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Adams wrong on retail pricing

Media release from the Coalition for Fair Internet Pricing.

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The Coalition for Fair Internet Pricing is disappointed the Communications & IT Minister is continuing to make inaccurate statements about retail pricing of copper broadband and voice services, and has repeated its commitment to work with her constructively to help fast-track the government’s ultra-fast broadband (UFB) initiative.

Speaking to reporters at parliament today, Ms Adams attacked the coalition and invited retail service providers (RSPs) of copper broadband and voice services to “admit” they won’t pass wholesale price cuts on to consumers.

Ms Adams’ comments follow her extraordinary attack on the telecommunications industry yesterday, in which she denied lower prices for copper broadband and voice services in the monopoly wholesale market would lead to lower prices in the highly competitive retail market.

Last week, she also declared that ‘[a]nybody who believes that the wholesale price drop is going to be passed on in full to consumers probably also believes in the tooth fairy’.

A spokesman for the coalition, Paul Brislen, also chief executive of the Telecommunications Users Association of New Zealand (TUANZ), said Ms Adams’ comments were unfortunate in that they seemed to deny basic economic theory as well as empirical data since the telecommunications industry was regulated in 2001.

“We are surprised that a minister and a National Party minister in particular, would have such little confidence in the power of competitive markets to reduce prices and improve quality,” Mr Brislen said.

“While the wholesale market for copper broadband and voice services is a monopoly and is therefore regulated by the independent Commerce Commission, the consumer market is highly competitive, with nearly 50 retail service providers, including the two giants, Telecom and Vodafone.

“Anyone with any confidence in competitive markets would accept this means prices will fall in real terms over time, especially with two of the mid-sized market participants already publicly committed to lower prices.

“Those two participants – Orcon and CallPlus/Slingshot – were described by the Commerce Commission as ‘aggressive price leading competitors in the market’ when it approved Vodafone’s purchase of TelstraClear,” Mr Brislen said.

“There can be no doubt that if they drop their prices, as they’ve promised to do, Telecom and Vodafone will be forced to follow suit.”

Mr Brislen said ongoing price cuts were exactly what had happened in the retail telecommunications market since 2001.

“Since the Telecommunications Act 2001, retail telecommunications costs have fallen by a massive 34%. Most consumers would also agree that the quality of services has likewise dramatically improved over that time,” he said.

“New Zealand telecommunications consumers have had a big win with news last week that parliament will not over-ride or delay wholesale price cuts that will come onto force on 1 December 2014.

“As Telecommunications Minister, Ms Adams should be welcoming the lower prices that are on their way and use her influence to drive them down even further.

“There is no bigger supporter of the government’s UFB initiative than the Coalition for Fair Internet Pricing and we would like to work with Ms Adams to help make it happen faster and more efficiently.

“It would be useful for Ms Adams to desist from making gratuitous and inaccurate attacks on the industry she is responsible for.

“We very much hope she will instead commit to working constructively with the coalition and all participants in the industry to make UFB happen even faster than planned.”