Privatization and Deregulation in New Zealand

Deregulation in the late 1980s has created a highly competitive telecommunications sector in New Zealand. Before 1987, the governmernt-owned Post Office held a statutory monopoly on telecommunications services. Similar to the U.S. Justice Department's breakup of AT&T, The New Zealand Telecommunications Act of 1987 ended this monopoly. The telecommunications branch of the New Zealand Post Office was privatized into Telecom in 1987 and sold in 1990 to U.S. and New Zealand private interests. Telecom is still subject to some regulation under the "Kiwi Share" agreement with the government, which obliges the company to continue to provide free local residential call, and not to discriminate between rural and urban customers in the pricing of telephone services; it also specifies that phone rental cost increases must not exceed the rate of inflation. ¹²

Telecom competes with Clear Communications (owned by a consortium of British, U.S., and local interests) in the provision of national and international toll calls and business communications services. An interconnection deal for local phone services signed between the two companies in 1996 will facilitate future competition in that segment of the industry. Australia's largest telecommunications company, Telstra, launced a New Zealand operation in March 1996 and intends to target multinational business customers. ¹³

There are four mobile networks in New Zealand and competition for the provision of services in the rapidly expanding cellular phone market is intense. The networks are owned by Telecom, Clear Communications, BellSouth, and Telstra. Other companies, although much smaller, also compete in the cellular phone market. Both Telecom and Clear Communications are planning to introduce cable TV infrastructure in the future. ¹⁴

The telecommunications market in New Zealand is very competitive. Firms are trying to attract business in a relatively small market. Profits at the retail end often come from service contracts, rather than equipment sales. Often times, these companies will sell the equipment below cost, and hope to recoup profits with service contracts. Price is the governing factor for the purchase of low-tech items. For more high-tech equipment, price is still a factor, but this segment is more driven by technology. ¹⁵

Radio coverage is widespread, and there are many local stations operated by Radio New Zealand and by private companies. Private commercial broadcasting began in 1970, and warrants by the Broadcasting Tribunal have been issued to local stations. Radio New Zealand operates 63 commercial medium-wave stations and two non-commercial networks. It operates a limited short-wave broadcast to the Pacific Islands. ¹⁶

Television broadcasts are restricted to two channels, TV1 and TV2, both operated by Television New Zealand. A third, private channel began operating in 1989, but was put into receivership after just five months. Four more companies were awarded broadcasting licenses in 1990. In 1991, the government announced that it was considering selling TV2 and semi-commercializing TV1. ¹⁷

The Deregulation of the Telecommunications Sector

1970	Private commercial radio broadcasting begins.
1987	The statutory monopoly of the New Zealand Post Office is removed, and Telecom is formed as a state-owned enterprise.
1989	Legal restrictions on entry into New Zealand's telecommunications service markets are removed.
1990	Telecom is sold to private interests for NZ$4.25 billion.
1991	Competition in national and international toll call service is introduced.
1993	Competition in cellular telecommunications is initiated.
1994	Competition in trunk mobile communications is established, and international call-back operators enter the New Zealand market.
1996	Competition in provision of local phone services is established with interconnection deal between Telecom and Clear Communications.

Source: The Economist Intelligence Unit, New Zealand Ministry of Commerce