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Bill Bennett

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Broadband has become politically charged in New Zealand, but it is essential to the economy. Now we’re on the move from copper to fibre. Wireless broadband is also important.

Spark dropping wireless data caps is not what it seems

Spark says fixed wireless broadband customers in parts of the country will no longer have to contend with data caps. The change applies to customers on the UnPlan Metro plan. There will be no extra cost.

It’s a clever move on Spark’s part. And it’s one that plays on popular misconceptions about data usage. To understand why, you need extra context.

Previously Spark fixed wireless broadband customers on the UnPlan Metro plan were restricted to 600GB of data a month.

This sounds paltry when the majority of fibre broadband customers have unlimited downloads. It also leaves customers feeling uneasy that they may bust their caps and get caught with extra charges or have their connections slowed down.

Will anyone notice when data caps go?

In practice, few if any Spark customers will notice any changes.

That’s because 600GB is more than any normal fixed wireless broadband customer can get through in a month.

Let’s look at the numbers in the recent Chorus annual report. The wholesale fibre company reports that an average household on its network chewed through 313GB of data in a month in June 2020. That’s a lot more than the 265GB households were using a year earlier.

Fibre customers on the Chorus network averaged 387GB of data in June.

Both these numbers are a long way behind the soon to be abandoned 600GB data cap on Sparks fixed wireless broadband network.

You could argue that averages don’t mean much. That there are households who get through far more than the average.

This is true. But the number of fibre customers who go past 600Gb in a month will be a small minority.

A faster pipe

Another thing to consider is that fibre is much faster than fixed wireless broadband. Those high-usage fibre customers, the ones who skirt or go past 600GB a month will have plans that are faster than 100Mbps. Many will be on gigabit plans.

Few fixed wireless broadband customers will get more than 50Mbps. Many will get less.

Which means fibre is between two and 20 times the speed. Or, in other words, you can download much more data in an hour. Faster broadband means more data goes down the pipe every hour that you are online.

Given this, it’s unlikely many of Spark’s fixed wireless broadband customers get close to 600GB in a month. In turn, this means going from 600GB to uncapped doesn’t change much for the overwhelming majority of fixed wireless customers.

Which is not to say the switch from capped to uncapped is not welcome. It will remove the nagging fear that a household might go over the cap and face repercussions. That’s a positive.

Huawei’s Gigabit Gap: NZ broadband ahead of Australia

Australian title Business IT covers a report released by Huawei: Australia suffering gigabit gap despite spending A$51B.

The report says it cost A$4,500 for each NBN connection network, a total of A$51 billion, but the network still only reaches 28 percent of premises. In comparison New Zealand’s UFB network now reaches 75 percent of premises. That figure will rise to around 85 percent when the second UFB stage finishes at the end of 2022.

 

 Gigabit capability in selected countries
Gigabit capability in selected countries (percent of premises)

Ten years after starting the NBN project, less than a third of homes can get gigabit fibre. Meanwhile New Zealand fibre companies are starting to offer speeds of up to 10Gbps. Australia has no plan to extend its fibre footprint.

The report also shows Australia has the world’s third most expensive gigabit broadband. The only people who pay more are in Norway and Canada.

OMDIA, formerly known as Ovuum carried out the research for Huawei.

 

A century for the Rural Connectivity Group

Gebbies Valley is the site of the Rural Connectivity Group latest mobile broadband tower.

I had to look the place up on a map before writing this story. That’s kind of the point.

The RCG’s job is to fill broadband and mobile voice coverage gaps. A government subsidy helps. The RCG is a joint venture between New Zealand’s three mobile carriers: Spark, Vodafone and 2degrees.

It runs an open access network. Some of the money funding comes from the Telecommunications Development Levy.  The Provincial Growth Fund also contributes. Spark, Vodafone and 2degrees invested $75 million in the project.

Today there are 100 working rural broadband towers.

Fixed wireless broadband

Each tower offers 4G fixed wireless broadband and 4G voice calling to the local community. To keep costs low, Spark, Vodafone and 2degrees share the antennae. The towers have fibre backhaul, which improves the performance.

Gebbies Valley has Voice-over-LTE equipment which means users can make high quality voice calls. There will also be 3G voice calling, that’s not commissioned yet. This will cover a black spot on State Highway 75.

A media statement from Communications Minister Kris Faafoi says it is a significant milestone for the second phase of the Rural Broadband Initiative. This a government funded project to deliver broadband services to the more remote parts of New Zealand.

Faafoi says the RCG towers now provide broadband access to 8,121 homes and businesses. They also mean extra mobile coverage for 343km of state highway and connect 23 tourism locations.

Eventually RBI2 will cater for 84,000 rural homes and businesses. It will improve mobile coverage on 1400km of state highways and connect 168 tourist sites.

While the project is planned to officially finish in 2023, there’s a somewhat open-ended nature to RBI2.

Early on in the programme, the government asked the RCG to build as many towers as possible with the allocated pool of money. Since then more funds have been tipped in and there’s no reason to think it will all stop at the formal end of the project.

New Zealand’s weird showing in ITU affordability rankings

If you look at the latest International Telecommunications Union affordability rankings you’d get the impression that New Zealand is doing better than Australia at mobile, but is behind on fixed broadband.

That’s not the case, but it looks that way because of the methods used to create international table rankings. The rankings are not meaningless, but they are hard to interpret and make sense of.

The ITU ranks New Zealand at number eight in the world for high-consumption mobile-data-and-voice. Australia sits at 22.

Meanwhile New Zealand is 41 for fixed broadband while Australia sits at 36.

Not the lived experience

These two rankings are opposite to the everyday experience of telecommunications customers in the two countries.

These kind of ranking tables are often a little strange. That’s because they tend to use artificial user cases to illustrate difference between markets where in reality there is a lot of nuance.

Remember here the tables are about affordability. The ITU measures and compares the prices of entry-level fixed broadband plans.

It then compares these prices with a nation’s gross national income (GNI). This is a way of relating prices to people’s earnings.

Affordability

As a rule countries with a lower income pay proportionately more for telecommunications services. Which is a way of saying they are less affordable.1

It turns out New Zealand’s entry level plan is a 50mbps fibre plan with a 60GB cap. Prices are converted to US dollars. In this case it comes in at US$44.97. The price also includes 15 percent GST.

That may well be the lowest plan on offer in New Zealand, but it’s a plan almost no-one buys.

Australia’s entry level plan is 20mbps with a 100GB cap. It sells for US$52.30. Australian GST is 10 percent. In other words the plan used for comparison is far slower and more expensive, yet includes more data.

According to the ITU when the GNI is taken into account Australia gets an affordably score of 1.2 while New Zealand gets a score of 1.3. So we sit a few places behind Australia in the fixed broadband table.

Mobile voice and data

The same methodological weirdness works in New Zealand’s favour when it comes to measuring high consumption mobile voice and data plans.

New Zealand’s plan costs US$14.53 and buys 200 voice minutes, 500 SMS messages and 1.8GB of data. Australians get unlimited calls, unlimited SMS and a whopping 15GB of mobile data for US$36.61.

Going back to the affordability scores, New Zealand gets 0.4 while Australia gets 0.8.

These ITU tables are useful when comparing, say, New Zealand’s year-on-year performance. That tells you if telecommunications is becoming better or worse value.

They are also useful in aggregate. The latest report tells us that entry level mobile-voice is affordable in most countries. It tells us prices have fallen in the last few year relative to income.

It also says that while fixed broadband prices around the world have remained more or less stable, download speeds have increased.

Yet when it comes to benchmarking, say, New Zealand’s performance against other countries, it’s hard to tease out useful data. Anyone who has operated in Australia and New Zealand knows our fixed broadband is better priced, while Australian mobile data is less expensive.


  1. Economists reading this may think this explanation is too simple. ↩︎

Sky has a broadband mountain to climb

After months of speculation Sky says it will enter the broadband market next year. The move was the industry’s worst kept secret.

Sky says it will start by targeting its existing TV customers. Then it will focus on homes that are fibre-ready but not yet connected.

In a media statement, chief executive Martin Stewart says: “We want to provide the best possible sport and entertainment experience to New Zealanders. A high-quality, high-speed broadband service built specifically for entertainment helps us do that.

Rumours about Sky’s entry into telecommunications have swirled around the sector for months.

Make that re-entry. The Vodafone merger turned down by the Commerce Commission would have got it there earlier.

And that wasn’t the only attempt. In 2006 Sky took a look at buying ihug. It asked for an exclusive due diligence period. Ihug refused, opened the process and sold to Vodafone for $41 million.

Analysis: Slow moving Sky

Sky entering the broadband market is welcome. The company has much to offer and understands how to deal with customers.

That said, next year is ages away in internet years. Everything internet moves faster than other industries.

By 2021 Spark will have 5G towers1. Most likely, it will sell fixed wireless as an alternative to the fibre services Sky aims to sell. Vodafone may have extended its network and its fixed wireless offering.

It is also possible next generation satellite broadband services will be available2.

Fibre is a better broadband experience that fixed wireless or satellite. Yet not all customers know that. ISPs will carpet bomb marketing for the alternatives.

Stuff Fibre, the missed opportunity

Likewise, New Zealand’s broadband landscape could look quite different. Last week Vocus picked up the 20,000 or so Stuff Fibre customers. A wave of consolidation is long overdue.

The acquisition is not enough to move the market share dial.

Even so, a larger base gives Vocus more scope for economies of scale. And more customers to crosssell energy and other products to. It gives Vocus momentum.

Sky is short of cash. Buying Stuff Fibre may not have been easy for the company. Yet, Stuff Fibre would have been a good fit for Sky; a better fit than for Vocus.

And anyway, Vocus is not awash in loose change either. If the hard-up Australian-owned telco could cut a deal, Sky could have found a way.

Reasons to buy Stuff Fibre

Buying Stuff Fibre would have done three things. First, Sky would enter the market with a crash and a roar, wrong-footing rivals. Never underestimate the value of shock and awe in a competitive consumer market.

It could also have brought the expertise needed to kick-start Sky’s plans.

The third reason Stuff Fibre would have been a good buy for Sky is that, Stuff is also a media company.3 They share some characteristics. While the Stuff Fibre customer proposition is different to Sky’s, it’s not so different.

A virtual ISP

It is not well known outside the sector, but Stuff Fibre is, in effect, a virtual ISP. Stuff looks after the brand, sells subscriptions and counts the money. Meanwhile, in the background, a company called Devoli handles the technical side.

This is an ideal model for Stuff with a well-known brand and few in-house technical skills. The Virgin brand does something similar overseas.

The virtual ISP model would almost certain work as well for Sky. Maybe it still will.

Tick-tock

Every day that ticks by is another wasted day for a would-be ISP. By this time next year about two-thirds of all people who can connect to fibre will be using it. Of the rest, some will have chosen fixed wireless broadband. Others may choose never to buy broadband.

Other ISPs will have picked almost all the low-hanging fruit by the time Sky gets its act together.

Sky’s second strategy is to “focus on homes that are fibre-ready but not yet connected.”

Take away the two-thirds of home that will be connected by 2021. Take away the people who don’t want or can’t afford broadband. Then take away the fixed wireless broadband users. However you cut the numbers, that does not leave much of an addressable market.

More intense competition

Which can only mean that Sky will need to woo customers away from other ISPs. It still has sports right, it still commands a lot of entertainment programming.

The company says it will use these to pull in customers. Maybe.

The obvious case to look at here is Spark. Spark’s Spark Sport and its Rugby World Cup streaming have been high profile. Nothing draws in New Zealand customers more than the promise of seeing the All Black in action.

Now here’s the bad news for Sky: Spark’s fibre broadband market share fell during the last year. That’s the time it was giving away RWC streaming to new customers.

This tells you that Sky has a mountain to climb. It never looked easy, but Sky has to put its foot on the gas. It won’t get a second chance.


  1. The South Island trial run doesn’t matter in the big picture ↩︎
  2. Cheaper perhaps, but unlikely to be as cheap as fibre ↩︎
  3. Media triva fans might recognise the two companies share common roots. Both stem from Wellington Newspapers in the 1980s. ↩︎