Getting smart about being in touch

HAMISH MCNICOL
Last updated 05:00 23/03/2013

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Smartphones, smart technology, smart prices. The average price of a television has plunged more than a third from about $1300 to slightly more than $800 in four years, and increased competition is also resulting in better prices for mobile phone and broadband services.

Prices have fallen so much that they have come on to the Reserve Bank's radar as a factor in keeping inflation down.

New Zealand's information and communication technology goods and services sector has grown 17 per cent since 2010, and is now just a whisker away from being a $23 billion industry.

Most importantly for consumers, however, are the increasingly smarter prices.

According to Reserve Bank figures, the cost of communication services has fallen 10 per cent in the past 18 months.

Furthermore, mobile and broadband technology use is the cheapest it has been for more than 10 years.

There are more connections, wider internet access, and higher smartphone ownership.

Audio-visual equipment, like televisions, was cited, too, by the Reserve Bank for a "particular softness in the prices".

The reason prices are being kept out of the clouds is simple - smart competition.

BROADBAND SERVICES

Statistics New Zealand figures show people spent $1.3b on internet connections in 2012. That was up a massive 44 per cent over the past two years. In that time, broadband subscribers grew by 300,000.

More people were spending more money on the internet, but broadband prices have actually been falling.

In 2010, Telecom was the only internet provider offering uncapped plans. The "Big Time" internet plan let you download as much as you wanted for $69.95 a month.

However, it was axed when a few customers generated enormous download traffic.

Alternative plans offered at the time were a 20 gigabyte cap for $69.95 a month, or 40GB for $89.95. Today, Telecom offers customers a 50GB allowance, with a phone line, for $85 per month.

The benchmark rate among many retailers today offers a 30GB cap on internet, with a variety of phone-line benefits, for about $75 a month.

Global market intelligence firm International Data Corporation conducts research on information technology companies and markets. IDC senior research manager Peter Wise says New Zealand's falling price for broadband services came when the market got competitive.

"Competition came late to this country," he says. "OECD figures for the six months to June 2012 showed New Zealand was the fastest-growing country in terms of broadband penetration, but this was more the fact that we were catching up with other OECD countries."

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The Government's local loop unbundling plans, which divided Telecom into three operating divisions, aimed to improve competition in broadband services by opening Telecom's network to its competitors.

Wise says more New Zealanders are taking up broadband, but we are mid-range in terms of actual penetration. "For comparison, in Australia regulation allowed other operators to tap into the network in 1999, whereas it didn't happen here until 2007."

Suppliers of broadband have largely been price competitive, and increasing data cap limits mean there is more value for money in the market, he says.

"Telecom has said their strategy is to hold market share. The price has definitely dropped with more price competition from them."

Consumer NZ technology writer Hadyn Green says ever since the unbundling, competition had "exploded". He says the technology behind broadband was also cheaper, which had contributed to declining prices.

The new ultra-fast network, however, intended to bring faster internet to 830,000 New Zealand homes by the end of 2019, will probably increase prices, he says.

"Ultra-fast broadband will bump the prices back up, no matter how much money the Government puts into it."

He says this will maintain over a long term, until the majority of customers switched to the ultra-fast service.

Some New Zealanders also still have a dial-up connection, he says.

MOBILE SERVICES

More than 1.7 million New Zealanders now own a smartphone, according to the latest report from Nielsen. This represented an increase in ownership of 11 per cent in 2012.

Smartphones mean people can not only call and send messages, but watch "videos on the bus".

Mobile connections make up part of an $8.3b industry, but for the December 2012 quarter, prices of telecommunication services fell 1.7 per cent.

Wise says increased competition forced the costs of operating a mobile to fall. "2degrees has definitely caused more competition, and the incumbents are yet to fully respond."

He says there has been a significant migration from voice to data in that time, spearheaded by the rise in smartphone use.

"Data has exploded, and is going to continue into the future. We are getting a lot more for our money, where phones are much more like smart little computers."

Improving data packages allows people to readily access other messaging services and people are spending a lot more time on their mobile phones, he says. "With Vodafone's 4G network, people will be downloading and watching YouTube videos on the bus."

Green believed New Zealanders still paid too much for data.

Plans were too inflexible, but subsidised rates on high-end smartphones, which were offered on long-term contracts, helped keep the price down. "You can't say, ‘I'll never use that many minutes' and transfer them to an increased data limit."

Aside from the price of operating a phone, Noel Leeming Group merchandise general manager Jason Bell says smartphone handset prices represented two ends of the market.

There were premium phones, such as Apple's iPhone and the Samsung Galaxy range, and lower-end smartphones which sold for as little as $99.

"It's a very strong growth category driven by premium-end sales, which make up a considerable share of the market. There is not too much in the way of mid-range price cellphones."

He says the average price, not including the iPhone or Galaxy, fell 11 per cent to $114 from last year. These statistics did not include the impact of subsidised phone plans, he says.

Vodafone offered free 16GB iPhone 5 handsets for customers who signed up to a $140 per month plan, on a 24-month term. This included 2500 texts, 700 minutes of calling and 3GB of data.

Telecom similarly offered free iPhone 5 handsets, but on a different 24-month plan, including 600 texts, 800 minutes and 2GB, for $139 a month.

Statistics NZ's ICT manager Hamish Hill says the $800 million increase in computer and phone sales from two years ago may appear contrary to expectations, as the cost of the goods themselves had fallen over the same period.

"The fact it is, more people are buying these items and getting connected. They have become a necessary part of life," he says.

AUDIO-VISUAL EQUIPMENT

Phone and broadband services are getting cheaper and so are televisions and other electronic gear.

Bell says the average market price of televisions has fallen 36 per cent in four years. This represented a fall from $1298 to $828 recorded for the year to January in 2013.

According to Noel Leeming's website, $828 would buy a Samsung 51-inch high definition plasma TV, with cash to spare.

In 2007, a new Panasonic 42-inch plasma television cost $3999. Just six years later, a new, and bigger, Panasonic 50-inch high definition plasma sells for $899 - a 78 per cent decrease in price.

Compared with New Zealand's first colour TV, the Philips K9, today's average prices have dropped about 94 per cent in 40 years.

Bell says there are many reasons for the drop in prices of televisions, including the strong New Zealand dollar, but competition was the chief contributor.

"Both from the overseas supplier and in New Zealand, the market is over-competitive. I have heard people say there are more appliance stores in New Zealand, given our size, than anywhere else."

There were 460,000 flat panel televisions sold in New Zealand last year.

He says the domestic market was swamped with televisions, which had driven the price down. "Visitors coming to New Zealand are blown away by prices here."

FLATMATES SEARCH FOR CHEAP BUT QUALITY TELEVISION

Young professional Nick D'Esposito recently moved to Wellington, and has begun browsing for a new television to help kit out his "swanky new apartment".

A self-confessed student of electronics, D'Esposito says he keeps an eye on prices but was pleasantly surprised when he and his flatmates started looking for a new television.

"I was actually astounded by how cheap they had become.

"I was on The Warehouse's website the other day and saw a 46-inch TV for about $600, which I guess a couple of years ago was unheard of."

D'Esposito and his flatmates figured they could pick up a decent television for a price that wouldn't break the bank.

"We're not going to go cheap and nasty but we are looking for something that is cheap but still of a good quality."

That said, D'Esposito stresses the flat's new television will have to be high definition, to gain a better experience from accessories such as his PlayStation 3.

"We'll be going high-def, that's for sure, especially for Fifa.

"We're not going to buy anything unless it's high-def."

D'Esposito's flat has just signed up for broadband internet, in a Vodafone package that includes discounted Sky Television.

He says for about $130 a month the flat will receive 50 gigabytes of internet, MySky and Sky Sport.

Internet is definitely cheaper than when he first began flatting about five years ago, he says, but he thinks it is still reasonably expensive.

"We've got a guy at work on secondment from America and he was just saying how crappy he thought our internet was here, how slow it was, how there's not wireless everywhere, and how it's generally more expensive, especially with data usage on cellphones.

"That's still a bit high."

D'Esposito has an iPhone which is paid for, but says if he has to shop for a new phone he will definitely still buy the Apple product.

He would sign up to a 24-month plan in order to get the discounted handset.

He says the convenience of his smartphone has helped streamline his daily routines.

"It's not so much the calling and texting, though that is pretty good, but it's the applications that you can get on it.

"You don't have to be by a computer to do your banking or pay your bills, and there's a whole lot of other things too, like Facebook - three or four years ago you used to have to be connected to a laptop or computer to do it but now it's a lot more convenient."

- © Fairfax NZ News

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