Smartphone subsidies not always good

Those ‘free’ smartphone deals offered by mobile carriers are anything but free according to an OECD report.

Of course you already suspected that. Now you have ammunition the next time a smooth tongued sales critter tries to tell you otherwise.

There are two parts to this. First a so-called subsidy is, in effect, a financial loan on not very good terms.

The second part is that subsidies have the effect of hiding the true cost of using mobile services. Carriers use that lack of transparency to confuse consumers and squeeze more from them. Transparency also helps improve competition, which is good for consumers.

The OECD isn’t entirely negative about smartphone subsidies, it says by not making customers pay up front for their hardware, phone companies put a lot of kit in people’s hands very quickly. And bundles can still help consumers, it would just like the phone companies to be clearer about the way costs break down and not lock people into long contracts.

Reading this report I can’t help think New Zealanders get a relatively good deal from the carriers operating here. What do you think?

Social messaging to cost telcos billions

Get in touch - I promise to put some clothes on

The original over-the-top communication service

Research company Ovum reports social messaging services – like WhatsApp - will cost telecommunications carriers US$86 billion a year by 2020.

Ovem analyst Neha Dharia talks about the changing relationships between network companies and the so-called over-the-top OTT companies that duplicate telecoms services like calling and messaging.

Social messaging services are often free or come as part of cheap packages, making them attractive to users. They reduce a carrier’s ability to charge for services making them less profitable.

When a user sends a Facebook message or makes a Skype call there’s a small data use cost, but carriers don’t earn SMS or call revenue.

We’re already seeing falling SMS use. Another research company, Informa, says internet message traffic went past SMS traffic.

Texting – which had its 20th birthday in December – was a cash cow for carriers. It costs them almost nothing to provide the service – until recently a simple message of a few characters could cost as much as NZ 25 cents for 128 bytes of data – that equates to tens of thousands of dollars per GB of data.

Carriers offset the loss from messaging by selling data bundles – the price per mobile data GB is still high when compared to data delivered over copper or fibre. However, OTT services can bypass mobile data and send messages using much cheaper Wi-Fi connections.

Mind Storm conference 2013


Let your people go, just don’t let them go feral

Allison Cerra from Alcatel-Lucent talks about end user trends at the Mind Storms conference in Auckland. The main point of her presentation is that technology is rapidly redefining the relationships between companies and their employees. This is unavoidable, so strap in for the ride.

High-end UFB fibre plans – April 2013

New Zealand’s government is spending $1.5 billion rolling out a high-speed fibre to cities and towns. The UFB network promises blisteringly fast speeds and competitive prices.

I’ve found ten companies selling UFB services to home users. More are coming online all the time. Here I list each company’s most expensive residential plan. This shows what more demanding home users can expect from their service provider.

table notes:

a) Lightwire has soft caps, if you habitually run over you’ll be asked to move to a higher plan
b) Snap sells addition blocks of 100GB for $15.

Three providers don’t offer the top UFB speed of 100 Mpbs down and 50 Mbps up. That’s interesting. Presumably these companies are not chasing every type of customer. If you don’t need the full speed – say you need UFB mainly for small business purposes – you may get a better quality of service from these providers.

The survey shows a range of prices, from the $134 for Orcon’s all-you-can-eat service to the expensive-looking $200 for 200GB deal at Xnet.

Bundled add-ons account for some of the price variation. Service providers offer voice over IP add-ons at different prices, while Telecom expects its customers to keep their copper phone lines. Typically you get a better deal if one provider supplies all your telecommunications needs.

You’ll also find not all service providers cover all areas of the country. Some are regional specialists.

At the moment Telecom – and some other fibre service providers – are not metering traffic, so the data caps and the cost of running over the caps don’t apply. This will change with time.

While Orcon’s unlimited plan looks the most attractive, there are fair use limits and the company pools available data. Read that as “if you’re a huge user you may run up against the limits of unlimited”.

Vodafone LTE fibre killer in New Zealand?

When fibre comes down my streetFour days ago I wrote that the best broadband I’m likely to see for the next five or six years will be wireless. If independent consultant Jon Brewer is right, that could come in the shape of a Vodafone-owned network of picocells connected to the company’s own back-haul network.

Brewer says Vodafone has the technology and the spectrum needed to roll out a network much faster and cheaper than the UFB network being built by Chorus. It will offer UFB-like speeds. Brewer doesn’t say so, but the economics he outlines suggest Vodafone would be able to boost data caps.

Until now the arguments against wireless networks have been to do with spectrum scarcity and the high cost of network equipment along with the expensive of getting resource consents. Picocell technology does an end-run around these. 

Where consumers have a choice between fixed and mobile networks, they tend to choose mobile leaving fixed-line for things like bulk downloading of media content.

While Brewer’s post is speculative, there are some sharp minds at Vodafone who must have at least considered this approach. It will probably run into regulatory hurdles – New Zealand’s centre-right government is not keen on letting market competition make decisions about future telecommunications.

Nevertheless, for me this is a far more exciting prospect than waiting for a glass fibre to be strung down my road.

LTE as Fibre Killer? Vodafone’s Quick Win for Fixed Mobile Substitution « Inside Telecommunications New Zealand.