IDEAS home Printed from
   My bibliography  Save this paper

A Pendulous Progression: New Zealand's Telecommunications Regulation 1987-2007


  • Howell, Bronwyn


New Zealand was the first country in the OECD to adopt a 'light-handed' approach to telecommunications regulation when in 1987 it eschewed industry-specific regulation for a generic competition law-based approach. The 'light-handed' regulatory environment prevailed throughout the 1990s during the privatisation of the incumbent provider the entry of competitive fixed-line infrastructure and services suppliers the establishment and growth of mobile market competition the expansion of the commercial internet and the consequent emergence of the 'information economy'. Over this period New Zealand emerged as one of the earliest-adopting and highest-utilising OECD countries with its ADSL services amongst the earliest highest quality most widely-available and lowest-priced in the OECD. Since 2000 however there has been a sea-change in the New Zealand approach to telecommunications regulation. Following a Ministerial Inquiry into the industry in 2000 industry-specific regulation was introduced in 2001 limited bitstream unbundling was imposed in 2004 full unbundling and the ability to undertake standard terms determinations were mandated in 2006 and in 2007 operational separation overseen by the Minister and not the regulator was imposed. Regulated mobile termination was also rejected in 2007 in favour of ministerially-brokered agreements. By tracing the economic performance of the New Zealand telecommunications sector during the periods of regulatory change in terms of productive allocative and dynamic efficiency this paper finds that there is little evidence to suggest that the 'light-handed' regime performed any worse than comparable industry-specific regimes over the same period. Rather the return to industry-specific regulation and each successive increasing of regulatory pressure appears to have been associated with reduced economic performance and reductions in competition relative to the regime replaced. Increased regulatory tension has also been associated with replacement of pursuit of economic efficiency as the sector objective with pursuit of competition in isolation from the efficiency consequences of this policy change. It is therefore unlikely that the latest changes including direct political control will deliver greater welfare to the New Zealand market. The paper suggests that an unjustified focus upon the incumbent's dominance as the underlying cause of poor competition metrics has resulted in policy-makers overlooking the role of the contribution of different regulations to the competition metrics observed. In particular the only regulations forming part of the light-handed regime which have not been overturned a universal service obligation and a mandatory tariff requiring no charges be levied for residential local telephony calls are materially connected with all of the poor performance indicators which have been used to justify increased sector regulation. These requirements persisted with because of political rather than economic efficiency imperatives provide a more plausible explanation for practically all of the positive and negative efficiency competition and strategic interaction observations observed in the New Zealand sector over the past 20 years than the alternative hypotheses that competition law has failed and the incumbent has exercised its dominant position unduly.

Suggested Citation

  • Howell, Bronwyn, 2007. "A Pendulous Progression: New Zealand's Telecommunications Regulation 1987-2007," Working Paper Series 3974, Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation.
  • Handle: RePEc:vuw:vuwcsr:3974

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Jean‐Charles Rochet & Jean Tirole, 2006. "Two‐sided markets: a progress report," RAND Journal of Economics, RAND Corporation, vol. 37(3), pages 645-667, September.
    2. Jean-Charles Rochet & Jean Tirole, 2014. "Platform Competition in Two-Sided Markets," CPI Journal, Competition Policy International, vol. 10.
    3. Nicholas Economides & Lawrence J. White, 1995. "Access and Interconnection Pricing: How Efficient is the Efficient Component Pricing Rule?," Working Papers 95-04, New York University, Leonard N. Stern School of Business, Department of Economics.
    4. Lewis Evans & Arthur Grimes & Bryce Wilkinson, 1996. "Economic Reform in New Zealand 1984-95: The Pursuit of Efficiency," Journal of Economic Literature, American Economic Association, vol. 34(4), pages 1856-1902, December.
    5. Grajek, Michal & Kretschmer, Tobias, 2009. "Usage and diffusion of cellular telephony, 1998-2004," International Journal of Industrial Organization, Elsevier, vol. 27(2), pages 238-249, March.
    6. Pindyck Robert S., 2007. "Mandatory Unbundling and Irreversible Investment in Telecom Networks," Review of Network Economics, De Gruyter, vol. 6(3), pages 1-25, September.
    7. Geoffrey G. Parker & Marshall W. Van Alstyne, 2005. "Two-Sided Network Effects: A Theory of Information Product Design," Management Science, INFORMS, vol. 51(10), pages 1494-1504, October.
    8. Alger, Dan & Leung, Joanne, 1999. "The Relative Costs of Local Telephony Across Five Countries," Working Paper Series 3930, Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation.
    9. Eugenio J. Miravete, 2002. "Estimating Demand for Local Telephone Service with Asymmetric Information and Optional Calling Plans," Review of Economic Studies, Oxford University Press, vol. 69(4), pages 943-971.
    10. Martin Gaynor, "undated". "What Do We Know About Competition and Quality in Health Care Markets?," GSIA Working Papers 2006-E62, Carnegie Mellon University, Tepper School of Business.
    11. de Boer, David Boles & Evans, Lewis, 1996. "The Economic Efficiency of Telecommunications in a Deregulated Market: The Case of New Zealand," The Economic Record, The Economic Society of Australia, vol. 72(216), pages 24-35, March.
    12. Blanchard, Carl, 1995. "Telecommunications regulation in New Zealand: Light-handed regulation and the Privy Council's judgment," Telecommunications Policy, Elsevier, vol. 19(6), pages 465-475, August.
    13. P.W.J. De Bijl, 2005. "Structural Separation and Access in Telecommunications Markets," Competition and Regulation in Network Industries, Intersentia, vol. 6(2), pages 95-115, June.
    14. Howell, Bronwyn & Obren, Mark, 2003. "Telecommunications Usage in New Zealand: 1993-2003," Working Paper Series 3886, Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation.
    15. Howell, Bronwyn, 2003. "Building Best Practices Broadband in New Zealand: Bringing Infrastructure Supply and Demand Together," Working Paper Series 3887, Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation.
    16. Martin Peitz, 2005. "Asymmetric Regulation of Access and Price Discrimination in Telecommunications," Journal of Regulatory Economics, Springer, vol. 28(3), pages 327-343, November.
    17. Howell, Bronwyn, 2006. "Submission: Telecommunications Amendment Bill," Working Paper Series 3829, Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation.
    18. Eugenio J. Miravete, 2003. "Choosing the Wrong Calling Plan? Ignorance and Learning," American Economic Review, American Economic Association, vol. 93(1), pages 297-310, March.
    19. Howell, Bronwyn, 2007. "The Tale of Two TELCO Markets: Comparing Finland and New Zealand," Working Paper Series 3958, Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation.
    20. Avinash K. Dixit & Robert S. Pindyck, 1994. "Investment under Uncertainty," Economics Books, Princeton University Press, edition 1, number 5474.
    21. Blanchard, Carl, 1994. "Telecommunications regulation in New Zealand : How effective is 'light-handed' regulation?," Telecommunications Policy, Elsevier, vol. 18(2), pages 154-164, March.
    22. Jean-Charles Rochet & Jean Tirole, 2002. "Cooperation Among Competitors: Some Economics Of Payment Card Associations," RAND Journal of Economics, The RAND Corporation, vol. 33(4), pages 549-570, Winter.
    23. David Evans & Richard Schmalensee, 2007. "The Industrial Organization of Markets with Two-Sided Platforms," CPI Journal, Competition Policy International, vol. 3.
    24. Joshua S. Gans & Stephen P. King, 2004. "Access Holidays and the Timing of Infrastructure Investment," The Economic Record, The Economic Society of Australia, vol. 80(248), pages 89-100, March.
    25. Enright, Christina, 2000. "Strategic Behaviour of Internet Service Providers in New Zealand and the Performance of this Market," Working Paper Series 3914, Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation.
    26. Distaso, Walter & Lupi, Paolo & Manenti, Fabio M., 2006. "Platform competition and broadband uptake: Theory and empirical evidence from the European union," Information Economics and Policy, Elsevier, vol. 18(1), pages 87-106, March.
    27. Pablo T. Spiller & Carlo G. Cardilli, 1997. "The Frontier of Telecommunications Deregulation: Small Countries Leading the Pack," Journal of Economic Perspectives, American Economic Association, vol. 11(4), pages 127-138, Fall.
    28. Wright Julian, 2004. "One-sided Logic in Two-sided Markets," Review of Network Economics, De Gruyter, vol. 3(1), pages 1-21, March.
    29. Karel, Annemieke, 2003. "The Development and Implication of Free ISPs in New Zealand," Working Paper Series 3883, Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Howell, Bronwyn, 2009. "Separating New Zealand's Incumbent Provider: A Political Economy Analysis," Working Paper Series 4028, Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation.
    2. Howell, Bronwyn, 2008. "Strategic Interaction Under Asymmetric Regulation: the 'Kiwi Share' in New Zealand Telecommunications," Working Paper Series 4016, Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation.

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:vuw:vuwcsr:3974. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Library Technology Services). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.