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telcowatch 2020 q2 monthly market share

The latest Telcowatch mobile market share report shows the relative performance of New Zealand’s carriers were close to unchanged during the second quarter. This is the period that covered much of the nation’s Covid-19 lockdown.

It paints a picture of a stable market with, apart from a special case we’ll look at later, little switching between carriers.

One conclusion you can read into the numbers is that Vodafone’s considerable investment building a 5G network ahead of its rivals has not paid off in terms of attracting their business.

Vodafone top brand

Vodafone remained the leader with a 37 percent market share. That’s the same market share as in the first quarter. Vodafone has been the largest single carrier brand for a year now.

Spark retains its second spot with 34 percent. Its share fell a fraction during the quarter.

Yet the story is more complicated than these numbers suggest. Spark’s cut-price Skinny brand was the largest climber during the period. It has a 7 percent share of the market.

Spark top carrier

If you add Spark and Skinny, the two are brands that share resources, the total is 41 percent. That figure has been stable now for months.

Meanwhile 2degrees brings up the rear with 23 percent.

In practice each of the three carriers is stable. The movement is all about Spark customers realising they can get what amounts to the same service for less if they switch to the company’s Skinny brand.

Skinny has seen its market share rise for the last three quarters while Spark’s has fallen.

Telcowatch is put together by Datamine. It says it analyses more than 2.9 million unique devices each month. The company restricts its data collection to active mobile devices and does not count machine to machine activity or non-consumer markets. Nor does it measure overseas-based networks operating here.

Telcowatch says Vodafone is New Zealand’s mobile market leader.

There’s not much in it. Vodafone is one percent ahead of Spark on 36 percent.

The two were neck and neck for most of last year.

While the lead is real, it’s not dramatic.

Nor is it the whole picture. The way Telcowatch measures the market means that Spark’s Skinny business is counted separately from its parent company.

Adding that back into Spark’s figure puts the company well ahead of Vodafone with a 41 percent market share.

Telcowatch monthly market share 2018 - 2019

However you crunch the numbers both Spark and Vodafone have a clear lead on 2degrees. The third mobile carrier’s market share is stable at 23 percent. That makes it a little over half the size of Vodafone and Spark.

That’s a respectable showing for the youngest mobile carrier which entered a market that was almost at saturation point. And there is no question 2degrees has reshaped the market.

It probably suits everyone concerned to count Skinny as a seperate business.

Yet Skinny is definitely a Spark brand.

When Skinny started it was more distinct from its parent than it now is.

Today Skinny’s product alignment can be seen as rounding out Spark’s offerings. It’s a no-frills version. In supermarket terms it is PaknSave to Spark’s New World.

The two share the same network infrastructure. Skinny employees may be loyal to the brand, but they are Spark employees. Spark’s management decides Skinny’s strategy.

Skinny remains the smallest of the four brands. In December its market share was 5.6 percent. It has been between roughly five and six percent for the last couple of years.

The most interesting aspect of the recent report from Telcowatch is not the interplay between Spark and Vodafone, but the way Skinny has been growing its market share at the expense of the parent company.

Over the last year Skinny is the best performer in terms of market share growth. It has grown gradually.

It’s not hard to understand why. Despite all the fuss about 5G, the mobile phone market is mature. There’s less differentiation between brands and less of a premium in Spark’s brand when compared to Skinny.

There is, however, a considerable price difference. Slowly, but surely, customers are waking up to this. You can buy what amounts to the same mobile experience for less money. The big surprise is that more people have yet to realise this.

Skinny broadband

Skinny Broadband has dropped the cost of a fixed wireless internet connection. From today it costs 20 percent less. The price is $52 a month for 100GB of data.

If you don’t need the highest download speeds and lots of data it is a great alternative to fixed line internet. See an in-depth review of the service written when it first launched in January 2016.

You need to buy a fixed wireless modem from Skinny before you can use the service. It costs $100 and a courier will deliver it to your home.

Seven months since Skinny Broadband launch

When Skinny Broadband launched, the price for a 60GB data plan was $55 a month plus $200 upfront for the modem.

Soon after launch, the modem price dropped to $100. Then Skinny added a 100GB plan for $65. This week Skinny settled on the cheaper and simpler 100GB for $52 plan.

One advantage Skinny Broadband has is it is prepay. This means customers only buy as much internet as they need. You might, say, use it if you move to a seaside bach for a couple of months over the summer. Students may sign for the service in term time, then use their parent’s internet during vacation.

Spark’s cunning fixed wireless plan

Skinny is a Spark subsidiary brand. It began by selling low-cost prepaid mobile phone plans. It expanded into prepaid broadband earlier this year.

While Skinny says “sales to date continue to hit target”, Spark is more positive.

Speaking at the company’s full-year results announcement, Spark New Zealand managing director Simon Moutter says fixed wireless broadband has exciting potential. He says it uses the significant spectrum assets Spark acquired in recent years.

Moutter says Skinny Broadband is a beta test of the company’s wireless internet plans. To date that service has signed about 12,000 customers.

Now Spark plans to ramp up its wireless broadband offering. It aims to add another 50,000 more connections in the next year.

The next step will see a full market launch of a fixed wireless service. Spark plans to promote it as a substitute for fixed-line broadband. The company will target the low-end of the market.

Beyond Skinny and Spark

Spark already sells fixed wireless to out-of-towners as part of the Rural Broadband Initiative. What is less known is that the company sells it to townsfolk as well.

Vodafone does much the same with its RBI fixed wireless offer. For now, Vodafone is not talking about ramping up its fixed wireless offer to urban customers. Yet a move would make sense. The company has the spectrum and the necessary technology is already in place.

Rival 2degrees has less suitable wireless spectrum to play with. Even so, in theory, it could offer its own fixed wireless service.

Much of the telecommunications industry interest in fixed wireless internet comes down to bypassing high wholesale landline charges. Thanks to a Commerce Commission ruling the wholesale cost of a copper line is $41.69. This is high by international standards and makes fixed wireless broadband more competitive.

Skinny broadband

If you don’t need fibre speeds or large amounts of data Skinny Broadband is a good low cost alternative. It’s possible to get speeds of 40 Mbps, not everyone does.

Coverage

Readers ask how they can know in advance if they’ll get decent speeds. Skinny says it offers a money back guarantee so you can test the service for 30 days to check it works for you.

Before going to the trouble, there’s a simple tool on the Skinny site that tells you if you can get a connection. You can also check the Spark 4G coverage map — Skinny Broadband uses the Spark 4G network.

In theory, the darker the pink, the better reception you’ll get at your home. In practice, you need to be careful. At one level the map shows my house is in a pink zone, but I only get so-so coverage. If I zoom in to the highest resolution, the coverage map shows my house only gets ‘fair’ 4G reception.

Antennae

There are antennae sockets on the back of the Skinny Broadband modem, but no antennae in the box. The sockets are hidden by a plastic lid.

According to the documentation in the modem box, you can buy the antennae separately. I asked Skinny about this. Skinny doesn’t sell the antennae. It doesn’t seem keen on the ideas. According to Skinny: “The testing we did showed they provided little material improvement to the speed.”

That could be right. I found a spare antennae I had from another product, it made no improvement. Although tempted, I decided not to attempt running a cable to the roof and mounting a higher antennae. There’s only so much I’m prepared to do in the name of science.

If I was going to stick with Skinny Broadband, I’d experiment with a home-made Yagi antennae. If anyone has done this I’d be keen to hear about it.

One problem I have here is that where I live is not yet covered by 700 MHz 4G, the local signal seems to be 1800 MHz, which has different characteristics.

One other good piece of advice I had from Skinny was to locate the modem as far as possible from other electronic equipment. I found I got better speed, 25 Mbps instead of the 20 or so I could see, when I moved the modem to a room without any computers, servers or routers.

Value

Even though the speed isn’t great at home, I’m almost tempted by Skinny Broadband. For me the deal breaker is the 60GB data cap.

While this is more than my household would use most months, there are times when we go way, way over. When I do a big cloud backup we might use close to a terabyte. That might happen twice a year. Then there are times when we have visitors and the data load jumps.

There’s no way to accomodate that kind of data consumption with wireless broadband.

I understand my use is far from typical. While Skinny Broadband may not suit your needs or my needs, the data cap is plenty for average users. Your parents might appreciate it even if you don’t. I’m already recommending it to people I know who are light data users.

Skinny broadband

Skinny Broadband is a solid, affordable low-end alternative to a copper or fibre internet connection. It suits many customers’ broadband needs.

It is competitively priced. Even after the $200 upfront payment for a suitable fixed wireless modem, Skinny Broadband is New Zealand’s cheapest mainstream broadband plan.

We’ve been conditioned to think wireless data is expensive. So you might think it odd that Skinny can deliver wireless broadband for less than any terrestrial broadband plan.

Skinny bypasses the copper tax

The reason is simple. Skinny doesn’t pay Chorus or any other network provider a regulated $42 (or thereabouts) each month for copper or fibre network access.

Don’t underestimate the effect this is going to have on the broadband market.

Some have described the access fee charged by Chorus as a copper tax. I’m told by industry insiders and advocacy groups that the government threatens retribution if they use that term again.

Flaw in UFB project

Forget what the Commerce Commission says. Government needed a high copper tax to placate Chorus shareholders. That’s because the government nailed fibre network builders to the floor when negotiating contract prices. Without the copper tax income, Chorus shareholders would get an unfair investment return.

In effect, the UFB deal the government first offered Chorus was financially unsustainable. The company had no choice at the time but to accept a poor deal[1] and hope it could negotiate or lobby for concessions later. Concessions like, say, the Commerce Commission settling on a high copper tax.

Before winning a higher copper tax through the lengthy Commerce Commission process, that earlier,  strong-armed fibre deal represented  a threat to Chorus and to the company’s shareholders.

It also threatens the government’s UFB fibre broadband project.

A bigger picture

The threat goes further. If word got around that doing big NZ government infrastructure projects was financially risky, the government would struggle to get roads, railways, airports or hospitals built. Shareholders wouldn’t let managers bid for future NZ government projects.

Experts, analysts and industry lobbyists argued the toss over the right copper tax level for months. In the end, the Commerce Commission settled on a regulated access price that pleased the government and Chorus shareholders while disappointing everyone else.

Now that high price has become a different problem. It makes fixed broadband vulnerable to wireless competition.

Copper tax headroom

If the Commerce Commission had settled the access price at the lower level the industry had previously anticipated, there wouldn’t be much headroom for an alternative like Skinny Broadband to muscle in.

Who knows what market share Skinny will pick up? It will win some business for sure. The price is keen enough to pull customers from existing plans.

Assuming Skinny Broadband grabs more than a handful of customers, it will mean a slice of the potential market is lost to copper, to UFB, to Chorus and to the other fibre companies. That will, in turn, change the economics of those businesses.  Costs will spread over few customers.

The UFB business model only works if a large number of potential customers sign up.  It may even mean the Commerce Commission will need to return and strike a higher copper tax to keep Chorus and the UFB on track.

There’s more to this than Skinny

If this was just about Skinny Broadband, Chorus and government would have little to fear. They could shrug it off as a small competitor.

However, Vodafone is sitting on a huge chunk of suitable bandwidth. 2degrees has some. Spark may enter the market it its own right. As New Zealand’s largest ISP that would cause headaches for UFB.

There are other slices of spectrum. In theory all, or at least most, of it can be used to bypass UFB fibre with similar wireless broadband products.

New Zealand has a small population and relatively uncrowded airwaves. There may be enough spectrum to meet all the market demand for broadband.

Vodafone threat

Vodafone also has a neglected, but still viable, HFC cable in Wellington and Christchurch which bypasses Chorus and Enable Networks. So far it has remained on the sidelines, but if the vultures circle UFB, this could come into play.

Should all these broadband alternative chickens come home to roost at once, they could put a serious dent in fibre demand.

Forewarned about wireless

Wireless has been a known threat to fibre since the UFB was first announced. Wireless was listed as a possible risk before the UFB contracts were awarded. The technology has improved since then.

Now it is maturing as a viable alternative, not for everyone, but for some users. Maybe enough users to upset market assumptions. Fibre may have advantages, it may be a better technology. History shows us that merely being a better technology has never been enough to ensure success.

While this is enough of a challenge for terrestrial broadband planners to be getting on with, it is only the start. Work is already underway on 5G mobile, that promises to deliver fibre-like speeds with greater efficiency.

No-one in government is going to heed the words of a journalist like me, but if it wants to avoid future problems with UFB, now would be a good time to revisit those original contracts and offer Chorus and the other fibre builders better, more sustainable terms.

Then revisit the so-called copper tax.


  1. At the time Chorus was still part of Telecom NZ. If Telecom NZ didn’t agree to build the UFB network it would have found itself up against a government subsidised and supported fibre network competitor.
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