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PSTN sunset looms as regulator eyes deregulation

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Competition behind ComCom push to remove rules

A Commerce Commission draft decision says the growth of alternatives means Public Switched Telephone Network (PSTN) interconnection regulation may no longer be necessary. It plans to investigate deregulation.

PSTN interconnection is about the ability of customers on one network to call customers on another network.

Regulation was essential in the past. Without it, smaller networks struggled to compete effectively since their customers could either only call others on the same network or face excessive interconnect charges. This gave dominant players market power over challengers.

Greater competition

PSTN interconnection opened the door to greater competition when it was first introduced 25 years ago as part of the 2001 Telecommunications Act.

Since then the market has changed considerably. A report prepared for the Commerce Commission by Network Strategies says fixed PSTN now serves a relatively small segment of the population.

In 2013, over 85 percent of homes had a landline, ten years later census data shows that had dropped to 31 percent.

Today, the majority of callers can use other means of communication including mobile and Over-The-Top (OTT) services.

Cloud alternatives

Business users can call on cloud-based telephony products such as Microsoft Teams and Zoom. For consumers it would be apps like WhatsApp and Facebook Messenger, although these are not without their drawbacks. Network Strategies also names low earth orbit (LEO) satellites as an alternative.

At the same time, Spark is decommissioning its PSTN which had reached end-of-life. The company’s Voice-over-IP (VoIP) services are also in decline.

While the wider risks to competition of removing PSTN regulation are low, there are some segments of the market that continue to use it.

Rural legacy

A small part of the rural market has no practical alternative to Spark’s legacy PSTN. The Network Strategies report notes: “Spark confirmed that as at 31 May 2025 only 39,935 legacy PSTN connections remained active.” Yet the telco says it is having challenges finding alternatives to legacy fixed PSTN services for some users.

The Commerce Commission’s 2021 review of PSTN regulation found the service remained important in parts of the country and there was no clear direct substitute. It concludes that PSTN interconnection continued to provide an important backstop and reference point for any commercial negotiations.

Among the responses to that review, both Tuanz (Technology Users Association of New Zealand) and a number of smaller ISPs argued there should be no change because the current regulatory settings work well.

Further reading: A brief background on telecommunications regulation in New Zealand.

Largest fibre networks earn below expected returns

New Zealand’s two largest fibre companies, Chorus and Tuatahi First Fibre, earned lower than benchmark returns in 2023 and 2024, according to the Commerce Commission’s first profitability review under the fibre information disclosure regime.

Chorus, which owns about 79 percent of the country’s regulated fibre assets and operates in most regions outside local fibre company areas, recorded returns on investment below its weighted average cost of capital (WACC) in both years. In 2023 its ROI was 0.72 percentage points below WACC. In 2024 it was 2.18 points below. That indicates it did not earn excess profits over the period.

Tuatahi, which operates in Waikato, Bay of Plenty, Taranaki and Whanganui, was also below the benchmark. Its ROI was 0.99 points under WACC in 2023 and 0.81 points under in 2024.

Enable and Northpower above benchmark

In contrast, Enable and Northpower Fibre both earned returns above their respective WACC benchmarks in each year.

The commission says Northpower’s higher returns were largely due to the use of historic tax losses and lower depreciation, particularly from the way it depreciates its financial loss asset.

Enable’s above-benchmark performance was driven mainly by lower operating costs and lower depreciation, including longer asset lives for ducts and manholes. The commission says short-term outperformance due to efficiency gains would not be considered excessive, but persistent outperformance may need to be shared with end-users.

Chorus stands apart because it is subject to price-quality regulation. The commission sets its maximum allowable revenue and minimum quality standards. A wash-up mechanism carries forward any over- or under-recovery of costs into the next regulatory period. The other three fibre companies are subject only to information disclosure rules.

Findings matter

The findings matter for several reasons. Fibre networks were built with government backing and are long-life monopoly assets in their regions. The regulatory framework aims to balance incentives to invest with protection against excessive profits.

Evidence that Chorus and Tuatahi are earning below their cost of capital may ease concerns about windfall gains, but it also raises questions about future investment incentives and the durability of returns in a maturing fibre market.

For context on how Chorus is building and investing in its network, see Chorus names new fibre sites.

TCF backs competition law overhaul

The Telecommunications Forum backs key parts of the government’s proposed overhaul of competition law. It says changes to collaboration rules and merger powers will give the sector more certainty.

The Commerce (Promoting Competition and Other Matters) Amendment Bill is the first major update of competition rules in nearly 20 years. The government says it will modernise competition settings and promote growth. It also gives businesses clearer guidance on what conduct constitutes legal breaches.

The Bill promises faster merger reviews, stronger tools to tackle anti-competitive behaviour and streamlined approval for collaborations that benefit the public.

In a submission to Parliament’s economic development, science and innovation committee, the TCF says it supports the Bill’s overall intent to improve efficiency and certainty.

Competitive, sometimes cooperative

The TCF supports proposed class exemptions for collaborative arrangements. It says that while the telecoms market is competitive, cooperation between operators is sometimes necessary.

Examples include emergency services coordination, scam prevention, number portability and network interconnection. Collaboration can also support rural connectivity and public safety initiatives.

At present, companies must manage Commerce Act risk themselves when working together, even where initiatives are encouraged by government. The TCF says this can increase cost and deter participation.

Lawful where beneficial

The proposed class exemption regime would allow categories of collaboration to be declared lawful in advance where they are judged more beneficial than harmful to competition. The forum says that would reduce uncertainty and avoid repeated, case-by-case assessments.

Giving the Commerce Commission explicit power to accept behavioural undertakings in merger cases is also supported by the TCF. That would allow mergers to proceed subject to conditions rather than forcing an approve-or-decline decision.

This would bring New Zealand into line with other countries and offers a more flexible way to resolve competition concerns.

The forum welcomes stronger protection for confidential information provided to the Commission. It argues that businesses will be more willing to provide full information if the risk of release under the Official Information Act is reduced.

Overall, the submission reflects a sector that operates under both general competition law and sector-specific regulation. The TCF says the reforms should make it easier to distinguish between anti-competitive conduct and cooperation that delivers public benefits.

Fixed wireless looks constrained in latest MBNZ report despite changes

After feedback from telcos, the Commerce Commission directed changes in methodology for its quarterly Measuring Broadband New Zealand report. The telcos argued the earlier methodology reported poorer latency figures than are the case.

This change did little to alter the impression that 4G fixed wireless services are an underperformer when compared to other post copper broadband technologies.

Testing shows 4G fixed wireless can manage 57 Mbps around the clock, but this drops to 42 Mbps in peak hours. In non-fibre areas, speeds are slightly slower.

MBNZ says 29 percent of speed tests run over fixed wireless lines achieve download speeds of less than 25 Mbps in non-fibre areas during non-peak hours, compared to 40 percent during peak hours.

Not only does this indicate there is a huge speed gap between 4G fixed wireless and other technologies, but it is volatile. The figures indicate 4G fixed wireless users suffer considerable congestion.

Compare this with 5G fixed wireless. Spark’s 5G fixed wireless operates at 348 Mbps all hours. The 85 Mbps for its 4G Everyday Wireless plan highlights a clear generational divide between the technologies.

You can also read congestion into the Starlink figures in the MBNZ report. Residential Starlink customers see 254 Mbps across all hours, those on the cheapest Lite plan see 215 Mbps.

These speeds are well ahead of 4G fixed wireless and heading towards fibre speeds. Yet, the report notes, like 4G FWB, Starlink is subject to congestion at peak hours and shows a large variation between peak hour and off peak download speeds.

One NZ adds over the top support for satellite service

One NZ has extended its satellite messaging service to support WhatsApp satellite voice calling and other apps.

Joe Goddard, experience and commercial director, says customers with eligible plans will be able to use apps to get information like weather and maps while outside traditional mobile coverage. This includes: “...letting them keep in touch with friends and family with satellite calling on WhatsApp when they have line of sight to the sky.”

He says that Samsung worked with One NZ to prepare rolling out the Starlink data service and Meta sent engineers to Aotearoa for WhatsApp testing.

In other news...

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Ye cannae change the laws of physics
New Zealand now third for orbital rocket launches (paywall) — The Press
Government relaxes caps on launch numbers
Auditor-General may investigate MethaneSat — Farmers Weekly
Project failure requires more scrutiny

One New Zealand named Sustainability Champion

One New Zealand won the Sustainability Champion title at The Fast Mode Awards for its approach to sustainability. The telco managed to cut emissions by almost two-thirds (64 percent) in the 2025 financial year and aims to reach 100 percent renewable energy by 2030. Last year One NZ recycled 4.4 tonnes of customer devices and 60 tonnes of network equipment, with 97.5 percent diverted from landfill.

2degrees completes 3G shutdown

After a short pause during the recent weather emergency, 2degrees says it has now completed its 3G network shutdown.

2degrees turned off 3G services at around 100 rural sites in December. In January it halted 3G services in Palmerston North and Rotorua then paused the shut down as people in North Island areas including Northland, Thames-Coromandel, Hauraki, Bay of Plenty and Tairāwhiti faced official states of emergency.

Spark plans to boost small business productivity

Spark is working with Icehouse Ventures on a series of workshops aimed at increased small and medium business productivity.

This comes on the back of research commissioned by Spark showing more than half of all NZ businesses face barriers implementing new technology to streamline processes. This rises to 74 percent for start-up businesses.

This time last year Chorus announced plans to crank up speeds

In a bid to keep fibre performance well ahead of rival technologies, Chorus said it would increase plan speeds from mid 2025. Customers on the standard 300 Mbps plan moved to 500 Mbps for no extra charge. Customers on the company’s Fibre 50 plan, which includes the low-cost Home Fibre Starter plan, saw download speeds increase from 50 Mbps to 100 Mbps.

Five years ago changes to New Zealand's Residential Tenancies Act meant landlords can no longer refuse requests for a fibre connection when the installation is free.

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