web analytics

Bill Bennett

Menu

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. ↩︎

«

»


One thought on “NZ broadband faces competitive reset

Comments are closed.

%d bloggers like this: