Tag Archives: Vodafone

Orcon sale underlines New Zealand’s telecommunications shakedown

industry consolidation in the animal kingdom - Salvador Dali

industry consolidation in the animal kingdom – Salvador Dali

New Zealand’s telecommunications shakedown continues with Orcon’s sale to Vivid Networks.

The government wading into the telecommunications business by sponsoring the UFB fibre-to-the-home network was always going to trigger change. Did anyone making those decisions expect it to be this fast and this dramatic?

Let’s run a quick ruler over the state of New Zealand’s telecommunications sector:

Telecom NZ: Formerly the largest telco by a country mile is still reeling from the Chorus demerger. The company lost 300 workers last year and plans to sack another 1200 in the coming weeks. Telecom’s Gen-i business unit recently did a part-retreat from Australia.

Vodafone: Integrating TelstraClear is like a python swallowing a lamb. Vodafone may digest the meal, but at the very least we will see hiccups as the dinner goes down. Acquisitions on this scale take years to bed down.

2degrees: Eric Hertz will be a hard act to follow.

Kordia: Selling Orcon makes sense for government-owned Kordia. Although no-one is talking about the sale price, the company should earn a premium on the $24 million it paid for Orcon in 2007. Kordia is now free to focus on the business-to-business services it is best at while the new owners have control of the most successful residential fibre service providers.

Chorus: Faces Commerce Commission moves to cut the price telcos pay for copper network access. While the government appears to be moving to change the law and the Commerce Commission mandate to shore-up Chorus’ business model, question marks remain.

Update: More disruption. Computerworld reports Gen-i is looking at buying Revera.

Data use fueling mobile growth

VodafoneWhen Vodafone announced New Zealand’s first 4G network last month, the company didn’t announce larger data caps allowing customers to make full use of faster downloads.

In the short-term this may not matter. Early adopters put up with less than ideal conditions – many see this as the price they pay to get access to new technology.

Long term it will matter. Telecom will launch a competing 4G network before the end of the year and 2degrees will no doubt follow. The could be another market entrant.

Either way, data is one area where competitors can differentiate products.

Make no mistake, data use will increase. According to numbers from this year’s Mobile World Congress mobile devices exchanged 0.9 exabytes per month in 2012. An exabyte is a billion gigabytes.

Last year more mobile data moved through the airwaves than in all human history.

Mobile data traffic is growing at a compound rate of 66%. By 2017 wireless networks will move 11.2 exabytes.

The fastest growing sector will be machine to machine (M2M) communication which is growing at a compound rate of 89%.

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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.

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Vodafone NZ: about your 4G business model

Vodafone 4G mobile dataVodafone NZ has stolen a march on its competitors rolling out 4G mobile to parts of Auckland earlier today.

Although coverage is limited, only 30% of Auckland gets the faster service at the time of writing, the company is getting runs on the board while rivals seem to be months away from a full launch. Vodafone plans a fast ramp-up with Christchurch getting a service in May, Wellington in August-September and a further 15 towns by year-end.

4G will give users faster data downloads and smoother experience with data heavy applications like   video conferencing and gaming. On a good day and a uncrowded tower, 4G sends data at around 10 times the speed of 3G networks.

How will Vodafone make its 4G investment pay?

First the company will charge most customers an extra $10 a month on top of their existing plans. Big spending customers – those already paying $120 a month or more – won’t pay the surcharge.

The second part is more subtle. There’s no increase in monthly data allowances. Given that 4G makes it easier and quicker to shovel bits into a phone that could see customers bust their existing limits and begin paying for more data. Extra data typically costs more per unit than bundled plan data, so Vodafone has an opportunity to extract more from customers this way.

Or possibly not. Vodafone chief executive Russell Stanners told the NBR’s Chris Keall faster speeds don’t necessarily mean users will download more data. He said overseas users only get through one or two GB a month.

And the business model?

Carriers like Vodafone often treat 4G as a bigger pipe for selling mobile broadband by the gigabyte. That appears to be what’s happening here. Over time Vodafone will collect hundreds of thousands of $10 per 4G account per month and will sell bigger data plans.

There’s another opportunity that Stanners and his executives must have considered: how to boost revenues by adding paid-for applications and extra value-added services to the mix. Carriers around the world struggle with this – can Vodafone’s New Zealand operation come up with some answers?

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New Zealand shows Australia how to do FTTP

Auckland's first fibre

Steven Joyce installing Auckland’s first UFB cable – Albany – 24 August 2011

While Australia’s politicians continue to wrangle over that country’s FTTP (fibre-to-the-premises) project, New Zealand’s is progressing nicely. However, New Zealand’s relatively low fibre uptake could yet inform Australia’s FTTP debate.

Figures releases yesterday by communications minister Amy Adams show that 134,000 homes and businesses are now able to connect to the  UFB (ultrafast broadband) network. Building is taking place in 24 of the 33 towns and cities that will eventually be on the government’s network.

Meanwhile 89,000 rural homes and businesses are able to connect to the Rural Broadband Initiative through fixed wireless connections and a further 36,000 rural users can now use fixed-line services.

To date only 3800 customers have signed for UFB fibre services. That’s a relatively low take-up rate – less that 3%.

The priority at this stage is to sign businesses, schools and medical facilities. Yet the fibre companies deliberately started their residential build in areas where they expected the highest uptake.

GIven that fibre isn’t any more expensive than existing copper-delivered broadband plans, this suggests there could be problems persuading consumers to switch to fibre.

There are two reasons why more haven’t moved. First, the big ISPs, who account for the overwhelming majority of the market, have yet to begin selling fibre services. That’s likely to happen  in the coming months – having more people on the UFB will give them more incentive to move into the fibre market.

Second, the government and the people boosting fibre have done a terrible job selling the advantages of the technology to everyday consumers. Instead of telling people fibre is fast and reliable, there’s been a focus on ridiculous and, to most people, irrelevant high-end applications. Telecom and Vodafone are likely to do a far better sales job than the government.

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Don’t expect NZ digital spectrum windfall

AucklandBritain’s 4G spectrum auction raised a third less than expected. UK telecommunications companies paid £2.3 billion to snap up the extra bandwidth needed to run next generation mobile data networks, that’s £1.2 billion less than the amount penciled-in by the government.

What does this mean for New Zealand’s spectrum sale which will probably take place later this year?

Previously there’s been speculation an open auction of the 700MHz band could raise $200 million. That figure  may look ambitious now.  

Vodafone and Telecom NZ are both experimenting with 4G services and are likely to bid for the new spectrum. 2Degrees could also take part and smaller players have bid for spectrum in earlier auctions.

The 700Mhz band is a sweet spot for mobile broadband – at those frequencies mobile signals do a better job of reaching through buildings in densely populated areas like central business districts.

As a rule of thumb, the lower the frequency, the higher the value of spectrum to carriers.

There’s also a Māori claim for spectrum which many expect could be used by iwi as a bargaining counter to wrest back some control of 2degrees – although that is not the only course of action open to Māori.

You could argue New Zealand’s carriers paid too much for 3G spectrum in 2001, it’ll be interesting to see how they act this time. While no-one wants to be locked out of 4G, the carriers will be just as wary of  overbidding.

 

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