Rural connectivity: a market reset in motion

Rural connectivity is going through its biggest reset in a generation.

Low Earth Orbit (LEO) satellite services, led by Starlink, are reshaping what connectivity looks like for rural New Zealand.

In many ways, this is the second major disruption to rural connectivity.

The first came 15 years ago, with the launch of the Rural Broadband Initiative (RBI), which has expanded coverage and improved connectivity for rural communities through investment in terrestrial wireless infrastructure. This also created opportunities for local wireless internet service providers (WISPs), who have extended competition and choice across much of rural New Zealand.

That investment in infrastructure serving the needs of rural communities and supporting their contribution to our economy remains important today.

But LEO satellite has introduced a fundamentally different way of solving the rural connectivity challenge - one that doesn't involve building towers on the ground.

The result has been a significant shift in the rural broadband market as consumers have responded to the new choices available to them.

Over the past five years, Starlink has captured 27 percent of rural broadband connections, making it the largest rural broadband provider in the country. Much of that growth has come from consumers moving away from legacy copper services.

Performance has shifted dramatically as well. Starlink is delivering average peak-time download speeds around four times faster than the next best alternative, 4G Fixed Wireless, and around twenty times faster than basic copper. This has given many rural consumers access to an urban-quality broadband experience for the first time.

Not surprisingly, those performance gains are changing the market.

Satellite competition from this innovative new technology is forcing existing providers to work harder to win and retain customers. We've seen them sharpen their prices, reduce data constraints, and increase investment in fibre, 4G and 5G upgrades. This is competition doing its job and consumers are banking the benefits.

But this isn't just a story about speed.

Some consumers are excited about the step change in performance that satellite services provide. Others place greater value on local presence, on-the-ground support and knowing there is someone nearby to call when something goes wrong.

We can see this playing out in the movement of rural customers coming off copper. While 54 percent are choosing Starlink, 46 percent are sticking with local providers, and local regional providers (WISPs) are in aggregate gaining more customers than they're losing.

The result is not a market converging on a single solution, but consumers making different choices based on different priorities, keeping a mix of competing technologies in play.

As the market evolves, questions are naturally emerging about where it goes from here.

One question is whether Starlink could ultimately become a monopoly provider. While Starlink currently enjoys a significant first-mover advantage, the expected entry of Amazon LEO and other providers is likely to increase competition at the satellite layer over time, reducing any risk of monopolisation.

Another question is the impact of satellite technology on terrestrial providers.

There is certainly more competitive pressure on local providers than ever before. Starlink has raised consumer expectations and shifted the performance frontier for rural broadband.

But the evidence so far suggests that local regional providers are holding their ground. They have largely maintained their position and the market is evolving towards a stronger mix of technologies rather than a single dominant solution.

There are also questions around the increasing reliance on offshore networks. The prospect of New Zealand being "switched off" is remote and becomes more remote as more satellite players enter the market. Nevertheless, it highlights the continuing importance of maintaining strong domestic communications infrastructure alongside these new technologies.

In a market changing this quickly, effective monitoring and enforcement becomes more important than ever.

As the regulator, our role is to track how competition is evolving, identify emerging issues, and ensure a level playing field between competing technologies.

Effective competition also depends on providers having a fair opportunity to respond. As competition from global providers intensifies, it becomes increasingly important that domestic providers can invest, innovate and adapt to changing consumer expectations.

Spectrum policy plays an important role in this regard and we are supportive of ongoing spectrum review work that could help rural providers improve network performance and compete more effectively. The objective is not to protect any provider from competition, but to ensure competition takes place on fair terms, so that consumers benefit from increasing investment, innovation, and choice.

More change is coming.

The disruption created by LEO satellite is real. But the evidence so far suggests that competition is becoming stronger, technologies are becoming more diverse, and consumers have more choices than ever before.

That is exactly what effective competition should deliver.