Some concessions, but Chorus has not got the final regulatory ruling it wanted from the Commerce Commission. Continue reading
Chatham Islanders, one of the most remote communities in New Zealand, is now connected to the rest of the world. Continue reading
NZ Comms sector left behind as IT spending surges
Gartner’s latest forecast says spending on New Zealand information technology will grow 6.7 percent next year. The forecast growth will be uneven. Gartner forecasts spending on enterprise software and devices will grow over 10 percent. Meanwhile spending on communications services will be flat; growing 1 percent. Next year Gartner forecasts the total IT spend to rise to $14.7 billion. That’s up from $13.8 billion in 2021.
Spending on communications services will move sideways from $4.16 billion in 2021 to $4.2 billion. This is the largest segment. All the other segments will grow. Spending on data centre systems will climb 5.2 percent from $362 million to $381 million. Gartner says this reflects the shift from on premise computing to the cloud. IT services spending will grow 6 percent from $4.1 billion to $4.4 billion. This will take it past spending on communications services for the first time. This category includes managed services, consulting, and cloud infrastructure as a service (IaaS).
Enterprise software continues to see rapid progress. Last year it grew 13.1 percent from $2.7 billion to a shade under $3 billion. This year Gartner forecasts 10.8 percent growth to a little under $3.5 billion. In 2021 spending on devices, for the most part that’s PCs and tablets, was up 6.1 percent. Remote work and learning drive growth. Gartner sees that continuing over the next year. Enterprises will upgrade devices and spend on new hardware to help employees with remote or hybrid working. The total installed base of PCs in New Zealand grew by 30% in 2020 and a further 18% growth is forecast for this year.
Vodafone relaunches wholesale unit as VIP
Vodafone has relaunched its wholesale division. Now branded as Vodafone Infrastructure Partners or VIP the unit will sell fixed and mobile services along with a range of specialist products and services. This will include options for mobile virtual network operators (MVNOs) and the Internet of Things (IoT)
Tony Baird, the company’s wholesale and infrastructure director says Vodafon.e already works with more than 100 partners including “international carriers, hyperscale operators, managed service providers (MSPs), greenfield property developers and iwi businesses”.
There’s a clear emphasis on iwi partnerships. Baird says: “As part of Whārikihia, our business-wide Māori development strategy, we want to partner with Māori business and iwi on customised infrastructure solutions and collaborate to create long-term value. Our approach is summed up in our tagline, Tūhono ki te Paerangi, which means connecting to the horizon.”
He says the company sees a lot of opportunity for growth,
Murray Osborne, a ten year Vodafone veteran, who in the past lead the public sector team will head VIP.
Opensignal flags Vodafone as fastest 5G
While there’s little between them in five out six 5G experience categories, downloads are faster on Vodafone’s network. The 2021 5G Experience Report from Opensignal clocks downloads on Vodafone’s network at 275.6Mbps. Users on Spark’s 5G network see download speeds of 157Mbps. Upload speeds are the same, 18.9–21.3Mbps on both networks. These speeds put New Zealand in the top 15 countries around the world for 5G speed. We are one place behind Australia. Opensignal says there is “no significant difference in users’ experience” when playing videos, gaming or using voice applications. Likewise there is nothing between the two when it comes to network availability. The company’s researchers made measurements over 90 days from the start of July 2021.
Chorus: NZ in broadband top 10 next year
Chorus says its planned upgrade will propel New Zealand into the top ten countries for broadband speed by early next year. The wholesale fibre company is offering to upgrade 100Mbps consumer connections to 300Mbps. Upload speeds will climb from 20Mbps to 100Mbps. Some business fibre plans will move to 500Mbps up and down. Modelling shows the average download speed after the upgrade will be around 230Mbps. It’s up to broadband retailers how they handle the speed upgrades. Chorus says it hopes most customers will see the benefit before the end of the year.
Chorus goal: 1 million fibre connections in ’22
CEO JB Rousselot says Chorus aims to have a million fibre connections on its network by the end of 2022. In a presentation at the annual general meeting on Wednesday Rousselot says Chorus hit 900,000 connections earlier in the week. Uptake in fibre areas is 66 percent. The company added 23,000 connections in the recent quarter despite Covid restrictions. Since then fibre connection activity has returned to pre-lockdown levels.
Small business under attack as security breaches double in three years
Research carried out for HP says more than half (54 percent) of New Zealand small businesses saw online crime in 2021. Attacks are now at twice the level reported in the previous 2018 survey. HP says the average cost of an attack is $159,000. With a large number of employees working from home there are new vulnerabilities. Half (49 percent) of the respondents say outdated software is a significant security threat. Almost as many put the blame on their workers: 44 percent of respondents identified employee carelessness as a threat. HP doesn’t say so, but this suggests companies need more security training.
In other news…
Australia’s Telstra plans to buy Digicel Pacific for US$1.6 billion. The deal os backed by the Australian government. China Mobile was a potential buyer for the regional mobile operator. The move is as much political as commercial. At Reseller News, Rob O’Neill reports Spark-owned distributor Telegistics has a new brand. From today it is Entelar. CommsDay reports Sydney and Auckland are among the most expensive datacentre locations. Auckland is cheaper than Sydney but both are a long way behind cities like Singapore. At The Register Simon Sharwood writes: China Telecom booted out of USA as Feds worry it could disrupt or spy on local networks. He says: The FCC now believes – partly based on classified advice from national security agencies – that China Telecom can “access, store, disrupt, and/or misroute US communications, which in turn allow them to engage in espionage and other harmful activities against the United States.”
The Download 2.0 is a free weekly wrap up of New Zealand telecommunications news stories published every Friday.
All it requires is an email address. Your address is only used to send out the newsletter. It will not be sold to anyone.
I’m not collecting the data for anything other than sending out the newsletter. You name isn’t going to be sold anywhere.
Telco sector revenues were flat last year. IDC forecasts a slow recovery. Continue reading
Spark topped New Zealand’s mobile market share in the third quarter of 2021. It has a 36 percent market share, a mere sliver in front of Vodafone which is on 35 percent. Continue reading
New Zealand takes the bronze medal for fixed line broadband data use in a week where numbers and reports dominate the telco sector news. Continue reading
This week: A trial run of The Download 2.0, a weekly wrap of New Zealand telecommunications news. You can subscribe below to get the newsletter delivered to your email inbox every Friday. Continue reading
Amazon Web Services says it will build a Region in New Zealand. AWS plans to start operating local cloud data centres by 2024.
An official press release telling us about this runs to more than 3200 words. It’s long, wordy, poorly written and hard to understand.
Despite the torrent of words, it is light on details.
It doesn’t answer key questions.
Such as: “Where will Amazon locate its promised data centres?”
That’s not mentioned anywhere in the 3200 plus words.
It’s an important question. New Zealand is on a fault line. That has implications.
Our biggest city, Auckland, is closest to the submarine cables piping in data from around the world. That’s handy. Yet because it sits on an active volcanic field it may not be the best site for a $7.5 billion investment.
Auckland has a large workforce, although the construction skills needed to build a data centre are in short supply. Does Amazon propose to bring that expertise in?
There’s an undersupply of electricity in the Auckland region. In winter Huntly’s dirty old coal-based power plant kicks in to top up the power supply.
Will AWS be using that power?
Meanwhile, at the other end of the country there is, or soon will be, an oversupply of low cost, clean, green power. Is that in the plan? It should be.
New Zealand’s south has a cool climate. Cooling is a major operational cost for data centres. Locating in a cooler climate not only reduces costs, it smartens up green credentials, an important part of any cloud marketing programme.
If Amazon locates in or around Auckland, it won’t have to pay much in the way of transit charges for data travelling up and down the nation’s backbone.
Nor will it pay for the cost of bringing in the power needed to run a hyper-scale data centre.
New Zealanders subsidise moving power around the country. There is a limit to how much of that is possible without network upgrades. Who pays for that?
AWS’ numbers look as they have been polished up for maximum press release impact.
From the press release:
AWS released an economic impact study (EIS) that estimates it will create 1,000 new jobs through investment of NZ$7.5 billion (US$5.3 billion) in the new AWS Asia Pacific (Auckland) Region with an estimated economic impact on New Zealand’s GDP of NZ$10.8 billion (US$7.7 billion) over the next 15 years.
Jobs for who?
We can assume many of the 1000 jobs will be temporary roles for people building the data centres. It’s rare for a giant data centre to employ more than a handful of people and that includes security guards.
Once the ball is rolling there won’t be many data centre jobs. There could be development work piggybacking off the data centre. AWS doesn’t say. Nor does it say where the people to fill those roles will come from.
Amazon doesn’t tell us enough about its plans for any sensible analysis of its $7.5 billion investment claim.
We know AWS is a worldwide hyper scale cloud business. Any comparison with Spark is always going to look odd. Yet, Spark operates New Zealand’s largest existing data centre at Takanini. That makes it the closest we have to a benchmark.
Spark’s original project cost $60 million. Subsequent expansion means that price will be a lot higher. It won’t be anywhere near $7.5 billion. It won’t be one tenth of that amount.
IDC Research says Spark and Datacom have a 43 percent share of New Zealand’s Infrastructure as a Service market. Amazon has a 23 percent market share. Microsoft is a touch behind on 19 percent. In other words, the four are all roughly the same size.
As a rule, the large, hyper scale cloud providers AWS and Microsoft Azure take 70 to 80 percent market share in any territory.
Their lateness to build here is one reason they have less share at the moment. The lure of winning that additional market share could be part of the reason both Microsoft and AWS have made big New Zealand cloud announcements in recent months.
Sure, there is more to cloud than IaaS. Yes, the market is expanding fast. Yes, Amazon is hyper scale. Does it need to spend 20 or 50 times as much as Spark?
The pair know a thing or two: they got the Hawaiki cable off the ground.
Datagrid has chosen a Southland site.
Interestingly, Amazon has invested in Hawaiki. It’s likely the Datagrid team has talked to AWS about potential cooperation1.
Part of Datagrid’s plan is to build a new submarine cable connecting Invercargill to Australia. There will also be a domestic submarine cable linking the site to major New Zealand cities.
Will Amazon build a similar cable to distribute its data?
At first Datagrid will be a 60 megawatt, 25,000 square metre data centre. Over time it will grow to 100 megawatts and 40,000 square metres. That’s a lot of data centre.
Assuming data centre costs scale better than linearly and Amazon can call on its worldwide economies of scale, its project will build more than ten times Datagrid’s capacity.
Which brings us to another question. How big is New Zealand’s cloud market?
That figure doesn’t square with AWS’s $7.5 billion build budget over 15 years unless AWS anticipates the market continuing to grow at a fast rate.
Assuming AWS doesn’t capture the entire market and intends its New Zealand operation to be profitable, either the local market would need to grow at about 40 percent a year for the next decade or the company expects to host a huge amount of international business here.
There are plenty of unknowns. Too many unknowns to make a careful analysis of AWS’s plans. Yet there are four possible conclusions one could make about the $7.5 billion announcement.
The first is the most cynical: that it is pure public relations hype.
Mentioning a big enough number and promising lots of jobs is a sure fire way of seeing off any resistance and buying-in political good will. AWS can rest assured no-one is going to look back in 15 years to check it spent $7.5 billion.
Big technology companies like AWS have plenty of form when it comes to talking things up.
A second conclusion, is that Amazon throws money around like water and is hugely inefficient. It overpays for everything.
This is implausible. It doesn’t square with anything we know about Amazon which is famous for trimming costs to the bone. Operational efficiency is key to making money from the cloud.
The third possibility is that AWS expects to scythe through the local cloud market. It has done this before. It’s possible, but wise cloud customers are wary of dealing with a single international ecosystem. Many will seek alternative service providers as a back-up.
That’s going to limit AWS’ potential market share. And even 100 percent share of a $730 million market doesn’t justify spending $7.5 billion even with heroic growth rates.
A more likely story is that AWS has bigger plans for New Zealand that serving local markets. It has hinted at this without explicitly saying anything. New Zealand gives, say, Australian AWS users a viable alternative location with, if not always similar, at least readily understood local conditions.
One last point. Until now, the big global cloud companies stayed away from New Zealand. They didn’t like it when there was only one submarine cable network. They didn’t like what they saw as a hostile and monopolistic telecommunications market. It took ten years of industry reform.
As far as technology is concerned, no-one thinks of us as a smug hermit kingdom.
- A speculating person might wonder if Datagrid will become part of AWS. ↩︎
Low Earth orbit satellites, 5G and a fibre speed bump are set to reboot broadband competition.
It’s a decade since the first customers connected to Ultrafast broadband. At that time fibre looked the likely Kiwi broadband future.
Fibre dominates today. Yet it is not the only option.
Mobile phone companies offer fixed wireless products that compete on price with fibre.
As 5G rolls out and more spectrum becomes available, it will close on fibre performance.
Meanwhile LEOs now beam satellite broadband into homes from above the clouds.
The rivalry between service providers is intense. That means customers get a great deal. None of the broadband options are expensive. Even the ritziest products are cheap compared to the prices we paid a generation ago.
This has implications for the industry. As Vodafone CEO Jason Paris told me a couple of years ago, the industry has competed away all its margins.
Mobile companies like Vodafone have a ready made response. They can deliver fixed wireless broadband using their mobile networks.
They have more control over prices and margins that way. There’s no wholesale payment.
Competition between fibre and fixed wireless is as intense as service provider competition.
Chorus, a fibre company responded in two ways. Enable, Northpower and UFF have the option to do the same.
High end customers can buy 4Gbps or 8Gbps Hyperfibre connections.
These are speeds that no other technology can offer for now. Fixed wireless speed depends on spectrum availability and there isn’t enough for gigabit speeds today.
Chorus doesn’t expect many customers to buy Hyperfibre. Its importance is more symbolic. Hyperfibre tells the market there is plenty of headroom. If you like, this works in the same way as Mercedes, Alfa Romeo and Ferrari’s investment in Formula One racing sells motor cars1.
By the end of the year Chorus wholesale customers will be able to upgrade 100mbps fibre lines to 300mbps at no extra cost.
It’s a pincer movement on fixed wireless from two ends of the market. In effect the message is: “You want high performance? You need Hyperfibre. You want better performance than fixed wireless can offer at roughly the same price? We have that too.”
Chorus’ offer is to all its retail service providers. It is not allowed to play favourites. Chorus has to offer everything to everyone, even if they choose not to take it.
It will be interesting to see if Vodafone, Spark and 2degrees take up the offer. If they don’t, they risk loosing customers to other ISPs. If they do, they risk customers churning from high margin fixed wireless to fibre.
It came from the sky
Meanwhile fixed wireless broadband faces a challenge from the skies. Low Earth orbit satellite broadband costs about twice the price of fixed wireless. It appears to offer better performance.
That doesn’t tell the whole story. Many fixed wireless customers get great speeds. Rural customers who live further from towers, often don’t. For them satellite is a bargain.
LEO satellite broadband is in its infancy. Performance will improve and, likely, prices will drop over time.
Fibre speed bumps and LEOs threaten fixed wireless. It has a get out of jail card. 5G promises to boost performance and reliability while reducing operator costs.
Competition will put pressure on prices. Price has always been where telcos go first.
Yet there is less room for sharpening the pencil than in the past. And that’s where this gets exciting. For broadband players to get ahead, they will need to come up with fresh ideas and innovations.
- We’re going to need a new metaphor as we move beyond the internal combustion engine era. ↩︎
The Commerce Commission wants to find and fix the pain points people have when dealing with telcos.
It’s a job the commission was given as part of a new regulatory regime introduced in 2018.
On the whole the customer experience with telcos has improved over the last decade.
Much of that improvement is down to increased competition.
Level playing field lifts performance
The arrival of 2degrees as a third mobile company and the demerger of Chorus from Spark have done much to level the playing field. This, in turn, meant companies have to work harder to retain customers.
Yet the magic of market forces has yet to improve all aspects of dealing with telcos.
Now there’s an opportunity to tidy up the loose ends.
Telecommunications Commissioner Tristan Gilbertson says: “We’ve been given a clear direction and new powers to improve outcomes for consumers.”
Remaining pain points
To get an idea of the remaining pain points, the Commerce Commission organised a consumer survey.
It found that 77 percent of those surveyed are satisfied with the service they get.
The numbers are broken down by brand. Customers are least happy with Trustpower and Vodafone, they are happiest with Skinny, 2degrees, Warehouse Mobile and the little local service providers.
The 77 percent satisfaction number does not sound as good if you flip it to find 23 percent are not satisfied.
Catching up with everyone else
Yet it is close to being in-line with other industries. Surveys here and overseas show customer satisfaction in general tends to range from around 80 percent to 90 percent, with a few rogue industries underperforming.
What’s more, it is a huge improvement on where satisfaction numbers would have been in the past. I’ve seen non-public surveys showing more people are unhappy than happy.
Which is great.
The survey shows customers tend to be happy with things like coverage, availability, speed, stability and price. They are less happy with customer service and technical support. Service quality has been a problem for years.
This should surprise no-one. New Zealand’s telecommunications companies have spent a decade competing on price, coverage and technical performance. None of them have ever thought to focus on providing the best possible customer experience.
More than half the people surveyed (56 percent) said they had reported problems with their service in the last two years.
That’s not good. Worse, of those who reported a problem more than half (54 percent) said it took a lot of effort to deal with the company.
Again Vodafone was the poorest performer. Two-thirds of the company’s internet customers (66 percent) had a problem. Almost half of mobile customers (44 percent) had ‘issues’. One in five Vodafone customers had a billing problem.
Industry body the TCF (Telecommunications Forum) published a glass-three-quarters-full blog post from CEO Paul Brislen looking at the Commerce Commission research. He says the industry is already addressing some of the issues and that overall it is doing OK.
It is certainly heading in the right direction, but the TCF and its members, shouldn’t rest until telecoms is just another unremarkable industry. It remains the most complained about sector in the New Zealand economy.
Outstanding pain points
Which brings us to the outstanding pain points the Commerce Commission would like to address.
Top of the list is dealing with a service provider. Anyone who has done this knows it involves spending a long time waiting for a call to be answered.
Skinny, the Spark brand that makes a point of providing little in the way of personal customer support, rates high. The more self-service and automation, the less need to talk to a customer service representative, the happier the customer.
The Commerce Commission would like to hear from consumers about their experience and to know which aspects of retail service quality it should deal with first. You can provide feedback at the Commerce Commission website.