Last week Spark announced its first half results for the six months to December 31. It is a solid report showing strong revenue growth.
Spark looks to be heading on the right track. Yet there is an interesting angle on one of the company’s strategic moves.
Nine paragraphs into the market release there is this quote from CEO Jolie Hodson:
“We made a deliberate decision to limit wireless broadband sales in the lead up to the Rugby World Cup, as a conservative measure to ensure customers had a great viewing experience while we introduced our new streaming service. Our capacity was more than sufficient, so we expect this to be a one-off and connection growth to return to trend in the second half.”
In other words Spark back-pedalled on fixed wireless broadband sales because senior management didn’t want customers to have a disappointing Rugby World Cup streaming experience.
Fixed wireless alternative
Spark pushes fixed wireless broadband to its customers as an alternative to fibre. It’s a strategic move because Spark owns its wireless network. That means the company doesn’t pay a wholesale fee to a fibre company. It keeps all the money and that makes for a higher profit margin.
Investors love that.
Downplaying fixed wireless broadband in the run up to the Rugby World Cup made sense. Although fixed wireless broadband should be able to give customers enough bandwidth to watch high definition streaming video, that’s not always the case in practice.
Unlike fibre, which has consistent and predictable performance, fixed wireless broadband performance varies from place to place. In some cases it also varies at different times of the day.
Fixed wireless broadband bandwidth is shared. So if a lot of people connect at once, speeds can drop. The Rugby World Cup saw data traffic peak across the nation. That put pressure on more marginal fixed wireless broadband connections.
Good at times
Fixed wireless broadband can be good. I’ve heard from happy fixed wireless customers who enjoy decent speeds and uninterrupted connections.
There are others who say their service does not do an adequate job with streaming video.
One common complaint is that wireless broadband speeds are not consistent. In some cases speeds vary in a regular pattern over the course of a day. Others say they get intermittent slow downs.
Conservative on fixed wireless broadband
Spark describes the decision to back-pedal on selling fixed wireless as conservative. That may be the case. But it underlines that the company is not confident about its fixed wireless performance.
There was no conservatism about selling fibre broadband to customers in the run up to the Rugby World Cup.
The message is clear: Spark knows fixed wireless broadband is a lower quality product. It knows customers get a better experience on fibre.
That said, fixed wireless broadband is often an acceptable alternative for customers living in areas that are not served by fibre. It is the main technology for Rural Broadband Initiative customers.
Again, going by user anecdotes, some people who can’t get fibre find fixed wireless performs better than their local copper broadband service. Others do better with a fast copper connection.
This is all anecdotal. Yet there is some evidence in the Spring 2019 Measuring Broadband New Zealand report prepared for Commerce Commission by SamKnows.
Customers with a 100 mbps fibre plan saw average download speeds of 99mbps. During peak time the dial barely moved. Samknows reported peak speeds at 98.6 mbps.
With fixed wireless broadband the average speed is 25.8 mbps. At peak times this drops to 22.7 mbps. That’s not a huge drop, but it squares with the anecdotal evidence that some customers see big drops while others see little or no drop.
Fixed wireless broadband latency
The SamKnows data also looks at latency. This is the time it takes for data to do a round trip. If latency is high, online users of applications like video conferencing and gaming can expect stuttering and dropouts. SamKnows says 30 ms is high.
SamKnows found nine in ten fibre connections had latency below 20 ms. In comparison 95 precent of fixed wireless connections had latency of over 30 ms. The average latency is around 50 ms.
Of all the latency tests performed on Fibre connections, 92% were below 20ms. At the other end of the chart, 95% of Fixed Wireless latency results were above 30ms.
That’s past the point where dropouts start. With everyday TV streaming, buffering can shoulder some of that load. Even so, it is a worse customer experience.
SamKnows’ summary says:
“…many fixed wireless connections will experience issues with latency-sensitive applications such as video calls and gaming.”
VDSL2+ can deliver near fibre speeds and in some cases is consistent and reliable. Before fibre came down my road I had a Spark VDSL2+ connection that delivered a consistent speed of more than 70mbps.
In three years it never wavered. You can read about my fixed wireless experience in this post. The speed was never anything like as fast as the VDSL2+ connection.
Fibre most reliable
Of course VDSL2+ is not as good as fibre. In the report summary SamKnows says:
“Households with multiple user should consider fibre, if available, for the most reliable performance.”
Spark knows all of this. The reason it pushes fixed wireless broadband is that the margins are higher. That’s because there is no wholesale charge.
For many Spark customers fixed wireless broadband is the right product. But let’s not pretend it isn’t an inferior product to fibre. Spark is willing to let its investors know that.
Disclaimer: I edit The Download magazine for Chorus as a contractor. It covers the company, the telecommunications industry and fibre broadband. These are my views and not those of Chorus.