four former broadcasting competitors – MediaWorks, Sky, Spark, and Television New Zealand – joined together to clamp down on a clutch of small ISPs, who were enabling (and arguably encouraging) their customers to access US Internet content via “global mode” connections. At stake for these four firms was the protection of their investments in exclusive content rights, which they purchased from (predominantly American) content producers to distribute popular movies and television shows in New Zealand.
Bronwyn Howell is general manager for the New Zealand Institute for the Study of Competition and Regulation and a faculty member of Victoria Business School, Victoria University of Wellington, New Zealand. She is a board member and secretary to the board of the International Telecommunications Society. She was formerly visiting research scientist at the Helsinki University of Technology. Building on both her formal education in economics and public policy, and her experience as a practitioner in the information technology sector in New Zealand and internationally, Bronwyn researches, teaches and writes on a broad range of matters concerning the Information Economy. Her publication portfolio includes journal articles, book chapters, monographs, working papers and presentations on technological diffusion, intellectual property rights and the contracting for and pricing of information goods. In recent years she has focused on competition and regulatory policy, and the evolution of industry interaction in the telecommunications and information communications technology markets. An area of particular interest has been the comparative effects of different forms of competition and regulation on market performance, especially in small, remote economies such as New Zealand.
strongest possible rules” on broadband providers, and the resulting order came out “threadbare and conclusory throughout.” But America is not alone. A look to New Zealand shows Americans what they are in for in the coming months and years.
Netflix will launch a local version of its service in Australia and New Zealand on March 24. Advocates of New Zealand’s government-subsidized Ultra-Fast Broadband Network have welcomed the arrival of the US giant, who they perceive to be a “killer app” that will bolster sluggish fiber connection uptake rates (which are currently languishing at 12%). In Australia, the CEO of ISP iiNet sees it as a game-changer: “it opens up a whole world of affordable entertainment options for our customers and we’re adamant about ensuring the content is easily accessible to as many people as possible. In addition to our partnership with Fetch TV, Netflix significantly strengthens our entertainment offering and we expect it to be an extremely popular option for all those avid television and movie fans out there.”
President Obama’s endorsement of them and the FCC’s decision to relax rules limiting the extent to which taxpayer-subsidized networks may compete with those funded by the private sector. While there is a case for subsidized networks where no provider is willing invest, it is far from clear that governments – be they national, state or municipal – are well-placed to commission and oversee network rollouts. Without the normal commercial pressures to make a return on invested capital, such projects can lead to “gold-plated” investment in infrastructure that vastly exceeds end-user demand. Absence of competition also leads to such operations being less efficient. This is exactly what has happened in Australia, and it has placed a significant cost burden on the very taxpayers whom the network was supposed to benefit.
report I wrote in 2007. In the 1990s, when New Zealand’s telephony markets were governed predominantly by competition law, fierce infrastructure competition translated into substantial gains to consumers in the form of lower prices for better services. However, when key telephony services shifted to an industry-specific regime in 2000 – arguably the lightest in the OECD at the time – these consumer benefits bottomed out. A vibrant, diverse industry with experimentation in both prices and services rapidly became moribund, depriving consumers of the welfare gains they enjoyed under a more liberal regime.