Tag: government

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Vodafone RBI tower

After a slow start New Zealand’s Rural Broadband Initiative has hit its stride.

RBI is a government-subsidised scheme to give farmers and people living in rural areas a broadband network.

Communications minister Amy Adams says the first stage is now complete with 154 new cellular towers now built. The towers serve 3G and 4G fixed wireless broadband as well as conventional mobile phone services.

She says 300,000 rural homes and businesses can use RBI wireless services.

Towers of power

The towers also increase mobile coverage in rural New Zealand. Before the RBI began mobile services reach a little over one-third of New Zealand’s geographical area. Today mobile services cover half the area.

In addition to the 154 new cellular towers, Vodafone will have finished upgrading a further 387 existing towers by this time next year.

Vodafone won the original contract to build new mobile towers. Chorus, which was then still part of Telecom NZ, won the contract to connect fibre to the towers.

Despite building the towers, the RBI contracts insisted Vodafone allowed other carriers to install their equipment. This proved a smart move.

3G RBI not up to much

Early Vodafone RBI services using 3G technology were slow, expensive and had low data caps. This meant there was a pitiful take-up. One year ago the total number of customers signed for Vodafone’s RBI was officially around 8,000, although insiders insisted the number of active was lower.

In May 2015 Labour communications spokesperson Clare Curran called for an inquiry into the low take-up numbers. Tuanz CEO Craig Young said his organisation was disappointed with the low uptake of RBI services.

At the time Vodafone RBI customers paid $95 a month for 30 GB of data and free calling. The 3G broadband speeds could be lower than 1 Mbps and were rarely faster than 5 Mbps.

Spark enters

Things picked up soon after. A few months after the complaints, Spark entered the market with a competitive offer. Spark’s rural wireless broadband was 4G from day one, offered a higher data cap and had user-installed hardware making it easier to get started. Vodafone responded in kind and numbers picked up.

Today many rural users can get fibre-like speeds for little more than the price paid by urban broadband customers.

Spark and Vodafone offer similar packages where customers get 80 GB of data and local calling for $106 a month, or an 80 GB naked broadband plan for $96 a month. RBI users with a 4G connection could see speeds go as high as 80 Mbps, although typical peak speeds are more often in the 30 to 40 Mbps range.

In comparison urban residential customers can get unlimited data at fibre speeds of 100 Mbps for around the same price.

Competition

Adams says; “This agreement has been very successful, with approximately four out of every five new cell towers hosting a mix of competing operators.”

RBI doesn’t stop with the 154 new and 387 upgraded towers. The now completed first phase of RBI was subsidised with $300 million of government funds — some of this from a tax imposed on telecommunications companies.

In the 2015 budget the New Zealand government earmarked a further $100 million to extend the RBI’s reach. There’s a further $50m to fill in mobile network black spots. The government says this will improve safety on highways and better serve remote tourism locations.

Adams set down ambitious goals for rural broadband, in May she issued a statement saying: “By 2025, I want to see 99 percent of New Zealanders able to access broadband capable of 50 Mbps, and the remaining one per cent in the hardest to reach locations able to access broadband of 10 Mbps.”

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IRD inland revenue department tax

Writing at the New Zealand Herald Matt Nippert says Top multinationals pay almost no tax in New Zealand.

A major Herald investigation has found the 20 multinational companies most aggressive in shifting profits out of New Zealand overall paid virtually no income tax, despite recording nearly $10 billion in annual sales to Kiwi consumers.

The analysis of financial information of more than 100 multinational corporations and their New Zealand subsidiaries showed that, had the New Zealand branches of these 20 firms reported profits at the same healthy rate as their parents, their combined income tax bill would have been nearly $490 million.

Big companies not paying tax may be legal, it isn’t moral. They shuffle profits to countries with low taxes so they can avoid paying for the taxpayer-funded infrastructure and social spending that made them rich in the first place.

Two tax avoiding tech giants Facebook and Google grew wealthy on the back of the internet.

It was originally paid for by taxpayers in countries like the USA and the UK. The internet wouldn’t exist without taxpayers, nor would Google or Facebook.

Apple grew into one of the world’s largest businesses on the back of the iPhone.

Yet for much of its history, Apple mainly sold computers. A large number of those sales were to schools. It depended on government funded education to keep it afloat during the lean years.

Without taxes, there would be no Facebook, Google or Apple.

Large countries like the USA, UK and even medium-size ones like Australia have moved to close the loopholes allowing multinationals to avoid taxes. New Zealand has less room for manoeuvre.

In the long-term our best chance of dealing with the problem is by taking part in international initiatives.

In the meantime, there is something we can do. We could insist government purchasers only buy from the companies who pay their fair share of tax.

Sure, fair share is a debatable and nebulous term. The less than one percent paid by some companies on Nippert’s list is not fair.

Not buying from tax avoiders would mean no more government purchased iPhones, no government Google Apps accounts, no government advertisements on Facebook.

At least not until they pay up.

Not taking this approach amounts to rewarding bad behaviour.

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IRD inland revenue department tax

At Computerworld James Henderson reports: Spark seals $60 million IRD contract as Revera overhauls tax system.

The headline tells the story in 11 tight words. Nice work.

Next comes what old school journalists call the second deck: 

We are delighted that the data centre’s contract has been awarded to a New Zealand company.

It is a direct quote from the Inland Revenue Department’s deputy commissioner Greg James.

A government department buying IT services from a New Zealand company shouldn’t be remarkable.

But it is.

I sometimes wonder if New Zealand government departments are allergic to home grown technology.

If this was Australia, the USA or the UK, government would be under pressure to buy from local suppliers. Listen to what candidates in the US presidential primaries say on the subject.

It’s a vote winner. It should be here.

Yet at times it feels as if the political pressure in New Zealand is in the opposite direction.

This isn’t about protectionism. After all, we’re a free trade economy. Yet it often feels as if government is biased against local tech companies.

We have world class tech companies. Spark Digital is least as good as its overseas owned competition. So is Revera. So are the other top tier local IT companies.

They don’t need favouritism. Give them a fair crack at contracts and you’ll find you get better service from professionals well acquainted with local conditions. You’ll create more, high-quality jobs and keep more local talent at home.

I’d be delighted with that.

 

 

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HD Voice vodafone NZ

Spark, Vodafone and Chorus will pay almost NZ$44 million towards this year’s $50 million Telecommunications Development Levy.

The Telecommunications Development Levy is an extra tax paid by telecommunications companies. Each company pays a little over one percent of its revenue to subsidise rural broadband and finance other worthy but uncommercial services.

Spark is the biggest contributor. It pays almost $20 million. Vodafone pays almost $14 million and Chorus’ share is around $11 million.

The next two telecommunications companies, 2degrees and CallPlus pay around $3 million and $1.2 million. There are 13 other companies paying the tax. Between them, they pay about $2 million.

Companies have to earn at least $10 million from “telecommunications services” before paying anything.

Government set the Telecommunications Development Levy fund at NZ$50 million. Each of the contributing companies pays a proportion of the total depending on its share of all “qualifying revenue”.

Some of the money raised, NZ$2.6 million this year, pays for the Telecommunications Relay Service. This helps people with hearing problems use telephones.

The government sets a further sum aside for 111 emergency services. It spends the rest of the money on rural broadband.

A tax by any other name

Note how government charges the Telecommunications Development Levy on revenue, not profit.

That would be difficult because as a whole New Zealand’s telecommunications industry barely scrapes a profit.

Last year the five companies paying the lion’s share of the levy made a collective loss. This year the numbers are better, but not much.

Telecommunications is not a high-margin business and requires huge capital investment in infrastructure. Not least in paying the government to use the radio spectrum — which could be regarded as another form of taxation.

In practice companies pass the extra taxes on to telecommunications customers.

Free riders

There’s an irony here. While telecommunications companies pay extra tax, the companies, one might argue benefit the most from a nationwide broadband network, barely pay any tax.

Google and Facebook earn a king’s ransom selling ads to New Zealanders. Because they claim these sales happen elsewhere in the world the revenue they collect is effectively tax-free.

They wouldn’t be able to earn this tax-free income if it wasn’t for the likes of Spark, Vodafone, Chorus, 2degrees or CallPlus providing the networks. They get a free ride.

According to the IAB industry spent some NZ$200 million on interactive advertising in the third quarter of 2015. I

Even if the government can’t force these companies to pay their fair share of company tax, perhaps it could include their revenue in the Telecommunications Development Levy.

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Vodafone NZ

New Zealand telecommunications went from state-owned to a competitive market in a generation.

Now the government is back in the telecoms business. Not as a direct player, but sponsoring and calling the shots for a national urban fibre roll out.

Government also imposed an extra tax on telcos to pay for rural service upgrades. It restructured the industry to get the ball rolling on its Ultra-fast broadband project. Telecom NZ had to spin-off Chorus, its network division, or miss out on fibre contracts.

From Telecom NZ to Spark

The restructure forced Telecom NZ to change its strategy and to find new markets. It also found a new name: Spark.

Vodafone went through its own changes adjusting to the new market conditions.

Now New Zealand’s two telecommunications giants are moving in different directions.

By changing it name from Telecom NZ to Spark, the company underlined its transformation. It is no longer the telephone company. Today Spark sells a broad variety of digital services.

Vodafone changes tack

Meanwhile, Vodafone acquired Telstra-Clear and pushed into business and rural markets.

Change was always going to happen with or without direct government intervention.

Competition between carriers means profit margins have fallen. Regulation and, in New Zealand, extra taxes like the Telecommunications Development Levy eat further into already slim margins.

Then there are new external competitors. Over-the-top services like Google, Skype and Apple offer free or low-cost products. They compete with toll calls and other once-lucrative sources of revenue.

It means an end to healthy profits from tolls, SMS and other value-added services.

Dumb pipes

Today the core business at Spark and Vodafone is selling dumb pipes. These can be through the air or through landlines. They sometimes speak of “selling bits”, which amounts to the same thing.

Whether you call it dumb pipes or bits, telecommunications is now a commodity business. Two Spark subsidiaries illustrate this. Big Pipe sells broadband, Skinny sells mobile phone services. They are bare-bones, low-cost alternatives. They offer a shorter menu of options and less customer hand-holding.

It is difficult to differentiate core telecommunications services. To the user voice calls look, or rather sound, much the same no matter how they arrive. Few consumers could tell the difference if a different broadband provider delivered their data.

700 MHz of difference

There are points of difference. Spark invested in an extra slice of 700 MHz spectrum. That will give it an edge with faster wireless broadband.

On the whole customers distinguish between telecommunications services on the basis of Hygiene Factors. They notice more when things they expect to see are missing or not working as they should.

So, say, poor service, counts against a carrier more than good service works in their favour.

It is hard to make money from undifferentiated, commodity services. To keep shareholders happy, Spark and Vodafone have strategies adding value to core services.

Spark now a digital services company

At Spark the answer is to find more digital services to sell. Among other options consumers can buy video-on-demand services and home security from Spark. There’s a new fixed-wireless rural broadband service.

Businesses can buy sophisticated IT services including cloud computing from Spark Digital. The company’s Qrious operation offers big data.

Spark is moving to sell a broad suite of digital services to consumers and business.

Vodafone tackles enterprise

Meanwhile, Vodafone has pushed into the enterprise market. It used its Telstra-Clear acquisition to move into areas like the internet-of-things offerings. Vodafone’s involvement in the rural broadband initiative has seen it turn up at Fielddays. It now offers products aimed at farmers.

Both look to expand beyond dumb pipes into growth sectors with non-commodity margins.

At a recent function, managing director Simon Moutter talked of Spark selling overseas assets. It used the money to focus more on New Zealand investments. Almost $100 million of that went towards buying Revera, the largest local cloud service provider.

Worlds apart

If Spark is looking more like a New Zealand business, Vodafone is moving in the opposite direction. Today is more into line with its UK parent. Part of that is so the local company can give Vodafone’s global customers the same services they use elsewhere.

Vodafone has moved from being mobile-centric to a full-service telco. It has formed partnerships to reach new rural and enterprise markets. The advertising has gone from cool urbanites to a daggy farmer and his pig. That’s a metaphor for something.

There’s another, less divergent part of the NZ telco transformation story. Spark and Vodafone are working together to build a new submarine cable across the Tasman.

Maturity

Although the two companies are as competitive as ever, their ability to combine for a project like this signals a fresh attitude, a maturity.

In the last year new, or revamped, competitors have emerged for Spark and Vodafone. Australia’s Vocus has snapped up enough network assets to be a challenger.

Vocus is merging with another Australian company, M2, which earlier acquired the CallPlus group. The move brought fresh capital and momentum to the industry’s third largest player. 2degrees has broadened its scope picking up ISP Snap.

The market outside of Spark and Vodafone may be consolidating, but most of that action is in the traditional telecommunications sectors. While that may be the two big companies’ home turf, they are busy looking at new pastures.