OECD Report on Telecommunications
I’m late blogging this but want to highlight how we compare to other OECD countries in regards to telecommunications.
First of all as TUANZ notes, we spend much more in NZ on telecommunications than any other country. A total of 5.4% of GDP compared to an OECD average of 3.0%. We are placed 1st of 30 for total spend.
So you would think with such a high level of telco revenue, we would be near the top for capital investment. But alas we spend barely half the OECD average as a % of revenue on capital investment. Just 8.7% of telco revenue went into capital investment, while the OECD average is 15.3%. So we are 3rd lowest of 30 for capital expenditure.
This is why the changes made last year were so necessary. NBR referred to the crushing weight on our economy and at 5.4% of GDP that is indeed a huge weight. And to have so little of it go back into capital investment indicates a market failure.
The Herald also has some good extracts, comparing investment levels in various countries.
July 22nd, 2007 at 3:20 pm
OMG no comments on the failure of the ‘free market’ to provide cheap fast broadband!!!!
surely further deregulation and lower taxes will make these essential services better for all of us
July 22nd, 2007 at 3:40 pm
A monopoly is not a free market. The problem Mr Idiot is not free markets but the fact we haven’t had one.
July 22nd, 2007 at 3:45 pm
so we need more investment. I know break up telecom and when the prices go up there will be more money to invest. Has some merits.
July 22nd, 2007 at 4:05 pm
5.4% of GDP doesnt sound right.
Just looking at the OECD Communications Outlook 2007
And the revenue per capita for NZ is well down the list (2/3) and not much changed since1996 p 75
And the total revenue in Nz for communications seems to have doubled from 2002 to 2005 p83. Maybe everybody just has broadband now and talking more
Comparing with a country like norway the difference (%GDP)is huge because of their oil they are the richest country in Europe p 84
http://213.253.134.43/oecd/pdfs/browseit/9307021E.PDF
July 22nd, 2007 at 4:53 pm
Brilliant!! Once again (as if we needed it), Red lifts his skirts a little and shows his fundamental ignorance on economics and politics. Great serve back to, David. But, of course, now you’ve been inked onto Red’s long list of socialist scum. Apparently it’s pure communism to point out that Red may not be as clever as he thinks he is.
July 22nd, 2007 at 5:22 pm
Selma
You never miss an opportunity to shill for your political masters do you. Let me put some real life flesh on the bones of what TUANZ and David mean. I use T-Mobile here in the US as it is uses the GSM – SIM card technology like Vodafone. I am on a 3500 minutes per month plan which costs me $99 per month flat rate – add $5 to lift my free text limit and with taxes and all charges I never pay more than $115. I was with Vodafone on a special negotiated low corporate plan before I left and I was never less than $350 per month and I use my cell phone more here in the US because its cheaper. I was in NZ 6 months ago and then Vodafone were offering 3000 minutes for $375 per month.
Then there’s the second even bigger cell phone rip off in NZ and that are the exhorbitant land line to cell ph charges that average 71c per minute (or did when I left). In the US your cell phone area code is the same as the landline area code of the area where you purchase your plan and so land line to cell phone calls are all FREE.
If I then factor in the cost of a business land line and fax line in the US vs NZ, the comparisons are just as bad. I estimate even allowing for the exchange rate that my total telecoms bill here in the US is less than HALF what I paid in NZ. That Selma is what the worse of 30 countries in the OECD means at the customers end. Name a 1st world country that imposes this level of burden on its business and private users
July 22nd, 2007 at 6:13 pm
David said; “A monopoly is not a free market. The problem Mr Idiot is not free markets but the fact we haven’t had one.”
OK, I understand that. I also understand that it is possible to have a free market for the service providers.
But is it possible to have a free market for the infrastructure provider? Telecom’s monopoly owed a lot to its ownership of the wires. I think that only Telstraclear has made any go of duplicating this network, and they were pulling back on that in 2003 when I worked for them.
To have a free and proper market for major infrastructure you’d have to have multiple providers of physical networks, which seems rather expensive and impractical to me. So I guess my question is, can the free market actually extend this far, or is there indeed such a thing as a ‘natural monopoly’ for physical infrastructure? Which might then best be left in the hands of a disinterested third party (like the State…….) so that the private sector can then compete across it?
Cheers.
Tane W
July 22nd, 2007 at 6:27 pm
Kiwi, the US is a massive market where you can have true competition and major savings due to economy of scale. Combine that with yhe fact that you are quoting US prices there and $NZ here which are generally aroung 1/2 the US doaller you have the explanation. NZ is at the bottom of the food chain for these large international technology companies and there is not a lot we can do about it.
I have talked to a number of accountants and we all agree that this telecom split is another rort like splitting water and ARC off the rates that has seen 400% price rises in 14 years and splitting power lines off the electricity company that has lead to very large price increases. Sounds great in principle but NZ can’t seem to do it in practice.
July 22nd, 2007 at 7:02 pm
Porc
Last I looked the USD$ was almost NZD$0.80c! Im sure you’ll find telecom rates in Sweden (9 million) and Austria (6 million) and Israel (6 million) not that much dearer than the US and significantly cheaper than NZ even if you use a common currency comparison so the economies of scale argument only goes so far
July 22nd, 2007 at 7:19 pm
Time will tell I suppose but I’d be willing to bet I never see a reduction in my telecom bill. I wonder how subsidised those countries telecom industreis are – especially with the scandinavian countries they have high taxes but everyone gets the benefit of those high taxes, not like here.
BTW I rad the housing report and while I agree that land supply is part of the problem in the short term, I still stand by my opinion that for NZ there are more buyers out there than land and that in the ling term it is a limited resource. They fixated on one thing also – regulation. The thing that stood out in the table was that the high priced places were desirable and low priced places less so. Almost all the high priced places were coastal and the low priced places were inland. They need to do a proper statistical factor analysis – if this was done I suspect that regulation of land would be a much smaller player. Even if the land was available which in many places like california it isnt because it would be so far from the coast. With the mudslides etc in california everyone is now paying the price for rampant cutting up of land just like they arre in NZ with houses slipping into the sea or down gullies – its due to decades of poor and expediant planning decisions (present co excepted) not global warming of course.
July 22nd, 2007 at 7:37 pm
Porc – You are right about coastal cities like San Diego – there is the desireability/climate factor that heightens demand. But when you examine the land inland from LA or San Diego there is screeds of it – the same with Sydney. Its just that a few spotted owls or rare toads have become cause celebs in liberal California and are legislated in favour of versus nasty filthy money grubbing land developers.
I dont share your view on NZ. The population density in NZ is so laughably low. Look at England or the East Coast of the US and many parts of the continent – they are infinitely more populated per sq km. The loss of farming land north and south of Auckland would not cripple NZ’s ability to feed itself so what other reasons are there to restrict the sale of land other than some warm fuzzy utopian notion of a ‘green belt’. That said – I do support higher density housing but as I said in the original thread, when I developed apartments, the biggest cost increases during construction I had to deal with was the local council and its rising taxes (there’s no other way to describe them) that came as a consequence I believe of the increasing list of social responsibilities, iwi consultation and socialist PC stuff that they were required to do courtesy of central government.
The market is still a good moderating mechanism. Too much development leads to mega city lifestyle issues (traffic etc) and eventually growth slows and even reverses. This is especially the case in California. Last year for the 1st time the population in CA actually slightly shrunk due to out migration of whites. The outmigration (that was offset by illegal mainly Hispanic/Mexican immigration) was due to the lifestyle factors (land prices, taxation burden too high, crime rate, traffic etc). The report does demonstrate that interfering with the land market does affect the price of land.
Apologies for a mild thread jack here
July 22nd, 2007 at 7:59 pm
I agree that the major cause of increased costs is council and government taxes (everone is in the highest tax brcket). These council taxes (user pays, barf) were brought in to make the new home ownere pay for the enormous cost of building 30 km out of Auckland but still wanting to be part of the infrastructure. but in reality they have become a revunue gathering exercise applied with even more vigour to cross leasing and high rise (why are we not surprised?)
It makes as much econimic sense to cut up farmland for houses in NZ as it does to knock down profitable businesses for house in the states. Expanding out into the desert is of course a different matter.
But the other compelling reason is because of the enormnous infrastructure cost of a sprawling city that we are also passing on to our kids and grandkids. Also the cost of houses sliping in poorly developed suburbs, …
Also, because we are a democreacy you only need enough voters to force the government to tax us senseless because they want a new motorway so they can get to their baches without going through town. It just never ends even though it is self evident that it cant solve Auckland’s transport problems.
Also sorry for the hijack.
July 23rd, 2007 at 12:35 am
Returns from rental property only look good if you gear up and make tax losses up front and then hope for a big capital that won’t be taxed later.
The middle class is really into this property investment thing. Did someone claim we now have 300,000 landlords in NZ. If so, that just shows that almost everyone with any equity is trying to get into the game. Sounds like tulip bulbs all over to me …
July 23rd, 2007 at 9:51 am
No vehement denials that the telecom split up won’t ultimately lead to higher prices I see!
July 23rd, 2007 at 9:55 am
Tane – you actually hit on the core issue. Infrastructure is much harder to have a free market in. There is little economic sense in having five pipes into every home for example.
In some cases you can get infrastructure competition. Fibre and WiMax may be infrastructure competitors.
If infrastucture competition is not feasible, then the impt thing is having access policies around that infrastructure rather than who owns it. It can work private or public.
Having said that the idea of an SOE layign out fibre to the home, and offering access fairly to all service and bandwidth providers is a model worth exploring IMO.
July 23rd, 2007 at 10:01 am
Some of the greater cost has to come from the fact that we’re a very remote island, so any comms in/out of the country have to be by satellite or undersea cables. But the rest is simply failure to keep up due to the lack of any necessity to compete by the local monopolies.
I’m still waiting to see any benefit from LLU, too. My experience has been that Telecom simply offered a “home brand” version of DSL, which had higher data cap and much lower service levels and average speed.