Spark fixed wireless broadband

Spark fixed wireless broadband arrived three months after subsidiary Skinny opened its fixed service.

There are three Spark fixed wireless broadband plans:

$80 a month buys 40GB of data and free local calling.
$90 boosts the data cap to 80GB.
$85 buys the same 80GB but subtracts local calling. Spark calls this its ‘naked’ plan.

Spark’s Home Wireless Broadband plans cost a little more than Skinny Broadband’s 60GB for $55 plan. Both charge $200 up-front for the fixed wireless modem. And no, you can’t bring your own modem.

However, customers prepay for Skinny Broadband, while Spark Home Wireless Broadband customers pay after the event through what we used to call the telephone bill.

You can take it as read that Spark’s move into fixed wireless broadband means the earlier Skinny Broadband launch has been a success.

Target market

Spark says Home Wireless Broadband is a service “for New Zealanders living in cities and towns who are frustrated with slow or unreliable copper broadband”.

There’s something in that. Waiting for promised fibre connections is frustrating for many. In some cases, a UFB link is still three years away.

Home Wireless Broadband will also be able to fill the gaps in some towns not serviced by either UFB fibre or by the Rural Broadband Initiative. In a sense Home Wireless Broadband extends the RBI beyond its existing boundaries to anywhere with a Spark 4G cellular tower.

Bypassing regulated services

Yet Home Wireless Broadband is also an end run around what service providers regard as expensive regulated local access fees for copper and fibre networks.

Spark has to pay a little over $40 to Chorus for each landline broadband account. With Home Wireless Broadband and Skinny Broadband, it gets to keep all the money. That means higher gross margins.

Fibre still best for most

Fibre remains a better choice for many customers. It’s faster, will get even faster and is more reliable.

Most fibre plans sold now are 100 Mbps or higher and are uncapped. That last part, no data caps, is important for people who stream a lot of video — and these days that means most users.

Typically you’d pay around $100 for a 100 Mbps uncapped fibre plan. Compared to $90 for 80GB of wireless data that’s a relative bargain — so long as you can get fibre.

Like Skinny Broadband only less skinny

Home Wireless Broadband uses the same technology as Skinny Broadband, it even comes with the same Huawei fixed wireless modem.

Most users will get low-end fibre-like speeds, although that depends on signal strength at your home. You should see around 40 Mbps which is more than adequate for streaming video. This is better than the 30GB basic fibre option.

However, 40 GB of data doesn’t leave much room for binge TV watching — an hour of decent-quality streaming video might use a gigabyte. Add in even modest day-to-day internet use and a Game-of-Thrones marathon will soon bust your cap.

Spark’s positioning

Spark recognises this limitation. It says Home Wireless Broadband is specifically for low to moderate data users.

A Spark press release quotes Mobile and Business CEO, Jason Paris who says: “While fibre broadband is the preferred solution for customers living in areas where UFB has been rolled out and who use a lot of broadband data each month, our wireless broadband services represent a great new choice for low to moderate data users, giving them fast, reliable and affordable broadband.”

Further down the press release Spark says it already has “more than 3000 customers” using 4G mobile for broadband services instead of using the traditional copper line network. This will be Spark’s rural customers, the company now sells an RBI service in direct competition with Vodafone.

Vodafone next?

Many in the industry expect Vodafone to roll out a similar fixed wireless broadband service to urban customers in the near future. It’ll be interesting to see if Vodafone sharpens its pencil to win market share.

Wireless broadband represents a threat to Chorus^[1].

Last year Chorus celebrated what it saw as a win when the Commerce Commission set the regulated price for copper and fibre connections higher than anticipated (or welcomed) by the internet service providers.

That higher access price effectively opened the door for competition from fixed wireless broadband. If the regulated price came in at around the $30 mark, as expected, the economics of fixed wireless versus copper and fibre would look quite different.

Chorus has a monopoly on the local copper network. In about two-thirds of the UFB area it also has a local monopoly on fibre. Other wholesalers; NorthPower, Enable Networks and UFF, also have local fibre monopolies.

Wireless poses fibre risk

In each case they would have built their original business plans on the assumption they could maintain local monopolies. Wireless was always known as a possible risk, but when the UFB contracts dropped affordable fast wireless broadband was still a relatively distant prospect.

If fixed wireless takes off the value of the UFB contracts will have eroded.

The fact that Spark moved to launch its Home Wireless Broadband so soon after Skinny Broadband suggests there is demand for fixed wireless broadband.

Fibre companies are able to sell wholesale connections for less than the regulated price, so long as they offer all customers the same price. They won’t want to do this for obvious reasons, but if enough consumers opt for fixed wireless broadband fibre operators could find themselves outflanked.

The shape of things to come

For the most part, fibre companies will see fixed wireless as an annoyance more than a serious threat. However, today’s fixed wireless broadband services are only a foretaste of what is to come.

With 5G mobile, expected to land in New Zealand in about five years, wireless broadband speeds will equal today’s fibre speeds.

Equipment makers promise 10 Gbps. They also promise more efficient use of spectrum and greater capacity. This means fixed wireless operators will either be able to drop data caps or extend them so far they are no longer a barrier to all but the greediest data users.

The move to 5G is also likely to give fixed wireless operators room to move on price. While there’s a huge upfront capital cost for new network hardware, once installed operators will want to maximise their return on investment and that’s likely to drive fixed wireless broadband prices down. It could become cheaper than fibre.

Spark’s entry in the fixed wireless broadband market also threatens companies already operating in this space.

New Zealand has a number of local fixed wireless broadband networks, mainly in the regions. These are usually small players who have offered an alternative broadband service. They are likely to find the going tough as well-capitalised Spark, and maybe Vodafone, muscle in.

On the other hand, having the big players enter will give them and their technology greater visibility. ↩