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Bill Bennett

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Author: Bill Bennett

Not actually a geek, more a chronicler of geekdom. Still mainly a journalist, sometimes a blogger.

Unpicking AWS’ New Zealand numbers

Amazon Web Services says it will build a Region in New Zealand. AWS plans to start operating local cloud data centres by 2024.

An official press release telling us about this runs to more than 3200 words. It’s long, wordy, poorly written and hard to understand.

Despite the torrent of words, it is light on details.

Mystery

It doesn’t answer key questions.

Such as: “Where will Amazon locate its promised data centres?”

That’s not mentioned anywhere in the 3200 plus words.

It’s an important question. New Zealand is on a fault line. That has implications.

Our biggest city, Auckland, is closest to the submarine cables piping in data from around the world. That’s handy. Yet because it sits on an active volcanic field it may not be the best site for a $7.5 billion investment.

Auckland has a large workforce, although the construction skills needed to build a data centre are in short supply. Does Amazon propose to bring that expertise in?

Electricity

There’s an undersupply of electricity in the Auckland region. In winter Huntly’s dirty old coal-based power plant kicks in to top up the power supply.

Will AWS be using that power?

Meanwhile, at the other end of the country there is, or soon will be, an oversupply of low cost, clean, green power. Is that in the plan? It should be.

New Zealand’s south has a cool climate. Cooling is a major operational cost for data centres. Locating in a cooler climate not only reduces costs, it smartens up green credentials, an important part of any cloud marketing programme.

Data transit

If Amazon locates in or around Auckland, it won’t have to pay much in the way of transit charges for data travelling up and down the nation’s backbone.

Nor will it pay for the cost of bringing in the power needed to run a hyper-scale data centre.

New Zealanders subsidise moving power around the country. There is a limit to how much of that is possible without network upgrades. Who pays for that?

AWS’ numbers look as they have been polished up for maximum press release impact.

From the press release:

AWS released an economic impact study (EIS) that estimates it will create 1,000 new jobs through investment of NZ$7.5 billion (US$5.3 billion) in the new AWS Asia Pacific (Auckland) Region with an estimated economic impact on New Zealand’s GDP of NZ$10.8 billion (US$7.7 billion) over the next 15 years.

Jobs for who?

We can assume many of the 1000 jobs will be temporary roles for people building the data centres. It’s rare for a giant data centre to employ more than a handful of people and that includes security guards.

Once the ball is rolling there won’t be many data centre jobs. There could be development work piggybacking off the data centre. AWS doesn’t say. Nor does it say where the people to fill those roles will come from.

Amazon doesn’t tell us enough about its plans for any sensible analysis of its $7.5 billion investment claim.

We know AWS is a worldwide hyper scale cloud business. Any comparison with Spark is always going to look odd. Yet, Spark operates New Zealand’s largest existing data centre at Takanini. That makes it the closest we have to a benchmark.

Spark’s original project cost $60 million. Subsequent expansion means that price will be a lot higher. It won’t be anywhere near $7.5 billion. It won’t be one tenth of that amount.

Market share

IDC Research says Spark and Datacom have a 43 percent share of New Zealand’s Infrastructure as a Service market. Amazon has a 23 percent market share. Microsoft is a touch behind on 19 percent. In other words, the four are all roughly the same size.

As a rule, the large, hyper scale cloud providers AWS and Microsoft Azure take 70 to 80 percent market share in any territory.

Their lateness to build here is one reason they have less share at the moment. The lure of winning that additional market share could be part of the reason both Microsoft and AWS have made big New Zealand cloud announcements in recent months.

Sure, there is more to cloud than IaaS. Yes, the market is expanding fast. Yes, Amazon is hyper scale. Does it need to spend 20 or 50 times as much as Spark?

Datagrid

Datagrid is a $700 million project to build what may still be New Zealand’s first hyper-scale data centre. The business is headed by Remi Galasso and Callplus founder Malcolm Dick.

The pair know a thing or two: they got the Hawaiki cable off the ground.

Datagrid has chosen a Southland site.

Interestingly, Amazon has invested in Hawaiki. It’s likely the Datagrid team has talked to AWS about potential cooperation1.

Part of Datagrid’s plan is to build a new submarine cable connecting Invercargill to Australia. There will also be a domestic submarine cable linking the site to major New Zealand cities.

Will Amazon build a similar cable to distribute its data?

Scale

At first Datagrid will be a 60 megawatt, 25,000 square metre data centre. Over time it will grow to 100 megawatts and 40,000 square metres. That’s a lot of data centre.

Assuming data centre costs scale better than linearly and Amazon can call on its worldwide economies of scale, its project will build more than ten times Datagrid’s capacity.

Which brings us to another question. How big is New Zealand’s cloud market?

In March Spark told Computerworld’s Sarah Putt it estimates total cloud revenue at around $730 million.

That figure doesn’t square with AWS’s $7.5 billion build budget over 15 years unless AWS anticipates the market continuing to grow at a fast rate.

Assuming AWS doesn’t capture the entire market and intends its New Zealand operation to be profitable, either the local market would need to grow at about 40 percent a year for the next decade or the company expects to host a huge amount of international business here.

Unknowns

There are plenty of unknowns. Too many unknowns to make a careful analysis of AWS’s plans. Yet there are four possible conclusions one could make about the $7.5 billion announcement.

The first is the most cynical: that it is pure public relations hype.

Mentioning a big enough number and promising lots of jobs is a sure fire way of seeing off any resistance and buying-in political good will. AWS can rest assured no-one is going to look back in 15 years to check it spent $7.5 billion.

Big technology companies like AWS have plenty of form when it comes to talking things up.

Efficient

A second conclusion, is that Amazon throws money around like water and is hugely inefficient. It overpays for everything.

This is implausible. It doesn’t square with anything we know about Amazon which is famous for trimming costs to the bone. Operational efficiency is key to making money from the cloud.

The third possibility is that AWS expects to scythe through the local cloud market. It has done this before. It’s possible, but wise cloud customers are wary of dealing with a single international ecosystem. Many will seek alternative service providers as a back-up.

That’s going to limit AWS’ potential market share. And even 100 percent share of a $730 million market doesn’t justify spending $7.5 billion even with heroic growth rates.

A more likely story is that AWS has bigger plans for New Zealand that serving local markets. It has hinted at this without explicitly saying anything. New Zealand gives, say, Australian AWS users a viable alternative location with, if not always similar, at least readily understood local conditions.

One last point. Until now, the big global cloud companies stayed away from New Zealand. They didn’t like it when there was only one submarine cable network. They didn’t like what they saw as a hostile and monopolistic telecommunications market. It took ten years of industry reform.

As far as technology is concerned, no-one thinks of us as a smug hermit kingdom.


  1. A speculating person might wonder if Datagrid will become part of AWS. ↩︎

Red flag for Chinese phones

Lithuania’s Defence Ministry warns his nation’s citizens to throw away Chinese phones and not buy new ones.

The country’s National Cyber Security Centre tested Chinese made 5G mobiles. It then reported claims one Xiaomi phone had built-in censorship tools and a Huawei handset had security flaws.

Ars Technica reports:

“The Xiaomi phone includes software modules specifically designed to leak data to Chinese authorities and to censor media related to topics the Chinese government considers sensitive.

The Huawei phone replaces the standard Google Play application store with third-party substitutes the NCSC found to harbour sketchy, potentially malicious repackaging of common applications.”

Both companies denied the claims. But we all know they would do that regardless of any merit.

Not surprising

A fuss over Chinese made phones was always going to happen.

The ball started rolling in 2018. For years before 2018 there were whispers circulating about Huawei’s ability to spy on conversations passing through its network equipment. Arguments ranged from rational and plausible to downright fanciful.

Whether any spying took place was immaterial. Western governments were concerned that critical network infrastructure could become a Chinese-owned monopoly. Or at least dominated by Huawei to the point where it might as well be a monopoly.

The giant had to be stopped before it was unstoppable.

Handsets

With Huawei network equipment in the spotlight, attention turned to phone handsets. These also had spying potential.

It didn’t help that the US was fighting a trade war with China.

When this was going on, it was clear that if Huawei is a problem, you have to consider other Chinese network equipment and phone makers as risky. And while we are looking in that direction, questions were asked about Chinese factories making phones for western brands.

The jury remains out on whether Huawei is spying on customers.

Chinese risk

If you don’t think China poses a cybersecurity risk, you haven’t been paying enough attention. There’s a Wikipedia page looking at the issue.

It may not be related to these risks, but Chinese phones have taken a smaller share of New Zealand sales in recent years. Samsung and Apple continue to dominate.

IDC reports that for the first quarter of 2021 they accounted for 84 percent of the market. That figure measures units. If IDC measured dollars, the top pair would be more than 90 percent of the market.

Regardless of cybersecurity fears, readers would be well advised to stay away from Xiaomi and its regularly updated Chinese government approved blocklist of sites.

If nothing else, the company gets reports on your browsing activity. Your activity could end up on a database and land you in trouble if, say, you travelled to China.

iPhone 13 – Incremental is only half the story

Apple iPhone 13 reviews from the US press are in. There is a wider spectrum of opinion than you’d expect to see when Apple launches a new iPhone.

At the New York Times, the headline on Brian Chen’s Apple iPhone 13 review – the story is behind a paywall – dismisses the new phone as “the most incremental upgrade ever”.

He says the annual phone upgrades from Apple and Samsung are a “mirage of tech innovation”. For Chen, upgrades are “a celebration of capitalism”.

Chen has a jaundiced view, not negative, but not positive.

Battery and cameras…

Joanna Stern is kinder. At the Wall Street Journal her headline reads: “iPhone 13 Review: From Mini to Pro Max, It’s All About the Battery and Cameras”. This is also behind a paywall.

Stern is positive about the battery life improvements. This will make more difference to many iPhone users than the new camera mode which is her second focus.

…better display

There is no paywall hiding the Verge’s Dieter Bohn more positive take. The headline on his review says: “…A better display, the best camera, and incredible battery life.

Bohn makes an important point about the cameras on the new iPhone models. Other reviewers can get bogged down with technical specifications and intense testing. Bohn writes: “ I also can’t remember the last time I’ve said “whoa, look at this photo” as many times as I have during this review.”

Reporting his response this way says more than raw figures ever could.

Low light

His big point is that the iPhone 13 takes excellent photos in low light conditions. I’ve found this to be the case with the last two iPhone ranges. Yet the iPhone 13 takes this one better.

This is the one last feature I want from a phone. Now Apple has fixed low light photography, there is little more to ask for. Phones have reached the end of one evolutionary path.

There’s scope for incremental improvements, there always is. Yet that’s it for today’s metal and glass slabs. The next change to get excited about will be revolutionary.

Incremental or not, Apple does a good job of pushing the boundaries of what is possible with a handset.

A different world

Apple may not throw up as many new ideas and features as the Android phone makers, but they live in a different world.

First, Android phone makers have to compete with each other and prove their phones are not commodities. They crave novelty and points of difference regardless of whether these are things customers want or need.

Second, many of the so-called innovations that turn up in Android phones go away again after a generation or two. Some are half-baked, some are change-for-the-sake-of-change. A few, think of ‘beauty mode’, appeal to people’s worst instincts.

It would be easy to dismiss the iPhone 13 as an incremental update. Indeed, that is exactly what the New York Times review does. Yet that’s not the whole iPhone 13 story.

Numbers, revenue, profit

Apple has won the phone market. While Apple may not sell the most handsets worldwide, it does make more phone revenue than anyone else. Moreover, Apple makes more profit from phones than anyone else. Almost no other company does.

Huawei is, in effect, out of the picture. This month Oppo, a would-be rival, hit the wall. Samsung sells more phones than anyone else, but it makes more money selling technology to Apple. No other phone maker gets close.

Earlier this year Apple sold its 2 billionth iPhone. There are more than a billion active iPhones in use today. It accounts for one mobile phone in four around the world. In the US Apple has a 60 percent market share. That’s 50 percent in the UK.

The most telling statistic is that more than 10 percent of US and UK iPhone users switched in the last two years. The company’s dominance is accelerating.

Apple allure

When discussing this subject, there are frequent comments about Apple’s allure all being in marketing or snob value. And there are claims iPhones are expensive.

The first assertion is clear nonsense. Samsung spends many times as much on marketing as Apple does. So did Huawei when it was still a player.

Likewise the snob value argument doesn’t hold much weight. Apple always sells its phones on the functionality. The product may have cachet, but the company doesn’t talk that way.

When Samsung launched the Galaxy Z Fold2, the company’s reps talked about it being a status symbol.

Oppo tried to push the same snooty buttons with a ridiculous overpriced Lamborghini phone. The market ignored it.

Expensive is in the eye of the beholder. You can spend NZ$3000 on an iPhone 13 Pro with a terabyte of storage. The cheapest iPhone 13 is the mini which starts at NZ$1250. Apple still sells the NZ$900 iPhone 11 and a NZ$750 iPhone SE.

Apple doesn’t have a monopoly on expensive. There are Android phones at all these price points.

Active life

The second part of this is that iPhones have a longer active life and have better resale prices. None of the critics take any of this into account. A $2000 phone with a five year working life is cheaper and better for the planet than a $1000 phone that needs replacing after 24 months.

It’s true you can get by with a $600 Android phone. On the surface there is validity to the argument that no-one needs to spend more than that on a phone.

But this ignores many of the less tangible but valuable aspects of life inside Apple’s curated garden. The App Store is better, the app choices are better. The integration with other Apple products beats anything offered in the Android world.

It’s a better all-round phone experience. I should know, my work involves a constant stream of new phones to test. I have access to almost any model and still choose to invest my own money on an iPhone.

The pay off is better productivity and convenience. Don’t take my word for it, there are a billion other iPhone users you can ask.

NZ broadband faces competitive reset

Low Earth orbit satellites, 5G and a fibre speed bump are set to reboot broadband competition.

It’s a decade since the first customers connected to Ultrafast broadband. At that time fibre looked the likely Kiwi broadband future.

Fibre dominates today. Yet it is not the only option.

Mobile phone companies offer fixed wireless products that compete on price with fibre.

As 5G rolls out and more spectrum becomes available, it will close on fibre performance.

Meanwhile LEOs now beam satellite broadband into homes from above the clouds.

Intense rivalry

The rivalry between service providers is intense. That means customers get a great deal. None of the broadband options are expensive. Even the ritziest products are cheap compared to the prices we paid a generation ago.

This has implications for the industry. As Vodafone CEO Jason Paris told me a couple of years ago, the industry has competed away all its margins.

Mobile companies like Vodafone have a ready made response. They can deliver fixed wireless broadband using their mobile networks.

They have more control over prices and margins that way. There’s no wholesale payment.

Technologies compete

Competition between fibre and fixed wireless is as intense as service provider competition.

Chorus, a fibre company responded in two ways. Enable, Northpower and UFF have the option to do the same.

High end customers can buy 4Gbps or 8Gbps Hyperfibre connections at an affordable price.

These are speeds that no other technology can offer for now. Fixed wireless speed depends on spectrum availability and there isn’t enough for gigabit speeds today.

Chorus doesn’t expect many customers to buy Hyperfibre. Its importance is more symbolic. Hyperfibre tells the market there is plenty of headroom. If you like, this works in the same way as Mercedes, Alfa Romeo and Ferrari’s investment in Formula One racing sells motor cars1.

Speed bump

By the end of the year Chorus wholesale customers will be able to upgrade 100mbps fibre lines to 300mbps at no extra cost.

It’s a pincer movement on fixed wireless from two ends of the market. In effect the message is: “You want high performance? You need Hyperfibre. You want better performance than fixed wireless can offer at roughly the same price? We have that too.”

Chorus’ offer is to all its retail service providers. It is not allowed to play favourites. Chorus has to offer everything to everyone, even if they choose not to take it.

It will be interesting to see if Vodafone, Spark and 2degrees take up the offer. If they don’t, they risk loosing customers to other ISPs. If they do, they risk customers churning from high margin fixed wireless to fibre.

It came from the sky

Meanwhile fixed wireless broadband faces a challenge from the skies. Low Earth orbit satellite broadband costs about twice the price of fixed wireless. It appears to offer better performance.

That doesn’t tell the whole story. Many fixed wireless customers get great speeds. Rural customers who live further from towers, often don’t. For them satellite is a bargain.

LEO satellite broadband is in its infancy. Performance will improve and, likely, prices will drop over time.

Fibre speed bumps and LEOs threaten fixed wireless. It has a get out of jail card. 5G promises to boost performance and reliability while reducing operator costs.

Competition will put pressure on prices. Price has always been where telcos go first.

Yet there is less room for sharpening the pencil than in the past. And that’s where this gets exciting. For broadband players to get ahead, they will need to come up with fresh ideas and innovations.


  1. We’re going to need a new metaphor as we move beyond the internal combustion engine era. ↩︎

NY Times says smartphones may be too good 

“Smartphones have been so successful that it’s possible new technology won’t be able to displace them”.

The New York Times’ Shira Ovide has a point when she writes: What if smartphones are so successful and useful that they are holding back innovation?

She starts by pointing out the risk making this kind of statement:

“I may wind up looking like a 19th-century futurist who couldn’t imagine that horses would be replaced by cars.”

That’s fair enough. There could always be something waiting around the corner that isn’t obvious yet.

“But let me make the case that the phenomenon of the smartphone may never be replicated.”

Yes, it definitely looks like its was a one-off revolution. The nearest equivalent might be the way the television eventually reached into every home and every corner of the world. It took the TV decades to reach that level of penetration, phones got there in ten years.

“The challenge for any new technology is that smartphones succeeded to the point where it’s hard to imagine alternatives. In a sales boom that lasted about a decade, the devices transformed from a novelty for rich nerds to the only computer that billions of people around the world have ever owned.

Smartphones have succeeded to the point where we don’t need to pay them much notice….The allure of these devices in our lives and in technologists’ imaginations is so powerful that any new technology now has to exist almost in opposition to the smartphone.”

The next big thing

That’s right. Take the smart watch. As things stand today it looks like the most plausible contender for the next big thing.

And yet it isn’t.

Apple launched its Watch seven years ago. It wasn’t the first smart watch and it is not the only one. It is the most popular by a long way.

One estimate says around 100 million people have an Apple Watch in 2021. A bullish estimate might put the total of all watches in use at twice that. On those numbers, smart watches will never catch up with smartphones. They are unlikely to hit one-tenth the sales.

What’s more, smart watches rarely exist in isolation from phones. They are, in effect, an extension of the phone.

VR, Glass

Virtual reality headsets and products like Google Glass are much further behind. And anyway, they offer considerably less functionality than a modern phone.

Where I take issue with Ovide is the idea that phones are holding back innovation. If anything is holding back innovation it is the tight grip a small handful of companies has on the crowning heights of the technology sector.

While there are examples of the big tech giants stifling potential competition, there are other reasons for a slow down when. it comes to hardware innovation.

Where next?

We’ve reached a point where there are few new places for device makers to go. Chip makers are bumping up against quantum limits which mean transistors can’t get much smaller. Batteries are improving, but progress is glacial.

A forward thinker might have dreamed up the essence of a personal computer, smartphone or smart watch any time in the last 60 years. That Dick Tracy wristwatch screen featured in cartoons decades before the technology was possible.

Now the best people can do is dream up ways for computers and devices to move even further into the background.

 

 

 

 

Dealing with telecoms pain points

The Commerce Commission wants to find and fix the pain points people have when dealing with telcos.

It’s a job the commission was given as part of a new regulatory regime introduced in 2018.

On the whole the customer experience with telcos has improved over the last decade.

Much of that improvement is down to increased competition.

Level playing field lifts performance

The arrival of 2degrees as a third mobile company and the demerger of Chorus from Spark have done much to level the playing field. This, in turn, meant companies have to work harder to retain customers.

Yet the magic of market forces has yet to improve all aspects of dealing with telcos.

Now there’s an opportunity to tidy up the loose ends.

Telecommunications Commissioner Tristan Gilbertson says: “We’ve been given a clear direction and new powers to improve outcomes for consumers.”

Remaining pain points

To get an idea of the remaining pain points, the Commerce Commission organised a consumer survey.

It found that 77 percent of those surveyed are satisfied with the service they get.

The numbers are broken down by brand. Customers are least happy with Trustpower and Vodafone, they are happiest with Skinny, 2degrees, Warehouse Mobile and the little local service providers.

The 77 percent satisfaction number does not sound as good if you flip it to find 23 percent are not satisfied.

Catching up with everyone else

Yet it is close to being in-line with other industries. Surveys here and overseas show customer satisfaction in general tends to range from around 80 percent to 90 percent, with a few rogue industries underperforming.

What’s more, it is a huge improvement on where satisfaction numbers would have been in the past. I’ve seen non-public surveys showing more people are unhappy than happy.

Which is great.

The survey shows customers tend to be happy with things like coverage, availability, speed, stability and price. They are less happy with customer service and technical support. Service quality has been a problem for years.

This should surprise no-one. New Zealand’s telecommunications companies have spent a decade competing on price, coverage and technical performance. None of them have ever thought to focus on providing the best possible customer experience.

Service problems

More than half the people surveyed (56 percent) said they had reported problems with their service in the last two years.

That’s not good. Worse, of those who reported a problem more than half (54 percent) said it took a lot of effort to deal with the company.

Again Vodafone was the poorest performer. Two-thirds of the company’s internet customers (66 percent) had a problem. Almost half of mobile customers (44 percent) had ‘issues’. One in five Vodafone customers had a billing problem.

Industry body the TCF (Telecommunications Forum) published a glass-three-quarters-full blog post from CEO Paul Brislen looking at the Commerce Commission research. He says the industry is already addressing some of the issues and that overall it is doing OK.

It is certainly heading in the right direction, but the TCF and its members,  shouldn’t rest until telecoms is just another unremarkable industry. It remains the most complained about sector in the New Zealand economy.

Outstanding pain points

Which brings us to the outstanding pain points the Commerce Commission would like to address.

Top of the list is dealing with a service provider. Anyone who has done this knows it involves spending a long time waiting for a call to be answered.

Skinny, the Spark brand that makes a point of providing little in the way of personal customer support, rates high. The more self-service and automation, the less need to talk to a customer service representative, the happier the customer.

The Commerce Commission would like to hear from consumers about their experience and to know which aspects of retail service quality it should deal with first. You can provide feedback at the Commerce Commission website.