Has competition reduced mobile prices in the Pacific Islands?

… for Samoa and Tonga at least, having competition between mobile providers has resulted in relatively low cost for users.

Want to know more about this topic? Contact the author Nina Matthews

Telecommunications services are currently undergoing major changes in many Pacific Island countries, with a move away from monopoly service provision and opening of markets to allow the introduction of competition. So has competition among mobile telecommunications service providers had any effect in terms of cost for the consumer?

We compared mobile phone tariffs from eight Pacific Island countries, calculating the average monthly spend for low, medium and heavy usage customers, based on the OECD 2006 baskets. 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 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. Two of the three countries with competing mobile phone networks (Samoa and Tonga) clearly have the cheapest mobile rates of all the countries studied, with the more recent mobile provider to enter the market offering cheaper rates in both cases. The monthly spend for a low user in these two countries is only 20-30% of that for the two most expensive countries with monopoly mobile providers (Solomon Islands and Kiribati). It appears that for Samoa and Tonga at least, having competition between mobile providers has resulted in relatively low cost for users.

The third country with competition (Papua New Guinea) still has relatively high costs however, with the monopoly countries Federated States of Micronesia and Fiji having lower monthly spends for low volume users. Papua New Guinea has experienced a reduction in mobile prices since Digicel commenced services in July 2007, with Digicel’s rates being considerably cheaper than those of the incumbent Pacific Mobile (B Mobile). Not all aspects of mobile phone competition have been addressed in Papua New Guinea, with Digicel and Pacific Mobile still in discussions regarding interconnection. This means that currently customers can only phone other mobiles that are on the same provider’s network.

Exhibit 1: Monthly spend for a low volume mobile phone user [Source: Network Strategies]

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. The monthly spends for each of the countries show the same trends as for low users, with Samoa and Tonga once again offering the cheapest rates.

Exhibit 2: Monthly spend for a high volume mobile phone user [Source: Network Strategies]

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, as detailed below.

• 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: coverage is concentrated around the coastal areas of the two main islands (Viti Levu and Vanua Levu), as well as most of the inner islands. There is some coverage on Kadavu Island also.
• 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 plans to extend coverage to include Milne Bay, Ora, Gulf, Western, Southern Highlands, Ega, East Sepik, Sandaun, Manus, West New Britain and the autonomous region of Bouganville, creating a nationwide network.
• Samoa: Digicel Samoa provides coverage to the coastal regions of the two main islands (Savai’i 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 Tonfon and TCC provide coverage to Tongatapu, and areas of the island groups of ’Eua, Vava’u and Ha’apai. Note: higher charges apply for calls to outer islands.
• Vanuatu: coverage is provided to limited areas in Santo, Ambae, Maewo, Malekula and Efate islands.

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 2006 Purchasing Power Parity (PPP) rates sourced from the World Bank
• All plans were current as at 19 December 2007
• 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.

January 2008

Copyright © 2008 Network Strategies Limited