Slingshot Broadband


Slingshot has dropped the price of its fastest unlimited data fibre broadband plan to a shade under $100. The Gigantic fibre plan is $99.95 a month. Slingshot says it is available in most towns and cities where there is fibre.

It is an aggressive price move from Slingshot. The company has thrown down the gauntlet to larger service providers who already complain about margins. Offering the cheapest option is vital in a market like New Zealand where consumers tend to buy on price more than any other criteria.

Spark charges $40 more for a service with similar characteristics although it does offer streaming TV and wi-fi hotspots as added incentives. The company’s no-frills BigPipe brand charges $130 for a naked, unlimited gigabit plan. Vodafone’s comparable plan is $110. 2degrees charges $115 for a similar product.

A gigabit by any other name would smell as sweet

The Gigantic plan includes gigabit technology. While the term is in common use elsewhere in the world. New Zealand’s Commerce Commission rules don’t allow ISPs to describe plans as gigabit.

That’s because there are network overheads so the available speeds to customers are less than the full 1000 mbps. In most cases customers get around 800 to 950 mbps. The company’s announcement is more cautious, it warns customers may only see speeds in the 700 to 900 mbps range.

Either way, it is still by far the fastest option and the best choice for heavy media users or homes with many devices. Whatever you call them, these plans mean there is never a case of not having enough broadband at home.

Slingshot General Manager Taryn Hamilton says the extra speed: “Makes a huge difference to the quality of the online experience”. He says the price cut is designed to stimulate greater take up of the faster plans.

Gigabit plans are still relatively new. Only a small number of users choose them, in part that’s because they normally come at a premium price. However, that’s changing fast. By dropping the price under $100, Slingshot has reduced the gap with the more popular 100 mbps plans. This means customers can upgrade to the best experience for a small extra amount each month.

Chorus’ network hit its 2017 peak at 9.25pm on December 10. The broadband network was delivering 1.328 Terabits per second.

We once measured large amounts of data in terms of books or towers of compact discs between here and the moon. This time Chorus says the peak was the same as 260,000 HD video streams being watched at the same time.

Four days into 2018 high demand during a storm broke the record. On January 4, at the same hour, the network hit 1.33 Terabits per second. No doubt the record will soon broken again as numbers continue to climb.

The people of Porirua are the most voracious data consumers. In December the average household chewed through 202GB, that’s 34 percent up on a year earlier.

Nationwide average data consumption on the Chorus network is now 174GB a month. That’s up from 123GB a year ago.

Fibre broadband accounts use more data

Users with fibre accounts use more data than those with a copper connection. While the average monthly data base across the entire Chorus network is 174GB, customers with fibre use around 250GB.

In September a Chorus forecast said this will climb to an average of around 680GB a month by 2020. In part the rise will come as more accounts move from copper to fibre.

The growth is largely about television moving from broadcast distribution to online, on-demand delivery.

Chorus network strategy manager Kurt Rodgers says it is not just the big international providers like Netflix driving this change. He says TVNZ and Three launched live streaming in 2017 and that has helped online television become mainstream.

Rodgers says people are watching on smart TVs, but they also watch on phones and tablets connected to home wi-fi networks. He says phone handsets are used more often with wi-fi than as traditional phones.

Broadband speeds on the Chorus network are also higher. Dunedin, which was the original Gigatown now has an average connection speed of 265Mbps. Rotorua is next on 72Mbps and Wellington is in third sport with 70Mbps. The national average across the Chorus network is 64Mbps.

A note on broadband averages

Chorus measures average use because that makes number sense for a network operator. It divides the total amount of data across the network by the number of user accounts.

The figure is, simple, easy to understand and demonstrates how demand for data is growing. It helps Chorus plan for growth. It makes discussion straightforward.

Not everyone likes this measure. Some point out that the data use pattern is not a Bell curve. They says that a small number of high-end users skew the average number higher. They argue that the median amount of data used is lower than the average.

There’s something in this. Yet the median and the average numbers are moving closer as more and more New Zealanders switch to streaming video. Or in other words, high data use is becoming mainstream.

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Stuff Pix new directionStuff Fibre says it is to offer Stuff Pix, a movie streaming service, from early next year. It takes the company in a new direction, one that hasn’t been tried before in New Zealand.

While getting into content is a natural move for an ISP part-owned by Fairfax, the largest regional media company, Stuff Pix has little to do with its parent’s traditional news business.

Instead, Stuff Pix opens with a catalogue of around 600 movies. Customers can watch them online for between $1 and $7 each.

Paddy Buckley who previously headed Quickflix in New Zealand will run Stuff Pix as general manager.

Stuff Pix not taking on Netflix

Buckley says the operation is a replacement for closed video stores, not a Netflix competitor. It will be open to all internet users and its main attraction will be the price. There is no subscription fee. Customers pay a one-off fee to view each movie.

He says the prices will be the lowest on the market. While it is technically possible to buy movies for less by parallel importing, customers need to set up a VPN (virtual private network).

Different, not differentiator

Although part-owned by a large corporation, Stuff Fibre is a broadband minnow and has yet to make an impact on the market. Until now it has offered rock-bottom prices and little else.

Adding Stuff Pix to the business is a bold attempt to build something other than a low-margin, race-to-the-bottom owner of a dumb pipe.

As you might expect from a minnow, Stuff Pix is a modest entry into the streaming market which is dominated around the world by Netflix.

The list of 600 movies is not large. Most old-school video stores had far more extensive catalogues. The movies on offer are not-exclusive. Stuff Pix will sell to people who are not Stuff Fibre customers.

In other words, with the way the businesses and offers are structured at present, no-one is going to buy Stuff Fibre to get at Stuff Pix. On that basis, it isn’t a differentiator. But it is an extra line of revenue and that’s important.

Buckley says Stuff Pix prices will be the lowest on the market. This means it will run on slender margins. The broadband service business is all about relatively small margins: the steady drip of subscription fees rolling in month after month that can still be a money-making recipe.

Revenue per user

Normally when ISPs add media, the idea is to bolster the margins and to raise the average revenue earned per user. That could work at Stuff Fibre, there will be opportunities to cross-sell moves to existing customers.

New Zealand’s two largest ISPs, Vodafone and Spark, have their own media offering. Vodafone resells Sky TV content through its Vodafone TV service. It isn’t cheap. Yet has an extensive catalogue of material and exclusive rights to popular sporting codes so there is a lot of value in the bundle.

Vodafone TV has the potential to more than double the revenue the company gets from each customer. It should do even better when it comes to lifting the per customer profit.

Meanwhile, Spark’s Lightbox streaming service seems a defensive play although it is a clear differentiator. Spark customers get Lightbox as part of broadband or mobile accounts. It’s a way of adding value and justifying higher prices. Spark’s basic unlimited fibre plan costs $95 a month compared to Stuff Fibre’s basic $90 a month.

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fibre opticWhat will move New Zealanders from copper to Ultra-Fast Broadband?

Or as we used to say in the 1990s: “What is the UFB killer app”?

Video is the simple answer. It’s not the only answer. We’ve been using video communications tools such as Facetime and Skype with success since the early days of ADSL. Video conferencing worked up to a point on dial-up connections. It worked better on ADSL and performs fine on most copper-based VDSL connections.

The same goes for streaming video entertainment. You can, at a pinch, watch it on all but the most feeble connection. True, you get a better experience on a faster connection. And there’s little point trying to watch a high definition movie if you have slow internet.

High definition video

Yet even HD video works fine on a VDSL connection. You need to have rarified tastes to need more than, say a 30 Mbps connection.

Sure, 100 Mbps plus is necessary if more than one person in your house is watching at the same time. And, yet, Vodafone does specify that you need a 100 Mbps connection to watch Vodafone TV.

Fibre improves the video experience mainly because it is faster. It’s also more reliable, less prone to outages.

Speed is the real killer app for fibre-based broadband. Faster broadband means you can do things that were either marginal or flaky with copper connections.

What about wireless?

Many fixed wireless broadband customers are able to get speeds that are fast enough to watch streaming video. Most of the time. There are issues.

First, fixed wireless bandwidth is shared. That means if you live in a neighbourhood with lots of other fixed wireless broadband connections, the performance can drop when everyone else is online. The can mean peak evening TV viewing hours.

Second, for now, the fixed wireless broadband plans on sale in New Zealand have data caps. That means you only get so many video viewing hours each month. That’s fine if you’re a light TV watcher, but is a deal breaker for many.

Even when everything is working fine, fixed wireless broadband connections tend to be slower and less reliable than fibre connections. Technology may change that — one day. For now, you can’t be guaranteed there will always be enough speed.

In today’s word, speed is the killer app.

Chorus active wholesaleComputerworld New Zealand reports that Chorus says it has moved to ‘active wholesale’ to stem the loss of customers to rival networks.

The story covers comments made by Chorus CEO Kate McKenzie at the company’s annual general meeting. She says the number of connections on the Chorus network has fallen following Spark’s move to push customers to its fixed wireless broadband services.

She says: “Total connections reduced by about 125,000 last year and by a further 20,000 in the first quarter to the end of September”.

From passive to active wholesale

To deal with this Chorus has moved from being a passive wholesaler to taking a more active role.

In response, McKenzie said Chorus had “gone from being a passive wholesaler to being more active in the marketplace. We can’t rely on all retailers to promote our products for us when they have their own competitive motivations.”

Among other things this has led to a Chorus information campaign highlighting the performance benefits of fibre broadband over a wireless service.

There has also been advertising promoting fibre. McKenzie told the AGM this is already showing results with defections to wireless slowing in recent months.

Follow the money

It’s not hard to understand why Spark wants to move customers on to fixed wireless connections. It makes a lot more money that way.

When a customer buys a fibre broadband connection from Spark, the company pays around $40 wholesale fee to the fibre company. In much of the country that’s Chorus, but the same applies in areas serviced by Northpower, UFF and Enable.

The wholesale cost of a line is around 40 to 50 percent of the price Spark charges its customers. So cutting out the wholesale level means better margins and greater profit. There’s enough room to pass some of the saving back to the customer.


Aside from the money, a fixed wireless connection keeps everything under Spark’s control. It means it becomes less reliant on others. At the same time, it regains some of the benefits of vertical integration.

In a normal market this would give Spark leverage to negotiate better rates from the fibre companies. Spark is by far the largest buyer of broadband connections, so it could expect something for economy of scale and something else to counter the wireless broadband threat.

That’s not how New Zealand’s open access fibre broadband market works. Prices are regulated by the Commerce Commission, fibre companies are not allowed to play favourites. They can’t offer one rate to Spark and a different rate to other players.

The wireless threat

When this model was first drawn up, wireless wasn’t a serious threat to fibre. At the time I asked then Communications Minster Steven Joyce if the rapid development of wireless broadband had been considered, he said it had not and dismissed the idea the technology could one day compete with fibre.

In a sense wireless broadband doesn’t compete with fibre. It can’t deliver high speeds and the big wireless operators have kept tight caps on data downloads to stop networks from overloading.

And yet not everyone needs gigabit speeds and vast quantities of data. Fixed wireless broadband is ideal for low-use customers. It also makes sense in areas where fibre is not available.

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