NZ lags fixed mobile substitution

According to the 2013 census, New Zealanders switched from fixed-line phones to mobile for everyday communications. We call switching from a landline to a mobile in this way: fixed mobile substitution.

In 2013, 85.5 percent of households had a landline telephone. That’s down from 92 percent in 2006. On the flip side of the equation 84 percent of households have home access to a mobile phone. This compares with 74 percent in the earlier census.

While there’s a clear move, New Zealand is well behind overseas trends. In 2011 27 percent of European homes were without a fixed line – that’s up from 18 percent in 2006. In Italy, 32 percent of homes are mobile-only. Many third world countries don’t have widespread fixed line home phones but do have mobile networks.

There’s something of a framing issue here. You could see New Zealand’s slow shift from fixed lines to mobile as Telecom NZ defending its market in the face of competition. This is something that overseas telcos have failed to do.

Fixed mobile substitution costs

The monthly fixed cost of a landline telephone in New Zealand is relatively high by international standards. However, it comes with unmetered local calls unlike many other markets. And the local call areas are relatively large – Auckland, one-third of the population – is a single call area.

The value of this bundle is questionable – consumers in other markets would have to make a huge number of calls at typical metered rates for their total telephone costs to climb above Telecom NZ’s line rental charges.

As a trend, households shifting from fixed line to mobile challenges Telecom NZ’s profitably – the company earns a sizeable slice of its revenue from the fixed-line network and uses it as leverage to win internet and other business. Over the medium term this is threatened by the UFB network where fibre broadband accounts are often sold as ‘naked internet’ that is without a conventional voice telephone account.