From Competition to Regulation: New Zealand Telecommunications Sector Performance 1987-2007

Using an efficiency-based framework this paper analyses the performance of New Zealand's telecommunications sector under competition law-based sector governance (the period from 1987 to 2001) and under industry-specific regulation (2001 to 2007). The framework considers the productive allocative and dynamic efficiency effects of each regime and the nature of the strategic interaction of sector participants. The analysis reveals that substantial gains in all forms of efficiency were achieved during the 1990s both compared to historic New Zealand and contemporary OECD benchmarks. Under industry-specific regulation however transfers to consumers appear to have reduced transaction costs have increased and delays are being incurred in the deployment of new applications and technologies relative to the competition law regime as participants engage in strategic gaming with politicians and the regulator and respond predictably to the range of incentives offered under the regulatory regime. The paper concludes that on balance in the New Zealand circumstances the regime based predominantly upon competition law appears to have outperformed the industry-specific regulatory regime albeit due in large part to sector participant interaction shaped by contractual obligations imposed by the government on the incumbent which have prevailed unchanged under both regimes.