21st century man: barefoot, with broadband

OPINION: People in the developed world are spending 20 per cent more on communications services than they did in 1995 and 20 per cent less on clothing and shoes, as a proportion of their income, according to an OECD report.

Booming demand for broadband and mobile services have bolstered spending on telecommunications in the OECD to US$1.2 trillion.

"Telecommunications markets have expanded at a fairly constant annual growth rate of 6 per cent since 1990, even during economic downturns."

The report suggests New Zealanders need not pay over the odds for cellphone calls, an issue currently the source of much angst.

The OECD said mobile prices in New Zealand were a little less than the OECD average, whether people's usage was heavy, light or average.

But the figures are based on prices consumers could pay for calls (for example by taking up some little-marketed Vodafone on account plans), rather than those they actually do pay, which the Commerce Commission notes can be quite a different thing.

Telecommunications Users Association chief executive Ernie Newman sees other skeletons lurking in the OECD Communications Outlook 2009 report.

The proportion of telecommunications revenue spent on mobiles, at 30.6 per cent, was the fourth lowest in the OECD. The average was 41 per cent.

Call volumes per handset were also declining. "That is not a sign of a healthy market in a scenario where mobiles are supposed to be taking over the world." The report has little bearing on the cheeky "Drop the rate" campaign launched this week by the association, 2degrees and others to cut mobile termination fees, Mr Newman says.

The low proportion of total telecommunications spending in New Zealand that goes on mobiles could actually be a symptom of high prices or low prices.

To know which, one would need to know the "price elasticity" of mobile phone services the extent to which people would spend more or less on calls as prices fell or rose. That is a topic on which economists seem to have shed little light.

Low spending on mobiles may simply reflect the impact of unmetered local calling, which encourages consumers to use fixed lines instead of cellphones for calls.

Free local calling also probably explains why New Zealand has by far the highest proportion of dial-up internet accounts in the OECD.

Whether that is a "problem" is debatable, given broadband uptake is now not far off the norm.

Indeed, New Zealand doesn't stand out in most of the graphs and tables in the 359-page report, which leaves the overall impression that Kiwis are making good use of an ICT infrastructure that is pretty much par for the course.

Encouragingly, New Zealand is sixth in the OECD for the number of secure servers, for its population. That is often taken as a reasonable proxy for the uptake of e-commerce.

If there is one statistic in the OECD report that should cause some concern, it is that New Zealand has the second worst comparative advantage in its "terms of trade" for telecommunications equipment, after Australia.

That's a reminder that Kiwis will need to export more of the items consumers in the developed world are apparently spending less of their income on such as food and wool to pay for our gadgets. That, or find other ways to improve our balance of payments.

- © Fairfax NZ News