New Zealand’s direct-to-cell revolution
In this edition:
- Khurram Shahzad on satellite challenges
- Will satellites overtake fibre and mobile?
- Chorus TimeSync
- ComCom fibre review
- Datagrid signs Tasman Ring contract
Space-based cellular networks are reshaping Aotearoa’s market. Bill Bennett interviewed Khurram Shahzad, Senior Director Analyst at Gartner to get the big picture.
Starlink fixes pain points and creates new ones
While mobile networks cover roughly 98 percent of New Zealand's population, they only reach about 50 percent of the landmass.
Unlike Australia's metro-centric population, New Zealand has far more people living outside major urban centres. This partly explains
low-Earth orbit (LEO) satellites have seen record per-capita uptake here.
For mobile operators, direct-to-device (D2D) solves a specific problem.
Shahzad says: “The biggest pain point of telcos is that they had the expectation by the regulators that they will provide universal coverage. This is just not economical. By partnering with Starlink, that burden is removed from them. They do not have to deploy towers in the rural areas anymore. Instead, what they can do is offload those users to satellite and focus more on the metro areas.”
Despite the excitement around partnerships like One NZ with Starlink or 2degrees with AST SpaceMobile, Shahzad says that direct-to-device is designed to complement, not replace, terrestrial 4G and 5G networks.
Capacity limits constrain satellite throughput
“In the case of direct to device, LEO can only provide throughput of up to 10 to 15 megabits to a standard smartphone. And that is only in an outdoor setting. It doesn't work indoors, which is a significant bottleneck... satellite is also limited by the same physics laws that your local base stations are.”
Shahzad says the promise of direct‑to‑device is ultimately constrained by the same capacity limits that govern terrestrial mobile networks.
Satellites and cell towers both rely on finite radio spectrum, which caps how many users they can serve and at what speeds. Today’s LEO systems often reuse mobile operators’ spectrum, so when a user is still within 4G or 5G range, the satellite service can’t cut in cleanly and coverage at the cell edge can be poor on both sides.
He sees upcoming 3GPP standards as a way to smooth that handover, but stresses that no matter how dense the constellations become, satellites will never match the sheer user density and throughput of well‑engineered urban 5G (and eventually 6G) networks because they are bound by the same physics and spectrum constraints.
Growing competition in low Earth orbit
While SpaceX and Starlink currently hold a massive head start, Shahzad forecasts rapid shifts as competitors like Amazon’s Project Kuiper, AST SpaceMobile and OneWeb scale.
He says: “Starlink has a significant advantage because they have had at least four years, but now there is competition. In the next five years, we can easily anticipate that this number can grow up to 100,000 [satellites] quite easily.”
For telcos, integrating satellite connectivity opens new revenue streams, with Shahzad estimating an ARPU (average revenue per user) uplift opportunity of "around 10 to 30 percent” through premium packages or subscription add-ons.
However, as orbital networks take over critical infrastructure, serious questions around security and data sovereignty emerge.
Data sovereignty and security risks
“The big one is data security and sovereignty. Once data goes up in the satellite, it can come down to a ground station which may or may not be in the same country... There has to be laws that have to be put in place.”
He says that without clear rules: “...countries are going to lose control over their data, and essentially will be relying on a third‑party country for their national security or highly critical data”.
Shahzad frames this as broader than the earlier Huawei controversy: “Huawei was a different proposition. That was more of a geopolitics thing. Here we are talking about controlling the data because it is a much broader play, and it's not limited to one country, but rather any foreign entity”
His solution is explicit sovereignty rules and technical constraints so that, for example, “if the customer traffic is collected from a certain country like New Zealand, it must come down to the earth station within New Zealand”, with telcos acting as gatekeepers to enforce that.
Analysis: Will satellites overtake fibre and mobile?
It’s not impossible that satellites will one day be the dominant way we access the internet, but it is not likely in the immediate future.
Today, fibre is the gold standard for internet connectivity. It currently handles speeds of 8 Gbps in New Zealand, but can go much faster. Equipment manufacturers already offer Passive Optical Network (PON) products that can deliver 25 and even 100 Gbps.
At the level of raw physics, light travelling through a single fibre strand is constrained only by the properties of the glass and the optical equipment at either end. Laboratory experiments have demonstrated petabit-per-second transmission rates, far beyond anything needed for today’s commercial networks.
Fibre will always offer lower latency, greater reliability and better energy efficiency than a satellite connection. It is also likely to remain cheaper to operate and easier to scale.
Satellites may never be truly cost competitive with fibre. Operators face costly rocket launches. Although newer satellites may remain operational for longer, LEO constellations still require continual replenishment as spacecraft reach the end of their operational lives.
The most plausible route for satellites to displace fibre would be prolonged loss-leading or predatory pricing by satellite operators backed by deep-pocketed parent companies. That could happen, there are satellite operators with vast amounts of capital. And yet it is probably not the best use of those funds.
Competition for mobile networks
Satellite operators increasingly target mobile networks, initially as partners extending coverage but ultimately as potential competitors. That threatens both the traditional mobile network operators and the fixed wireless broadband service providers who use mobile infrastructure.
Satellites cannot replace terrestrial mobile networks yet due to capacity constraints, though operators are expanding bandwidth.
In the next few years we may start to see that happen. Although as Gartner’s Khurram Shahzad explained in the interview earlier in this newsletter, they may never be able to displace terrestrial mobile in densely populated areas. And because the technology requires line of sight, there could be parts of cities without coverage.
Orbital congestion limits expansion
There is another constraint. Low Earth orbit is a finite resource. As more satellites are launched, collision risks increase and orbital management becomes more complex. That doesn’t mean LEO constellations cannot continue to grow, but it does suggest they are unlikely to enjoy the effectively unlimited scalability of terrestrial fibre networks.
Bill Bennett
Chorus launches national precision timing service
Chorus has launched TimeSync. It’s a wholesale network-based precision timing service, built with Nokia on Chorus' fibre network. The company says it gives organisations access to accurate, secure timing without relying solely on satellite systems such as GPS, which it says can be vulnerable to interference, weather events and geopolitical disruption.
TimeSync will link to Coordinated Universal Time via atomic clocks maintained by the Measurement Standards Laboratory, New Zealand's official timekeeping body. Chorus says potential applications include time-stamping financial transactions, synchronising electricity networks, and supporting mobile connectivity and emergency communications.
The first phase covers deployment of atomic clock and synchronisation infrastructure across Chorus' network. TimeSync is due to roll out progressively from early 2027, starting in Wellington, Auckland and Christchurch, either standalone or added to existing fibre products.
ComCom fibre review flags lower risk estimates
The Commerce Commission has launched the next phase of its review into how wholesale fibre network prices are set, zeroing in on the profit margins allowed for network owners like Chorus.
A key focus is the weighted average cost of capital (WACC), the calculation that caps the return companies can make on infrastructure investment. Early proposals suggest lowering key risk estimates, which would push down Chorus' allowed returns and help offset recent upward pressure from rising interest rates.
The regulator has also tentatively rejected requests from Chorus to build in higher profit buffers, keeping standard profit targets in place.
Is 5G competition already priced in?
Asset stranding risk is also revisited in the review. This is the possibility that fibre investment isn't fully recovered if customers switch to competing technologies such as 5G, or if a rival provider overbuilds a network.
The Commission says this risk is largely non-systematic, meaning investors can hedge against it by holding a diversified portfolio, so it's normally not compensated through the WACC itself. Instead, providers get a 10 basis point ex-ante allowance through cash flows, plus flexibility on depreciation and the option to keep stranded assets in the regulated asset base.
Tuatahi and Enable have both argued the Commission should reconsider whether these settings still adequately protect against stranding risk, particularly for new investment. The Commission's initial view is that the existing tools remain fit for purpose, but it wants more evidence before ruling that out.
Public feedback on these proposed financial settings closes on 1 September 2026, with final decisions expected in October 2027. Separate rules covering capital spending plans will be finalised later this month.
Bill Bennett
Datagrid signs Tasman Ring contract
Datagrid has signed a contract with Alcatel Submarine Networks and OMS Group for the pair to supply and install a 2,300 km submarine cable connecting Invercargill to Melbourne.
It will be the first international cable to land in the South Island. Chief executive Remi Galasso says the Tasman Ring will reduce latency by up to 45 percent.
The project represents a scaled-back first stage of the 6,000 km Tasman Ring Network originally proposed in tandem with Chorus. Chorus left the initiative in 2025.
It will have at least eight fibre pairs and a 160 Tbps capacity and is primarily being built to service Datagrid’s planned 360MW hyperscale data centre at Makarewa. This project recently secured resource consent, power options with Mercury along with a US$30 million investment.
The cable route survey will be conducted using OMS's autonomous survey vessel.
In other news
- SpaceX confirms plans to go after telcos — NZ Herald (paywall)
— Elon Musk talks of delivering “the majority of the world’s internet”. - Hunt on to fund second rocket launch pad in New Zealand — RNZ
— Demand for launches is growing fast. - Spark’s divisions - The Bottom Line
- Comparing the telco to the wider NZ economy.
ComCom lifts Enable's WACC for 2027
The Commerce Commission has set Enable Networks' cost of capital for disclosure year 2027 (1 July 2026 to 30 June 2027) at 7.07 percent vanilla weighted average cost of capital and 6.64 percent post-tax WACC, both up slightly on last year's 6.96 percent and 6.53 percent.
The rise is driven by a higher risk-free rate, up from 3.78 percent to 3.98 percent, which more than offset a lower average debt premium, down from 1.33 percent to 1.15 percent. Leverage stayed at 29 percent and the asset beta unchanged at 0.50.
The determination, published 4 August 2026, applies the Fibre Input Methodologies and follows the same annual pattern the Commission uses for Chorus, Tuatahi First Fibre and Northpower Fibre, each assessed against their own disclosure-year timing.
For Enable, Tuatahi and Northpower, the WACC is a disclosure benchmark rather than a price determinant.
Worth noting for readers: this is a different mechanism from Chorus's price-quality path, where the WACC more directly shapes the revenue cap and therefore prices. For Chorus it can determine the regulated price.
One NZ adds 18 sites in quarter
One New Zealand says it completed 18 new builds and upgraded six existing sites in the most recent quarter. This included work in Auckland, Waikato, Bay of Plenty, Gisborne, Hawke's Bay, Taranaki, Manawatu-Whanganui, Wellington, Nelson, Tasman, Canterbury, Otago and Southland.
Cello buys GKC Consulting
Cello Group, a Wellington-based enterprise network services provider, has acquired GKC Consulting, a specialist in observability and digital resilience. Cello says the move gives it in-house capability in network monitoring and incident resolution. Terms were not disclosed.
ShadowTech gives girls taste of tech careers
Tech Women's ShadowTech26 programme runs 11–20 August, placing over 1,500 Year 9–11 girls from 90-plus schools with 60-plus tech employers across nine centres. Students get workplace tours and hands-on activities. Women made up just 27 percent of 2024 IT degree enrolments, which highlights the need for earlier pathways into tech careers.
This time last year NBN Co promised satellite broadband 'by mid-2026'
A year ago this week, Australia's NBN Co announced it would wholesale Amazon's Project Kuiper satellite broadband to more than 300,000 regional and remote customers, with services due to start 'from the middle of 2026'.
The date has passed and NBN Co still has not gone live.
Project Kuiper is now branded Amazon Leo. Behind the rebrand sits a string of launch problems. In January, Amazon asked the US Federal Communications Commission to push out its deadline for getting half its 3,200-plus satellite constellation into orbit from July 2026 to July 2028.
The company blamed simultaneous scheduling slips across three heavy-lift rocket programmes: Ariane 6, Blue Origin's New Glenn and ULA's Vulcan Centaur. New Glenn then suffered a launchpad explosion in May, adding to the disruption. The FCC granted the extension but stripped Amazon of launch priority for anything after 31 July 2026, meaning it now has to prove new launches will not interfere with other satellite operators, including Starlink.
NBN Co's message has shifted accordingly. Rather than a mid-2026 launch, the company is now talking about proof-of-concept trials in Tasmania between July and September this year, a wholesale pricing consultation that opened in February and a target of completing customer migrations from the ageing Sky Muster satellites only by the fourth quarter of 2027.
Sky Muster itself will now run until at least 2028, two years longer than first flagged. As recently as last month, an Amazon Leo executive suggested the commercial launch timeline had slipped further still.
None of this means the deal is dead. NBN Co has kept working through the practical steps: pricing, equipment and RSP consultation. This suggests genuine intent rather than a stalled project. But the confident 'mid-2026' framing of a year ago has not survived contact with the realities of building and launching a satellite constellation at scale.
For New Zealand, where a higher proportion of rural households depend on satellite broadband than anywhere else, that is a reminder that LEO timelines announced by any provider, including Amazon, are best treated as aspirational until satellites are actually in the sky.
Five years ago telcos were told to clean up their marketing
Telecommunications commissioner Tristan Gilbertson sent an open letter to retail telcos telling them to clean up their act. He did this after complaints from consumers that they are getting confusing or incomplete information about their technology options as copper networks were being withdrawn.
Ten years ago Fairfax launched Stuff Fibre in a move that seemed odd at the time (the story questions its wisdom) and did not last long.
The Download Weekly is a New Zealand telecommunications industry newsletter written by Bill Bennett. You are welcome to pass it on to your friends and colleagues. While the newsletter is free, reader support helps enormously. If you are reading this for work, donations are tax-free. A banner at the top of the page will take you to the support site.
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Bill Bennett has covered New Zealand telecommunications for nearly 40 years and was named Tuanz Journalist of the Year 2025.
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