The Commerce Commission says it appears business and consumers have benefited from increased competition in the phone market, following the opening of Telecom's network to rivals.
Telecommunications director Osmond Borthwick says people are seeing better bundled offers, where telcos combine landline and broadband services, although these are mainly in major urban centres.
He says opening Telecom's Auckland exchanges spurred Vodafone and Orcon to lure customers with cheaper broadband deals.
TelstraClear has been more aggressive in the broadband market in Wellington and Christchurch.
That's seen Telecom's share of the retail broadband market continue to slip, falling 7 percentage points to 57%.
Mobile phone usage has increased further to 108% of the population by September last year, with Vodafone's base plans pushing down the cost of owning a mobile phone.