What does Vodafone know about Ultrafast Broadband anyway?

Last week Vodafone New Zealand chief executive Russell Stanners caused a stir when he called on the government to scrap the roll-out of fibre-based ultrafast broadband in much of Wellington and Christchurch.

He makes a good case for saving taxpayer money by not overbuilding an existing network.

The HFC (hybrid-fibre coaxial) cable network Vodafone picked up when it acquired TelstraClear isn’t the company’s only fast broadband network. The company also owns a fast wireless broadband network.

A year has passed since Vodafone launched its 4G network. Telecom has a similar network, 2degrees says it expects its 4G service to start later this year.

While no-one is going to claim any of the 4G networks are equal to the UFB fibre network, comparing the projects provides some useful insight into the relative performance of the government-subsidised project:

Taxpayer involvement

Government is investing $1.35 billion of taxpayer money to build the UFB network. The government received $259 million plus GST when it auctioned the 700MHz spectrum. That’s not the only spectrum used for 4G, at a conservative estimate carriers have paid the government $500 million for bandwidth.

Industry disruption

Building the UFB network meant breaking up Telecom NZ – at huge expense and disruption. It also meant rewriting telecommunications legislation.

The government didn’t get that right the first time, so a second round of disruption is coming. In contrast, Vodafone, Telecom and 2degrees just rolled up their sleeves and got on with building 4G networks.

Time to build and reach

If everything stays on schedule, it will take nine years for the UFB network to reach 75 percent of New Zealand. Vodafone says by next month its 4G network will reach more than 2.5 million people. That’s roughly 60 percent of the population covered in a single year. In the long-term 4G will reach more New Zealanders.

Network speed

Direct comparisons between fibre speeds and 4G speeds are difficult. A fibre connection is a direct link from a building to the nearest node. If you buy a basic UFB plan you get the 30/10 Mbps service. In practice you’ll get something close to 30 Mbps down, 10 Mbps up. Pay more and you’ll get 100/50.

Wireless bandwidth is shared. I’ve seen 4G speeds of around 70 Mbps down and 40 Mbps up, but in practice speeds are lower on busy cell sites and at busy times of day. The key point here is that in terms of performance, 4G is in touch with low-end UFB. That’s significant.

Cost of data

UFB plans vary. There are low-cost plans with only gigabytes of data. At the other extreme are unlimited plans. Vodafone offers a 30/10 UFB plan for $95 that includes 80GB of data. Snap offers 100Gb for $75.

Pay roughly the same amount for a Vodafone 4G service and you’ll get just 1.5Gb of data – although that package includes unlimited voice calls and texts. Telecom has a plan with 3Gb costing $119 and the company’s Wi-Fi hot spot network can add another 1GB per day.

Demand

The last report from Communications Minister Amy Adams says 19,000 have connected to UFB. Vodafone says it has signed 30,000 prepaid 4G customers in the eight weeks since it launched a prepaid option. The company has a total of 300,000 4G customers. Telecom hasn’t announced numbers, but sent out tens of thousands of 4G sim cards.

Need for fibre?

Fibre is essential for businesses who need bulk data and sold, consistent bandwidth. 4G isn’t an alternative, it’s a complementary service. Smart companies will buy both.

Things are more complex with home broadband. Not everyone needs lots of data, nor do they want to pay for it.  Many would be happy to stick with copper. For most people, buying fibre services only makes sense if it opens the door to new entertainment options. There was a danger the residential component of the government investment in fibre would do little more than give Sky TV a taxpayer subsidised delivery mechanism – that no longer looks to be such a risk.

So what does Vodafone (or Telecom for that matter) know about Ultrafast Broadband?

First of all they know how to sell fast internet services. They also know how to build vertically integrated data networks. They know how to give people the products and services they want.

I can’t help wonder what the 4G carriers might have been able to deliver if they had a $1.35 government subsidy instead of having to pay the government $500 million for spectrum.

And, in hindsight, their success with 4G calls into the question the idea of separating network operation from retail services.

So when Russell Stanners comes calling with ideas about delivering Ultrafast Broadband, it would pay to at least give the man a hearing.

6 thoughts on “What does Vodafone know about Ultrafast Broadband anyway?

  1. No, no, no.
    Wireless is a very limited, very unstable network.The speeds UFB are touting now (30MBps) are very much on the low side (as I ‘ve mentioned before Google do 1,000MBps and want to make it 10,000MBps soon), there is no way 4G will keep up with that.
    As you’ve said 4G is limited and the more users on it, the worse it gets. If you have most homes in an area on 4G the spectrum will be quite saturated and you will have a bad time with keeping a stable download for streaming or gaming. Remember that even in Auckland 4G is new and there is probably less than half the people on it that might be in a few years.
    The other question is, fibre is an infratsructure open to other companies (You have choice) whereas Vodafone will not (I don’t know if they could anyway) open up their towers for other companies’ use so you will be locked into Vodafone and that will start our slide into hellish American Cable Company territory. That is a hell I do not want to visit on New Zealanders.

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  2. The story is clear that I’m NOT suggesting 4G is an alternative to UFB. Both are essential.

    But you can’t argue with Vodafone selling half as many again new prepaid 4G accounts in eight weeks than the mass ranked of UFB service providers managed in 18 months. That speaks volumes.

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    • I’m willing to bet those customers either are just new customers getting 4G capable SIMs or 4G capable phones. It’s different to wired broadband where there is not so much turnover of hardware.

      I’m sorry but any comparison between either network rubs me the wrong way with what has been happening around the world lately.

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  3. I get frustrated by two points you made Bill
    1) that vertical integration is inherently ‘bad’
    2) the lack of understanding, indeed research into UFB in general

    Vertical integration allows organisations to control most of the facets of delivery, it lets them create code to automate and effectively stand up silo’s…
    The bad of this is it creates lockout, the good of this is you get cost and efficiency advantages…
    one of the reasons UFB is a bit of a cluster is that in seperating Telecom, you broke the integration… Now everyone has to integrate into multiple 3rd parties, who sets the product spec, deliver in their own way etc etc

    Research into UFB, like genuine investigative journalism…. why did Chorus have to do ‘right performing products’, why are none of the big carriers using Northpower…. what benefit to the consumer was there in excluding Telecom from UCLL…. why aren’t priority user groups (remember them?) getting fib re (RMA)…

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    • 1. Where do I say vertical integration is bad? When I wrote
      “Their success with 4G calls into the question the idea of separating network operation from retail services” I was suggesting the opposite. I don’t actually have a firm view for or against vertical integration, there are times when it is good, times when it is bad.
      2. If you want to suggest story ideas, I’m open to suggestion. Email me bill@billbennett.co.nz.

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  4. Bill, you raise some fair points here – especially about why it’s often preferable to let competitive markets get on with it rather than leave things to the public sector. But I suggest your analysis overlooks a few key points: a) the economics of transmitting data via mobile networks are far more challenging than fixed (it’s several times more expensive per unit of data and is likely to continue to be so for the foreseeable future at least, even more so for heavy users. So it’s not a case of mobile or fixed – we need both. b) while its fair to say that not all homes today may be high data users who need fibre, who knows what will eventuate over the next decade … think back to when ADSL first came in and most people questioned whether they would need it c) Vodafone’s HFC network was in place well before CFH decided to award contracts to overbuild with UFB – as it did in other places like Nelson’s Loop fibre network. For better or worse, the train left this station some years ago. d) if Vodafone wants to have its HFC replacing UFB in those areas (setting aside whether it is technically as good), then it should have to physically separate the HFC network as a standalone business (as Telecom had to with Chorus). plus do a deal with CFH and Chorus or Enable to take over the UFB contract obligations in those areas. Otherwise, Vodafone would get the benefit of vertical integration which is denied other industry participants. e) its a shame that this HFC idea has overshadowed some of the other more important issues that will drive fibre uptake, such as better speeds on UFB entry plans to create a more compelling difference between fibre and copper broadband.
    cheers Andrew Pirie (Telecom)

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