Progress of competition in Pacific Islands mobile markets
Overall, the introduction of competition in the mobile markets has resulted in reduced monthly spend for users.
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See our updated analysis of the rates as at March 2012.
In early 2008 we undertook our first comparison of mobile phone tariffs in eight Pacific countries to see if the recent introduction of competition in some of the markets had noticeable effects on the cost of mobile phone usage.
At that stage, only three of the countries Papua New Guinea, Samoa and Tonga had two competing mobile phone operators. The other five countries Fiji, Federated States of Micronesia, Kiribati, Solomon Islands and Vanuatu had monopoly mobile phone operators.
The tariffs were compared by calculating the average monthly spend for low, medium and heavy usage customers, based on the OECD 2006 basket usages. We found that two of the three countries with competition had low mobile rates compared to the average, whilst the third country Papua New Guinea had higher than average rates, although still significantly reduced since the introduction of competition.
One year on, and in both Fiji and Vanuatu a competing mobile operator has entered the market. Digicel a highly aggressive mobile operator expanding across the Pacific has also acquired the Tongan operator Tonfon. So how is this further competition affecting the mobile tariffs in the Pacific?
The cheapest plans for each operator, and the resulting monthly spend for a low user (one who makes 30 calls and sends 33 text messages per month), are illustrated in Exhibit 1. In comparison with those countries with competition in the mobile market, the mobile costs in the three remaining countries with monopolies vary widely, with Micronesia having the cheapest monthly spend for a low user, at USD9.40 per month, and the Solomon Islands being the most expensive, with a monthly spend of USD68.60. Both countries with newly introduced competition show the incumbent operator having reduced its prices, with the monthly spend for a low user reducing significantly, even when the new entrants prices are not necessarily lower, as in the case of Fiji. In the countries where competition has been present for over a year there has also been some price movement. The monthly spend for a low user for each of the operators in Samoa and Tonga has converged to a similar level, with the cheaper operators prices increasing. In the case of Papua New Guinea there has been no change in the monthly spend for a low user.
Similarly the monthly spend for a high user (someone who makes 140 calls and sends 55 text messages per month) is illustrated in Exhibit 2. Once again, the countries with monopolies represent both the cheapest and most expensive prices, with Micronesia having a monthly spend of USD37.50 for a high user, and the Solomon Islands a monthly spend of USD282. Both the countries with newly introduced competition show reducing monthly spend with the incumbent operator, as was the case for the low user. In the countries with existing competition there have been fewer changes in the monthly spends for high users than for low users.
Overall, the introduction of competition in the mobile markets has resulted in reduced monthly spend for users. This decrease seems to be most dramatic in the first year of competition, where the incumbent operators reduce their prices significantly. After this initial response it seems that the prices between the two operators tend to converge to a similar level, although this has been more evident in Samoa and Tonga than in Papua New Guinea. The greatest shift in mobile prices over the past year appears to have occurred in prepaid tariffs, as evidenced by the changes in low user mobile spends. In each case it was found that the cheapest plan for the low user was a prepaid one.
It is important to note that mobile phone coverage is still fairly limited in the Pacific Islands, with coverage concentrated in the main populated centres and with inland and outer islands often having no service. During 2008, coverage increased in Vanuatu, with the new entrant Digicel's network offering wider coverage than the incumbent, and also in Papua New Guinea, with Digicel extending their network. Current mobile network coverage is as follows:
- Federated States of Micronesia: coverage is provided to town areas of Kosrae, Pohnpei, Yap and Chuuk islands. Note: higher charges apply for calls between states.
- Fiji: both Vodafone and Digicel provide coverage to the coastal areas of the two main islands (Viti Levu and Vanua Levu), as well as most of the inner islands. There is also some coverage on Kadavu Island.
- Kiribati: coverage is provided to South Tarawa, Kiritimati Island and some parts of North Tarawa.
- Papua New Guinea: Pacific mobile provides coverage to Wewak, Madang, Mt Hagen, Goroka, Lae and Port Moresby. Digicel currently provides coverage to Port Moresby and the provinces of Central, Morobe, Madang, Chimbu, Eastern Highlands, Western Highlands, East New Britain and New Ireland. During 2008 Digicel planned to extend coverage to include Milne Bay, Ora, Gulf, Western, Southern Highlands, Enga, East Sepik, Sandaun, Manus, West New Britain and the autonomous region of Bougainville, creating a nationwide network.
- Samoa: Digicel provides service to the coastal regions of the two main islands (Savaii and Upolu), covering at least 80% of the population. Samoatel does not give details of its coverage on its website.
- Solomon Islands: coverage is provided to Honiara only.
- Tonga: both Digicel and TCC provide coverage to Tongatapu, and areas of the island groups of Eua, Vavau and Haapai. Note: higher charges apply for calls to outer islands.
- Vanuatu: Telecom Vanuatu provides coverage to limited areas in Santo, Ambae, Maewo, Malekula and Efate islands. Digicel provides coverage to areas in Santo, Malekula, Ambae, Maewo, Pentecost, Ambrym, Epi, Efate, Erromango and Tanna.
Notes for analysis of monthly spend:
- Prices include GST (at the rate relevant to that country) and are in US dollars
- All prices were converted to US dollars using 2007 Purchasing Power Parity (PPP) rates sourced from the World Bank
- All plans were current as at 9 February 2009
- The prices for each operator represent the plan resulting in the lowest monthly spend
- OECD mobile baskets of usage for a low user and a high user were sourced from the report: Revised OECD Telecommunications Price Comparison Methodology, July 2006.
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