It’s remarkable that Vodafone ever thought it could get away with calling its HFC cable network FibreX. It always look like the exercise would end in tears.

This was a law suit waiting to happen. And boy did it happen.

At the New Zealand Herald Chris Keall writes Vodafone pleads guilty to some FibreX charges, will contest others

Vodafone has pleaded guilty to nine charges brought by the Commerce Commission over its “FibreX” service, but will contest a further 18 related to allegedly misleading marketing.

That’s total of 27 charges. In other words this is a big deal.

A rose by any other name

Most, but not all, the problems stem from the name.

I questioned the name when FibreX launched. A Vodafone executive explained with a smile that the name comes from the full version of HFC: hybrid FIBRE coaXial. He knew it was pushing things a bit.

HFC uses both fibre and copper cables. The network was first built almost twenty years ago. There are networks in Kapiti as well as parts of Wellington and Christchurch.

Vodafone inherited the network when it acquired TelstraClear in 2012.

Performance woes

Readers with long memories may remember that the cable network had appalling performance at that time. Yet it was capable of delivering television signals along with broadband data connections at a time the copper network would often struggle with video.

From outside it looked as if TelstraClear had under invested in the technology and even neglected the network.

The TelstraClear acquisition was a mixed bag for Vodafone. It accelerated the company away from being a mobile phone carrier into enterprise and fixed line markets.

It didn’t do much to grow Vodafone’s market share. The company’s overall market share in 2018 is the same as it was in 2009, despite swallowing a sizeable rival.

Potential millstone

In some respects the HFC network became a millstone around Vodafone’s neck. It was a support nightmare and hurt the company’s reputation.

In order to recover some of its value, Vodafone beefed up the technology moving to a new, far faster version of Docsis. While this could put it on a performance par with UFB fibre in theory, the practice proved somewhat different. HFC networks can suffer from congestion in ways the UFB network does not.

Nevertheless, it looked like a plausible alternation to UFB fibre.

FibreX vertically integrated

There is something else. Vodafone’s FibreX network is vertically integrated. The company doesn’t need to pay anything to a wholesale network provider. Vodafone gets to keep all the monthly subscription.

Vodafone launched FibreX launched a the peak of the nationwide UFB fibre build. It priced it at much the same level and its marketing went out of its way to present FibreX as a like-for-like replacement. It’s not.

The fibre networks being built by Chorus, Northpower, UFF and Enable send photons along a length of glass fibre. There are fast, reliable and modern. Some FibreX users report UFB-like performance. Others don’t. What’s clear is that it is not as consistent as fibre.

Dodgy tactics

There are stories of customers calling Vodafone asking for fibre connections being told FibreX is the same thing. There are stories of customers asking for fibre being told the only upgrade available to them is FibreX.

A lot of the Commerce Commission charges are to do with the way Vodafone sold FibreX.

Vodafone is no stranger to the Commerce Commission. Over the years the company has consistently pushed at the boundaries of ethical, legal marketing of its services.

The senior executives responsible for many of those incidents have now left the company. A new team has been left the task of cleaning things up. That’s going to take time. A good place to start would be coming clean about FibreX.

4 thoughts on “FibreX marketing lands Vodafone in court

  1. Along with Vodafone’s integrity I hope this buries the notion “the customer doesn’t care how the data gets there as long as it does.”

    Apart from the disrespect it pays to customers’ ability to differentiate among the past and future options, it simply isn’t true. Calling it FibreX was clearly intended to deceive and entice by misrepresenting precisely the matter customers aren’t supposed to understand or care about.

    PS.

    “The company doesn’t need to pay anything to a wholesale network provider. Vodafone gets to keep all the monthly subscription.”

    Yes, and pay all the costs that the wholesaler would have, for which it got part of the monthly. The narrative that retail service providers who have their own infrastructure (Spark & cellular another example) are eluding wholesale costs is… irrelevant?

    • “Yes, and pay all the costs that the wholesaler would have, for which it got part of the monthly. The narrative that retail service providers who have their own infrastructure (Spark & cellular another example) are eluding wholesale costs is… irrelevant?”

      It’s not irrelevant.

      First, the gross margin on FibreX subscriptions would be higher than when Vodafone sells a UFB subscription.

      I’ve been told it could be two or three times as much. Of course that depends on how Vodafone accounts for these things, the cost it attributed to buying the HFC network as part of the bigger TelstraClear deal and so on.

      I wonder how much of the saving is passed on to customers, when FibreX launched the difference was about $30 a month. Today there’s little price difference between FibreX and UFB.

      Second, the size of margin determines Vodafone’s strategy. If the margin was on a par with UFB, then the company’s sales people wouldn’t have worked hard to push people onto FibreX.

      Third, there’s a fixed cost component to UFB. The more customers who go elsewhere for fast broadband, the higher the per-user cost of delivering UFB. This isn’t an argument for or against FibreX or fixed wireless by the way.

  2. Thanks for that clarification.

    & 2. Yes, there would be an incentive to avoid the margin that the wholesaler applies (particularly if it is larger than the economies of scale of the fibre deployment afforded) and stove-pipe or forward channel integrate the margin. It certainly goes to the incentive to do something so transparently stupid.
    It’s just in the sentences you used there isn’t any mention of margin or the cost to these retailers of supplying themselves with what the wholesaler would.
    The footprint of the cable is miniscule by comparison with even the truncated 84% coverage of UFB, a much greater threat would be fixed cellular. But as your article suggested, there wasn’t always benefit in choosing Fibre(not)X in cost or performance over fibre, which in some cases wasn’t available at the time: https://twitter.com/BR3NDA/status/982450833894887424

    “This isn’t an argument for or against FibreX or fixed wireless by the way.” No, but I do hear a similar argument being used to charge people for electrical copper connections they don’t use much due to self-generation.

    Perhaps the quicker we move to 100% connection of fibre, where we currently are with electricity lines, to the home, the sooner legacy quirks like coax and copper will be competitive temptations. Indeed the cheaper those connections are the less alternative solutions will imperil the fixed cost of fibre. 🙂

  3. Something peculiar happened there when posting.

    “1. & 2. Yes…”

    “3. The footprint of the cable”

    and in the last para, “be competitive” should read “be less competitive.”

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