Telecommunications Usage in New Zealand: 1993-2003

This report suggests that the telecommunications market in New Zealand is surprisingly mature. We infer that the potential for growth is limited. There has been negligible growth in any of the number of fixed lines either business or residential since 2000. The number of residential lines is growing only in proportion to the number of households indicating that household penetration is now saturated. Business line connections have been constant since approximately August 1999 although there is evidence of substitution away from Public Switched Telephone Network (PSTN) connections towards Independently Switched Digital Network (ISDN) connections in this market. ISDN is predominantly used for voice access by New Zealand businesses with less than 0.1% of connections being used for data communications in January 2002.While the number of mobile connections has been increasing the total volume of voice-based telephony traffic (local and long distance fixed line and mobile) has settled at a constant level. Diffusion of mobile telephony sits at approximately 75% of the population over 10 years of age and while still growing the rate of growth appears to be slowing implying that this technology is close to saturation as well. Average usage per mobile account is declining indicating that the connection growth that is being recorded is related to users with lower than average demand for the service.The data offer significant evidence of substitution between technologies (fixed line to mobile) for voice traffic. Thus the presumption that mobile and fixed line telephony are separate markets must be questioned. This is particularly evident in the residential market; as the evidence supporting substitution coincides with the introduction of prepay accounts which have been targeted at residential consumers.The only telephony volume to show significant growth is that of dial-up Internet traffic. However even this traffic is showing signs of slowing both on measures of volume per fixed line and volume per Internet Service Provider (ISP) account. Diffusion of this technology is also widespread with nearly 60% of households having connections. Thus this technology may also be approaching maturity in the New Zealand market as with mobile technology new connections represent users with lower than average demand. Whilst there is some evidence of substitution of dial-up Internet access technology with DSL in the business market in the residential market substitution still appears to be dominated by learning effects associated with the applications that consumers use and the individual valuation of time

Broadband Diffusion: Lags from Vintage Capital, Learning by Doing, Information Barriers and Network Effects

This paper examines the factors that affect the uptake of broadband in the residential and SME markets. We searched the economics literature on diffusion theory and identified five different models that potentially provide insights into the broadband phenomenon. These models were applied to the New Zealand market using detailed product and market data from an index ISP and the major telecommunications network provider which we consider representative of the market as a whole.We find evidence to suggest that the adoption of ADSL the dominant broadband technology in New Zealand is driven differently in the residential and SME markets. SMEs pay a fixed fee for each telephone circuit plus a toll tariff for all calls including local calls. An SME with multiple computers accessing the Internet requiring multiple telephone lines or with a reasonable level of traffic generating toll charges can cost-justify prematurely retiringmodem capital and introducing ADSL as there are immediate cost benefits. However an SME with little traffic and only one telephone line may still find that dial-up modems provide adequate service at a lower price

The Tyranny of Distance Prevails: HTTP protocol latency and returns to fast fibre internet access network deployment in remote economies

As public policies seek to advance deployment of enhanced broadband infrastructure as a means of acquiring economic advantage the issue has arisen of the extent that additional economic performance accrues from increases in headline bandwidth speed in locations that are physically remote from the infrastructure hosting time-critical information services.For time-dependent applications latency (the time delay in accessing data across a network) is correlated with the effective bandwidth (the actual speed of access) and thus impacts upon the economic performance of the application to the user. We extrapolated data for interactive web-based applications from Belshe (2010) where latency was found to substantially reduce the effective bandwidth available to the user of a typical web-based application to estimate the effective bandwidth over a range of headline bandwidths and latencies typical of web-based transacting patterns in New Zealand. We find that the decreasing returns on effective bandwidth as headline bandwidth increases are further exacerbated by the higher levels of latency experienced as a consequence of New Zealand's distance from the bulk of the global infrastructure supporting web-based applications. The benefits of enhancing headline bandwidth through new forms of faster infrastructure were substantially reduced by the impact of the latencies typically experienced by New Zealand users accessing remote web-based applications and thus the economic benefits expected from investment in infrastructure in accessing those applications most impacting economic performance is likely to have been exaggerated; providing an insight into a constraint upon cloud computing and other web-enabled information systems

Broadband Diffusion: Lags from Vintage Capital, Learning by Doing, Information Barriers and Network Effects

This paper examines the factors that affect the uptake of broadband in the residential and SME markets. We searched the economics literature on diffusion theory and identified five different models that potentially provide insights into the broadband phenomenon. These models were applied to the New Zealand market using detailed product and market data from an index ISP and the major telecommunications network provider which we consider representative of the market as a whole.We find evidence to suggest that the adoption of ADSL the dominant broadband technology in New Zealand is driven differently in the residential and SME markets. SMEs pay a fixed fee for each telephone circuit plus a toll tariff for all calls including local calls. An SME with multiple computers accessing the Internet requiring multiple telephone lines or with a reasonable level of traffic generating toll charges can cost-justify prematurely retiringmodem capital and introducing ADSL as there are immediate cost benefits. However an SME with little traffic and only one telephone line may still find that dial-up modems provide adequate service at a lower price

Linking increased returns to industry-level change : a thesis presented in partial fulfillment of the requirements for the degree of Doctor of Business and Administration in Strategy at Massey University, Palmerston North, New Zealand

While the change literature is currently dominated by the punctuated equilibrium paradigm, anomalies have appeared to the paradigm in the form of high velocity change and hypercompetition. D'Aveni (1999) reconciles these anomalies with the punctuated equilibrium paradigm by suggesting that the frequency of change experienced affects the change experienced. This research considered whether the presence of increasing returns in an industry is correlated with the frequency of change experienced by the industry and the types of change that appear, thus providing an explanation for the differing forms of change. A second observation in the literature is that an industry experiences a period of instability after a discontinuity. This research considered whether the temporal proximity or type of a preceding discontinuity influenced the likelihood or type of later discontinuities. A longitudinal study identified discontinuities in nine industries throughout the industries' histories. The industries were categorised as: increasing returns, derived from external network effects (Airlines, Data Communications, Electricity and Shipping Lines), complementarity (Information Storage) or information content (Software), respectively; or as constant returns (Aircraft Manufacturing, Telecommunications Manufacturing and Shipbuilding). A comparison of discontinuities has been made between pairs of industries with a common end-user of the industry outputs, where one industry exhibits increasing returns and the companion industry has constant returns, using Binomial Distribution, Fisher's Exact Test and Generalised Linear Modelling techniques. Further Generalised Linear Models tested the interactions of discontinuities. Industries with increasing returns were found to have greater frequency of change. The types of change experienced were found to affect subsequent change, with both types of discontinuities being correlated with increased proportions of competency-enhancing change for ten years, while competency-destroying and competency-enhancing discontinuities were associated with increased frequency of change for twenty and ten years, respectively. The evidence associating increasing returns with competency type was unreliable. Consequently, increasing returns industries may experience a greater variation of frequency of change, with industries entering and leaving periods of enhanced frequencies of change. Thus, industries with increasing returns are more likely to experience change consistent with hypercompetition and high velocity conditions, compared with the punctuated equilibrium style change experienced by constant returns industries

Seminar: The Tyranny of Distance Prevails

The Tyranny of Distance Prevails Internet technologies have been widely claimed to herald an end to the 'tyrannies of distance' that have proved costly for small remote trade-dependent economies. Consequently support for 'Knowledge Economy' policies such as the current plans for substantial Australian and New Zealand government investment in fast fibre broadband access networks relies in large part upon an economic 'step-change'. New Zealand Communications Minister Stephen Joyce describes the New Zealand UFB network as a means of ending the "tyranny of distance that's hampering businesses here compared to ones in the US that have access to a vast internal market". But will faster internet infrastructures within New Zealand really reduce the disadvantages faced by New Zealand firms? And how big is the economic effect likely to be for those applications most probably to be the ones generating new economic activities? Mark Obren and Bronwyn Howell examine the trade-off between latency (the time delay in accessing data across a network) and the effective bandwidth available as local access bandwidth increases to assess the likely productivity gains available to New Zealand users of web-based applications hosted in a range of overseas locations. The findings suggest that for many applications the tyranny of distance still prevails. Mark Obren is an ICT strategist Massey University Doctor of Business Administration graduate and former researcher at ISCR. He is co-founder and Executive Director of the research and development firm Development Systems Limited. Bronwyn Howell is General Manager of ISCR

Seminar: The Tyranny of Distance Prevails

The Tyranny of Distance Prevails Internet technologies have been widely claimed to herald an end to the 'tyrannies of distance' that have proved costly for small remote trade-dependent economies. Consequently support for 'Knowledge Economy' policies such as the current plans for substantial Australian and New Zealand government investment in fast fibre broadband access networks relies in large part upon an economic 'step-change'. New Zealand Communications Minister Stephen Joyce describes the New Zealand UFB network as a means of ending the "tyranny of distance that's hampering businesses here compared to ones in the US that have access to a vast internal market". But will faster internet infrastructures within New Zealand really reduce the disadvantages faced by New Zealand firms? And how big is the economic effect likely to be for those applications most probably to be the ones generating new economic activities? Mark Obren and Bronwyn Howell examine the trade-off between latency (the time delay in accessing data across a network) and the effective bandwidth available as local access bandwidth increases to assess the likely productivity gains available to New Zealand users of web-based applications hosted in a range of overseas locations. The findings suggest that for many applications the tyranny of distance still prevails. Mark Obren is an ICT strategist Massey University Doctor of Business Administration graduate and former researcher at ISCR. He is co-founder and Executive Director of the research and development firm Development Systems Limited. Bronwyn Howell is General Manager of ISCR