Mobile Market Study – Findings
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ISBN 978-1-869457-17-4 Project no. 13.03/16462 Public Version Mobile Market Study – Findings The Commission: Dr Stephen Gale Dr Jill Walker Elisabeth Welson John Crawford Date of publication: 26 September 2019 Associated documents Publication Reference Title date Mobile Market Study - Terms of 6 October 2017 N/A Reference 27 March 2018 N/A Mobile Market Study – Scope paper Study of Mobile Telecommunications 31 August 2018 ISBN 978-1-869456-54-2 Markets in New Zealand - Issues Paper Mobile Market Study – Preliminary 16 May 2019 ISBN 978-1-869456-88-7 Findings Red Dawn Consulting – Global Mobile 16 May 2019 N/A Industry Trends: Implications for New Zealand Red Dawn Consulting – MVNO 16 May 2019 N/A Landscape: Global perspectives and New Zealand Applications Behavioural Insights Team – Behavioural 16 May 2019 N/A Biases in Telecommunications: A review for the Commerce Commission Commerce Commission Wellington, New Zealand 2 3 Glossary Acronym Title 2G 2nd Generation mobile communications technology 3G 3rd Generation mobile communications technology 4G 4th Generation mobile communications technology 5G 5th Generation mobile communications technology ACCC Australian Competition and Consumer Commission ARPU Average Revenue per month per User/subscriber In a telecommunications network, backhaul is the capacity between Backhaul the core backbone network and the local edge networks BEREC Body of European Regulators for Electronic Communications Code-Division Multiple Access – a 2G mobile phone standard CDMA developed in the United States Consumer Data Right – typically a data portability right, whereby a CDR consumer can easily provide a standardised set of their usage information to a potential provider Commerce Act The Commerce Act 1986 Direct Fibre Access Service defined in section 164 of the DFAS Telecommunications Act. Typically used in mobile networks for dedicated backhaul services An accounting term – Earnings Before Interest, Tax, Depreciation EBITDA and Amortisation eSIMs Embedded SIM – a non-removable version of a SIM card A family of computer networking technologies most commonly Ethernet used in wired Local Area Networks and Wide Area Networks GB Gigabyte. 1 gigabyte = 1024 megabytes GCSB (NZ) Government Communications Security Bureau GHz Gigahertz. 1 gigahertz = 1000 megahertz Global System for Mobile communications – a standard developed GSM to describe the protocols for 2G digital cellular networks Global System for Mobile Communication Association – trade body GSMA that represents the interests of mobile network operators worldwide Internet of Things – the network of physical and virtual objects IoT accessed through the internet (such as smart sensors and smart meters) 4 Internet Protocol – the method or protocol by which data is sent from one computer to another on the internet. Each computer IP (host) on the internet has at least one IP address that uniquely identifies it from all other computers on the internet Local Fibre Company – provider of fibre access services under the LFC NZ Government’s UFB initiative (see section 156AB of the Telecommunications Act) Long Term Evolution – a name given to the fourth generation of LTE mobile technology that can provide high speed mobile broadband MBIE Ministry of Business Innovation and Employment Mobile Black Spot Fund – Government fund to provide greater MBSF mobile coverage on state highways and in tourism locations where no coverage currently exists MHz Megahertz – one million oscillations per second Mobile Network Operator – an operator that owns or controls all MNO the elements necessary to deliver mobile services to consumers, including radio spectrum and the wireless network infrastructure Mobile Termination Access Service – a regulated service that MTAS provides for the termination on a cellular mobile telephone network of voice calls and SMS messages MTR Mobile Termination Rates – the wholesale prices for the MTAS Mobile Virtual Network Enabler – a company that provides the platforms to keep pace with rapidly evolving consumer demand for MVNE services. They also allow rapid on-boarding and integration of an MVNO with an MNO and provide the ability to connect with third parties via defined IT systems Mobile Virtual Network Operator – an operator that provides mobile services but does not generally have its own radio spectrum or much of the infrastructure required to provide mobile services. It MVNO therefore relies on buying services from an MNO. The amount of control it has over the services it offers will vary according to the nature of its agreement NERA NERA Economic Consulting OECD Organisation for Economic Cooperation and Development Office of Communications – the regulatory and competition Ofcom authority for broadcasting, telecommunications and postal industries in the United Kingdom Over the top – refers to content and applications provided from a OTT third party and delivered to an end user device, leaving the retailer responsible only for transporting IP packets 5 Rural Broadband Initiative – an initiative where the Government RBI (and RBI2) partners with private sector telecommunications operators to upgrade or extend telecommunications networks outside UFB areas Rural Connectivity Group – a joint venture between 2degrees, RCG Spark and Vodafone who have a contract with the Government under RBI2 and the MBSF Retail Service Provider – RSPs provide telecommunications services RSP to consumers Radio Spectrum Management – business unit of MBIE responsible RSM for managing radio spectrum RTP Restrictive Trade Practices Subscriber Identity Module card – commonly known as a SIM card SIM that contains a microchip that stores data that identifies the user, for use in GSM and compatible 3G and 4G mobile phones Short Message Service – commonly known as a text messaging, this SMS is a service for sending and receiving short messages between mobile devices Standard Terms Determination – the Commerce Commission’s primary mechanism for regulating non-fibre telecommunications STD services under the Telecommunications Act by determining the terms on which a designated access service or specified service must be supplied Telecommunications The Telecommunications Act 2001 Act UFB The New Zealand Government's Ultra-Fast Broadband initiative Universal Mobile Telecommunications System – the 3G successor to the 2G GSM standard, which allows voice telephony, mobile UMTS internet access, fixed wireless internet access, video calls and mobile TV Wireless Fidelity Standard – a series of standards for a popular technology that allows electronic devices to exchange data WiFi wirelessly (using radio waves), including allowing mobile devices to connect to high speed internet connections Wireless Internet Service Providers Association of New Zealand Inc – an association of Wireless Internet Services Providers (WISPs) WISPA NZ that typically service rural locations in New Zealand where mobile networks currently do not operate, or have limited coverage 6 TABLE OF CONTENTS Glossary 4 Executive summary and findings 9 Mobile services market study 9 Competition in the mobile market 9 Findings from our study of the mobile services market 10 Chapter 1 Introduction 16 Purpose of the study and legal framework 16 Purpose of the study 16 Legal framework for the study 17 Timeline of the study 17 Purpose and structure of the Findings report 18 Chapter 2 Mobile networks and services 20 Purpose of this chapter 20 Mobile networks 20 Mobile services 22 Mobile service providers 25 Mobile regulatory settings in New Zealand 26 Changes to regulation 27 Chapter 3 Development of mobile services and competition 28 Purpose and structure of this chapter 28 Purpose 28 Structure 28 Analysis of the mobile market 28 Market structure and market shares 29 Bundling 34 Pricing 36 Usage trends 46 Investment 48 Profitability 50 Quality of mobile services 52 Consumer satisfaction 54 Our views on the key issues in the mobile market 57 Spectrum 57 MVNOs 58 Consumer engagement 59 Chapter 4 Key issues we identified 60 Purpose and structure of this chapter 60 Spectrum 60 Introduction 60 Spectrum and competition between existing MNOs 60 Spectrum and new entry 66 Other obligations and payment terms for spectrum allocation 69 7 MVNOs 72 Introduction 72 Potential benefits to consumers from MVNOs 72 MVNO operating models and margins 75 Emerging competition at the wholesale level 77 Consumer engagement and experience with mobile services 85 Introduction 85 How easily can consumers access the information they need? 85 How easily can consumers assess the information they have? 86 How easy is it for consumers to act? 90 Behavioural biases 94 Potential remedies/actions 96 Chapter 5 State of competition in the mobile market 100 Purpose and structure of this chapter 100 Purpose 100 Structure 100 Our view on the state of competition in the mobile market 100 Existing competition 100 Conditions for further expansion and entry 104 Consumer engagement 106 Chapter 6 Future developments in mobile services 109 Purpose of this chapter 109 5G mobile networks 109 eSIMs 112 Network slicing 114 Infrastructure sharing 115 Chapter 7 Regulated services 119 Purpose of this chapter 119 Mobile termination access services 119 National roaming 122 Mobile co-location 123 Number portability 125 Backhaul 125 8 Executive summary and findings Mobile services market study X1 Mobile communications have developed into an essential function, supporting New Zealanders in all aspects of their lives. Mobile services allow consumers to contact friends and family,