Being a small country there’s always the risk that key parts of the economy are dominated by a few companies or government trading enterprises.

Some months ago we investigated the pricing of LPG. We found the LPG industry was dominated by a handful of firms from production through to retail distribution. Our view was that this lack of competition translated into higher prices for consumers.

The prices we pay for mobile telephony are dominated by the twin giants of Telecom and Vodafone. So the launching of 2degrees’ network is exciting news for consumers. It has built its own network in the main centres, so it offers a genuine challenge to the incumbents. We will only get true competition in high technology by competing firms offering their own networks or platforms. We won’t get it by firms “piggybacking” on the existing networks of dominant firms.

This is one of the reasons we’re supporting the campaign to lower termination rates between mobile-phone networks to the levels suggested by the Commerce Commission.

Telecom and Vodafone argue that lowering these rates will mean they will need to recover this lost income elsewhere.

We’re not convinced. Vodafone and Telecom have roughly the same number of customers, so the fees they charge each other for access to their networks should roughly balance out over a year. Where it makes a difference is for a new rival network. Most of 2degrees’ customers for instance will be calling or texting customers of the big two and so it will be constantly charged termination rates by the other two networks. Little money initially will be flowing back to 2degrees.

Current termination rates look suspiciously like a barrier to entry to the mobile-phone market.

The Ministerial Review of Electricity Market Performance has released some proposals for creating more competition in power pricing. We will be making a submission to the review. Our particular interest is in the role Powerswitch (which we run in partnership with the Ministry of Consumer Affairs) can play in helping consumers find the best power plan and encourage them to switch suppliers.

Consumer choice and sovereignty can only work if consumers have access to full information and can easily switch to a genuine competitor.

David Naulls
Editor
Consumer magazine

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