This will be good for rural consumers and we’ll be able to monitor and track how competition plays out in future versions of the Annual Monitoring Report,” he said.

The Commission is calling for feedback from stakeholders regarding the revised structure of the report – the value of the stand-alone rural chapter and where improvements could be made.

Feedback can be emailed to market.regulation@comcom.govt.nz (subject line: AMR feedback) by 28 July 2023.
 

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