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Copper phone networks have served New Zealand for over 100 years. They won’t be around much longer, at least in cities and towns.

Spark has started to call time on urban copper. It says it plans to retire PSTN in Devonport and Miramar by Christmas. That move will affect around 1000 customers.

It is the first step in Spark’s plan to move customers from copper on to either fixed wireless connections or fibre. In the companies words, these are “the modern alternatives”.

Plain old telephone service

PSTN is the public switched telephone network. That’s the engineers name for the old copper-based telephone system. At times people in the business call it Pots: plain old telephone service.

The key word in that phrase is old.

Spark says PSTN is now at the end of its life and needs replacing. It is now 17 years since equipment makers stopped making PSTN hardware. Spark says it is getting harder to find people with the skills to maintain the technology.

Old folk reluctant

Older customers continue to love Pots. There’s a reluctance to move from a technology they have known for decades.

It is no long essential.

It is possible to deliver services resembling PSTN voice calling on fixed wireless and fibre connections.

The alternatives do not work in a power outage. You can’t, say, make a 111 call if there’s no power. This worries planners and officials, but there are few homes without mobile phones.

Alarms

There are difficulties with security or medical alarms designed for copper network technology. Again, there are modern alternatives in almost every case.

Nevertheless Spark says it will not move anyone who needs special hardware until it has found a replacement.

Getting rid of urban copper will simplify telecommunications and lower costs. We won’t have to run two networks in parallel. Companies like Spark can streamline support operations and reduce costs.

No longer controversial

A move from copper networks may have been controversial a few years ago. Today he majority of customers in cities and towns now use fibre or fixed wireless instead.

Fibre uptake is now 60 percent or better in urban areas. There are 180,000 homes or business using fixed wireless connections. Meanwhile there are more mobile phones in use than there are people.

There are problems in areas not yet covered by fibre. Removing urban copper will put further pressure on the government and fibre companies to extend the reach of the UFB network to these places.

Fibre and beyond

Fibre is now scheduled to reach 87 percent of New Zealand by 2022. It is realistic to stretch fibre coverage up to around 90 percent or a little beyond.

Where that isn’t possible, mobile coverage and Wireless Internet Service Providers can fill in the gaps.

Compared with fibre or wireless, copper is expensive to maintain. It is more expensive to maintain in the rural areas where it is likely to remain.

As the number of lines falls, the support cost per line will rocket. There will come a point where the remaining copper network is economically unsustainable.

The flip side of this is that reducing those costs should free up money to pay for rural network upgrades.

Spark not hanging around

Spark is moving early. The Commerce Commission has published a code for dealing with 111 calls after copper is switched off. This has to be in force by the end of next year. Once that is done Chorus will be allowed to stop offering copper services where fibre is available.

Chorus continues to own and operate the copper networks. They will remain in the ground for now even in the areas where Spark has withdrawn services.

By running pilot programmes in Devonport and Miramar Spark will be able to better understand how decommissioning PSTN might work. The company expects to spend years moving off the services across the rest of the country.

This story has been updated (24-07-20) to reflect out-of-date numbers and timings.

Apple Newton MessagePad 130It raised smiles 14 years ago when I carried a 1996 Apple Newton MessagePad 130 into the IDG Auckland office.

IDC is the publisher of titles like Reseller News, ComputerWorld and PC World. It was a workplace where the Newton was instantly recognisable.

The Newton looked odd among the 2006 Motorola flip phones, Blackberrys and Palm Pilots1.

Old dogs, old tricks

Odd, but not too ancient to use. My Newton still worked fine. I could still scrawl notes on the screen with a stylus2. It could still track my diary dates and manage my contacts.

Of course, the Newton couldn’t hook up to much else. The Newton MessagePad predated Wi-fi and Bluetooth. However there was a proprietary cable that would send a trickle of data to and from a PC or Mac.

The Newton needed AA batteries. I had a rechargeable pack that was an afterthought, but my MessagePad didn’t have internal rechargeable power like many modern devices in the 2005.

My motivation for digging the Newton out from the back of the cupboard and giving it another go was twofold.

First, I wanted to see if the technology was as far ahead of its time as it seemed in 1993 when I had my first Newton. In some ways it was.

The second reason was because, at the time, there were rumours Apple was working on something that would replace the Newton. According to the reports that something was also a phone.

The rest is history.

Hardware that goes on and on

Perhaps the most remarkable thing about the Newton MessagePad 130 was that it was still working after a decade. When the Newton line was first launched there was talk of the devices being short-lived. A year later I sold my working Newton on TradeMe.

So long as it isn’t dropped or hammered by hard use, a digital device can live a long time. It will always be able to do whatever it was purchased for in the first place3.

But keeping devices for years is not fashionable. In some circles it is almost viewed as subversive.

Technology companies carpet bomb journalists like me who covering the sector with new products. There is a constant stream of product launches. New this, improved that, enhanced4 something else and so on.

It can get tiring.

New, improved a bit

Often the new thing is better than the old thing. It is rare that it is so much better that we should bin the old stuff and buy the new. And yet that is what people do. Often far too soon.

The hardware you buy can, and should, last for years. There is more to not jumping to the latest model than being frugal. Electronic hardware is hard on the planet, an ecological time bomb. In the case of some materials it can also be the cause of much misery.

Upgrading less often makes the world a better place.

Wise technology buyers choose hardware with a long life. Even if you don’t intend to hang on to something for ages, you’ll get a better price if you sell your device on when you upgrade.

Hardware that lasts

There are two parts to finding products that last a long time. Some hardware brands take a pride in making things that last. Others design their gear so that it can be upgraded.

According to Asymco, the average life of an Apple device in 2018 was four years and three months. That number has increased since then. I’ve seen estimates that iPhones now last almost five years.

Statista estimates the life of an average phone, iPhone and Android, in the US is around 2.88 years.

The sources and methodologies for the two sets of statistics are different, so we can’t read too much into the numbers. Even so, it appears Android phones are active for much less that iPhones.

Retain value

Supporting evidence for this comes from Trademe. Second hand iPhones retain value far more than second hand Android phones.

Another thing to consider is that Apple has historically provided software updates for longer than Android phone makers.

The point here is not to say one is better than the other. I’ll leave that to you. What’s important is if a phone’s lifespan is important to you, choose an iPhone.

You can do similar research with tablets and various types of computers. Apple hardware tends towards lasting longer than average.

Meanwhile some brands are easier to upgrade. You can’t do much to keep a MacBook Air up to date. It’s a piece of cake to put more memory, more storage or a faster drive in a Windows desktop computer.

Popular helps

There is something else to consider about device long life. If you choose a popular brand, that would be Apple or Samsung for phones, Apple, HP and Dell for laptops and so on, there’s a bigger community of people to support that product over the long haul.

You won’t have trouble finding someone to fix a broken Apple or Samsung phone, you might struggle if you pick a less popular brand like, say, Oppo.

Likewise there is a ready market in components like replacement batteries or screens for popular products. Finding parts for obscure hardware is tough.

You may have other tips for getting more out of your spending on hardware. Feel free to share in the comments below. There is a prize for the best tip.


  1. I had each of these too ↩︎
  2. Apple had fixed the early teething troubles with handwriting recognition, late model Newtons like the 130 were remarkably good at the job. ↩︎
  3. So long as there are no idiotic software updates that render the thing useless. ↩︎
  4. Was there ever such a weaselly marketing word as enhanced? It implies something is better when often it means is some problems are now fixed. ↩︎

Telcos are waging a public relations war on Ultrafast Broadband. Reading between the lines of their public statements, they don’t like the regulated market model.

This was set-up over a decade ago by John Key’s first government. The government restructured telecommunications. It tilted the playing field in favour of customers. New Zealand businesses and consumers got a great deal.

Regulated separation

Reforms separated the market into two parts. Regulated fibre companies would build, own and operate the UFB network. They are regional monopolies. They can only sell wholesale services.

Retail service providers can sell broadband without geographic boundaries. RSPs all buy wholesale services on identical terms.

This model promotes competition. No single player can dominate in the way companies could before the restructure.

Chorus, Northpower, Enable and UFF are the fibre companies. There are 90 retail service providers. The biggest and best known are Spark, Vodafone, Vocus, Trustpower and 2degrees.

Consumers are happy with how the market operates. At least those in areas that can get fibre are. The fact that people in areas without fibre are grumpy about it speaks volumes about the model’s success.

Best broadband

Thanks to UFB New Zealand has one of the best and most affordable broadband networks in the world.

It is great for consumers. It is less wonderful for big RSPs. The biggest ones are not happy.

There are two main reasons they don’t like the UFB model.

First, from their point of view, separation does too good a job of promoting competition. RSPs fail to compete on anything other than price. They discount broadband to the point where, as Vodafone CEO Jason Paris says; “They compete away all the margins”.

Thin margins

Retail broadband margins are wafer thin.

A consumer might pay $80 to $100 or so each month for a fibre broadband account. Roughly half of that goes to the wholesale fibre company. RSPs have overheads and costs. The margin is often less than 10 percent of the monthly fee. It can be lower, some only make five percent.

They get that money 12 times a year. Yet regulated UFB is not as lucrative as the old ways of selling telecommunications.

This explains why Spark and Vodafone are keen on fixed wireless broadband. It’s an inferior product, but they get to keep a larger slice of the cake.

The second reason the bigger telcos don’t like the UFB model is they are not in control of their own destiny. This bothers them. They have few options, little room to manoeuvre.

Equivalence

Another, less obvious grievance is the UFB idea known as equivalence.

A supermarket chain like Countdown pays less for products than the wholesale price paid by a corner dairy. They get economies of scale. Countdown buys tins of baked beans from a wholesaler at a lower price than dairies pay.

Equivalence means the largest telco pays the same as the smallest RSP for a customer hook-up.

There are economies of scale when it comes to support, back-end services and marketing. Yet the aristocratic telcos resent paying the same price as the peasant RSPs.

Phoney war

All these aspects of the UFB model come into play as telcos wage a phoney war. It is a war that is being fought on a few fronts.

Last month there was fuss from big telcos about something known as the wall of bad debt. This sounds like something from the Pilgrim’s Progress.

Spark, Vodafone and 2degrees have been the most vocal. They say a recession is coming and they face large unpaid broadband bills.

They want Chorus, it’s always Chorus 1, to share the cost.

This is an unusual argument on two counts. Wholesalers don’t shoulder the risks of their retailers in other sectors.

What’s more, the debt risk facing the large RSPs is of their own making. When lockdown began the telcos said they would not cut off customers for non-payment.

Decent

It was a good and decent thing to do. Or at least it is a good and decent thing to do with your own money.

It’s not such a good and decent thing to be generous, then turn around and ask the fibre companies to pay half. It would be fine if they had gone to the fibre companies first and agreed something along these lines. But they didn’t.

This doesn’t mean their argument is unjustified. They have a case. It is not as clear cut as they argue.

It is not as if fibre companies don’t face their own post-lockdown financial risks.

First they had to keep contractors ticking over when there wasn’t much work. What’s more, they face their own potential wall of bad debt if RSPs go bust in the looming recession. Having an RSP fail to pay would be far more serious than an individual consumer missing a payment.

Moral hazard

There is a moral hazard aspect to the wall of bad debt. If telcos get wholesalers to carry half of the risk, they have an incentive to take more risks.

Companies have a tendency to be reckless when protected from consequences. Among other things, they might not chase bad debts as hard if they know they face half the loss. They might be less fussy about who they give credit to.

It doesn’t help Chorus’ case that it is now enjoying the financial light at the end of the UFB-build tunnel.

That said, Chorus agreed to pay $2 million towards the bad debts. In round numbers that’s about half the cost if 7000 New Zealanders fail to pay for six months of broadband. Around one million New Zealanders connect to the UFB. So if seven percent default on payment, Chorus pays RSPs half the cost.

Telcos don’t think that’s enough. Remember here that Chorus has no legal obligation to pay anything.

Minor regulatory risk

There is a small danger here to the idea of regulated separation. If the fortunes of wholesale fibre companies depend on RSP performance, they could play favourites. A bigger danger comes from another battle: fibre unbundling.

To understand how fibre unbundling threatens UFB, let’s go back to the original plan. The government decided fibre companies would sell layer 2 services. It left open an option for layer 1 services at a later date.

In this context layer 1 is an unbundled service.

That later date is now. Or, to be more precise, it was January this year.

Layers

You don’t need to know the technical nuance about layer 1 and layer 2 to understand what is at stake. Here’s the simple version.

In effect layer 2 means fibre companies sell RSPs a complete service from a home or office to a network node. This includes the network connection hardware at each end of the link. Fibre companies wrap all the parts needed to do this into a bundle and sell it as a whole.

If they sold layer one, RSPs would get a fibre connecting the home to the node. They pay for the hardware on the ends of the line. Hence unbundled.

The problem with unbundled fibre is that all the costs in a network are in the civil engineering. Stringing fibre around the country is expensive. The hardware on the ends of the fibre cost peanuts in comparison.

Wholesale UFB prices are regulated. The price depends on the cost of building and supporting the network. The bundled hardware turning layer 1 into layer 2 is a small percent of the total. The input cost difference between bundled and unbundled fibre is tiny.

In other words, in the UFB model unbundled fibre doesn’t make economic sense.

Economics

Big telcos know how the cost structure works, but don’t accept the economics. They continue to argue and lobby for lower unbundled prices. If they get their way, fibre companies would sell connections at below cost.

The entire regulated UFB model would collapse. And future governments would struggle to raise private capital for infrastructure projects.

This connects to another way telcos are waging war on UFB. Last week, a Vocus press release said the latest round of Chorus fibre price rises is: “cynical, money grabbing and unwarranted”.

It’s an opinion. UFB regulations say fibre companies can raise prices in line with inflation. That’s a step away from “cynical, money grabbing and unwarranted”.

Inflation is tiny, around one percent, so the rise is small. It reflects the increased costs fibre companies pay for maintenance. Without it, a fibre company’s margins would ratchet down each year.

Futureproof

Government choose this price rise as part of the regulated UFB model when it feared investors would not want to fund fibre. It needed this clause to attract investors. It still needs this clause to attract private investors for future infrastructure projects.

Vocus, like the other telcos can choose to pass this cost on to customers. As we’ve seen, competition is tight, if a telco raises prices customers may move elsewhere. But that’s how market economies work.

And that’s the story here. Price increases, unbundling and, to a lesser degree, the coming wall of debt are all hardwired into the UFB. Government designed market regulations that way for a reason.

Regulated competition

UFB has been a success, in part, because there is a competitive market. Unpick the regulations and the whole UFB fabric unravels.

The challenge facing telcos is that the market is too competitive. As Paris says, they have competed away their profits. Corporations might pay lip service to free markets, but they don’t like them.

Mobile means Spark, Vodafone and 2degrees have alternative paths to profit. Enterprise services, adding value through content deals or power billing are other paths. Being better at what you do is always an option. Market consolidation might help.

Attempting to repair margins by chipping away at the foundations of UFB is not a wise strategy. There was a time when Telecom thought it could defy government policy and regulation. Look how that ended.

Disclosure: I do freelance writing and editing for Chorus, but the company doesn’t tell me what to write. 


  1. Telcos have figured out it is easier to bash the biggest fibre company. Criticising Chorus gets more media attention and more sympathy, than disrespecting “fibre companies”. Yet almost every accusation made against Chorus applies to the other fibre companies. If, say, Northpower was the target of anger, that would look like bullying. ↩︎

Apple Installed Base (Number of Users)
Apple Installed Base (Number of Users)

For the second year in a row, Apple held a developers conference that should frighten its competitors. Relying on a nearly maniacal obsession with the user experience, Apple is removing oxygen from every market that it plays in.

At the same time, the tech landscape is riddled with increasingly bad bets, indifference, and a lack of vision. Apple is pulling away from the competition to a degree that we haven’t ever seen before.

Source: Above Avalon: Apple Is Pulling Away From the Competition

Above Avalon analyst Neil Cybart says Apple is stealing a march on other technology companies. He says the company has made long-term decisions that mean its rivals will struggle to catch up.

The story needs to be read through a careful filter. Cybart writes about the company both from an investment point of view and from a Silicon Valley perspective.

This doesn’t necessarily make his analysis biased or wrong, it isn’t,  but it can lack broader context.

Coherence

Cybart’s main idea is that Apple has pulled now all its strands together. The range of products and services has a new coherence and a clear direction.

This, according to Cybart, comes at a time when rivals are weakening.

Together these two trends have set up conditions that will move the company even further ahead of rivals over the next decade.

He makes a good case. Yet there are flaws in this line of thinking. Maybe flaw is too strong. Let’s say questions.

Samsung lack of vision

In the middle of the web post Cybart lists the ways Apple is beating key rival technology companies. He, rightly, notes that Samsung “remains rudderless from a product vision perspective.”

While that’s true, Samsung is a major component supplier to Apple and other hardware companies. If you look closely at Samsung’s financials, it’s clear the areas that compete with Apple are not central to Samsung’s profits.

The areas where the two companies co-operate are more important to Samsung.

Cybart correctly dismisses Google and Amazon as direct rivals. In the greater scheme of things their hardware products are inconsequential. Yet both remain on growth trajectories that could yet pose a threat to Apple.

Microsoft hardware

Microsoft’s hardware move has failed to alter the balance of power between Macs or iPads and Windows hardware. Cybart is right on the money when he says Surface mainly takes business away from Microsoft’s Windows partners.

Yet like Amazon and, to a lesser degree Google, Microsoft is powering ahead with cloud computing. These companies are building a significant digital world where Apple doesn’t play.

This is not a criticism of Cybart’s story. He is on the money as far as personal computer hardware and its immediate successor technologies are concerned. Apple does look set to dominate.

Beyond this there are parallel markets where Apple is, at best a bit player. These markets interact with Apple’s market. In the future they may interact in ways that are not yet clear.

Shorn of context, Apple is powering ahead. But let’s not forget Amazon and Microsoft are also powering ahead. Technology is not a simple zero-sum game.

It is more than a decade since people started telling us we are in the post-PC era. I’m guilty1. From memory the idea took off soon after crowds first queued to buy the original Apple iPhone.

There is something in the idea. PC sales peaked in 2011 at 365 million. In big picture terms it has been downhill ever since. Last year people bought 260 million PCs. In comparison phone hit 1.5 billion sales. That’s roughly six new phones for every computer2 .

Yet, to steal Mark Twain’s joke, reports of the PCs’ death are an exaggeration.

Who you gonna call?

Nothing illustrates this better than the response to the Covid–19 pandemic. Phone sales dropped when companies, schools and whole communities moved into lockdown.

Meanwhile PC sales are up 11.2 percent year-on-year. That’s according to IDC’s preliminary PC sales numbers for the second quarter of 2020.

All the big brands saw strong growth of notebooks and desktops. Apple, Acer and HP all saw double-digit year-on-year growth. Apple is up 36 percent on the year earlier. HP remains in the top slot with 17.7 percent growth. Dell was weakest with only a 3.6 percent increase.

Reports say HP took a punt early on in the quarter and increased its notebook orders with its suppliers. The bet paid off.

Notebooks notable

Notebooks were the biggest winners. Channels around the world reported selling out of many models. It didn’t help that China, where most computers are made, was in lockdown during the period and the logistics firms moving hardware around the world had reduced capacity.

The main driver was the shift away from offices to working from home. Schools sending students home to continue learning online was another major cause. Both of these were obvious to anyone watching events. Less obvious was the number of people buying home computers to help relive lock-down boredom.

An untold story of the quarter was the shift from retail computer sales to online stores. Customers couldn’t shop, but they could click online. It’s possible this change may stick as the world moves on from lockdowns. This may have wider implications.

Relevance

The PC may not be dead. Yet despite the new relevance, sales are still nowhere near the peak. And most analysts see the recent strong result as a one-off. The long slow decline may, or may not, have bottomed out, but no-one sees long term recovery.

Indeed, a worldwide recession is likely to have an impact on future PC sales. Mind you, the impact could be worse for phone sales.

Still, the key point here is that when the going got tough, people didn’t reach for phones, they reached for PCs. That should restore some confidence to the market.


  1. A previous, long dead blog of mine used the term post-PC an August 2011 entry IBM CTO: PC dead, we bailed long ago. ↩︎
  2. Tablets change things a bit, but you get the picture here ↩︎