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Bill Bennett

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Spark remains New Zealand’s largest telecommunications company. Previously known as Telecom NZ, it was originally the state owned monopoly.

NZ broadband faces competitive reset

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.

Intense rivalry

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.

Technologies compete

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 at an affordable price.

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.

Speed bump

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.


  1. We’re going to need a new metaphor as we move beyond the internal combustion engine era. ↩︎

Dealing with telecoms pain points

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.

Service problems

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.

Telcos told to clean up post-copper marketing

Telecommunications commissioner Tristan Gilbertson is concerned about the way telcos are marketing their services as Chorus prepares to close local copper phone networks.

Yesterday he sent an open letter to the companies, in effect telling them to clean up their act.

The move comes after complaints from consumers that they are getting confusing or incomplete information about their technology options.

Ball of confusion

It can be complicated because there are two separate processes going on at the same time. Yet there’s evidence telcos are deliberately adding to the confusion.

First, from next month Chorus is able to decommission the local copper network in areas where fibre is offered.

It can’t turn copper off overnight. There’s a long consultancy period and an agreed process. People have at least six months from getting the first letter. They get two or three reminders from Chorus along the way.

Chorus wants to decommission copper in part because running two networks is an unnecessary expense.

There are areas where no-one continues to use copper. And other areas where the number of users is small. In these places the cost-per-connection of maintaining the network can be very high. And anyway,  a copper network is more expensive to maintain than fibre.

Goodbye public switched telephone network

The second process is the Spark is turning off its old-fashioned voice technology that uses copper lines. That’s the public switched telephone network or PSTN.

In both cases the changes mean people must find alternatives.

And that’s where things can get nasty.

Each of the three mobile phone companies sell fixed wireless broadband in competition with fibre.

Hello fixed wireless broadband

Fixed wireless isn’t as fast or reliable as fibre. Nor is it necessarily cheaper. Yet for many people it is good enough. Lucky fixed wireless broadband customers with good connections like the service.

Mobile companies like it in part because they can push their mobile phone networks harder and get a better return on their investment in towers and antennae.

They also like not paying the monthly wholesale fibre fee to the likes of Chorus, Enable, UFF or Northpower. This means they get a much better margin selling fixed wireless.

Which means the mobile companies push their fixed wireless options to customers and back-pedal on mentioning fibre. There are cases where telcos tell customers they don’t have a choice.

There are also cases where customers are told the changes are about to happen even when they could be months or years away.

Enter the Commerce Commission

The Commerce Commission only gets involved in cases when it gets a lot of complaints or queries from the public. It has had a lot of communication from people on the receiving end of misinformation.

There’s no question misleading marketing is out there. At times the deception is deliberate.

It harks back to when Telecom CEO Theresa Gattung talked at a conference about telecommunications companies being able to use confusion as a marketing weapon.

 

 

Spark expands uncapped fixed wireless broadband footprint

Last week Spark extended what it calls its ‘uncapped’ fixed wireless broadband footprint. It now reaches another 500,000 potential customers.

The company’s Unplan Metro plan, yes that’s right and yes, it does sound weird, is now available at 1.2 million homes. The expanded fixed wireless broadband footprint includes towns and the rural areas where it is more needed.

Spark says that covers around two-thirds of all homes and more than 10 percent of rural households.

Where fixed wireless scores

Fixed wireless broadband is an alternative to fibre broadband. It’s a great choice if you live in a place where you can’t get fibre.

Performance and reliability is not as good as fibre, but it is better than your practical alternatives.1

If you can get fixed wireless at your address – that is not always a given2 – it installs fast. Spark will courier a modem and you could be online within an hour of it arriving.

It may be worth buying a low-end fixed wireless plan if you have limited broadband needs or are on a tight budget. Spark has a Basic plan for $45 a month with 40GB of data.

That’s more than enough for almost anyone who doesn’t use streaming, video conferencing or online gaming. You’ll be able to make voice calls and handle a limited number of Zoom meetings each month.

Otherwise, for a lot of people fixed wireless represents poor value. In almost every case you’ll be able to buy a faster, more reliable fibre plan with fewer restrictions on data downloads for less money. A number of people were let down by fixed wireless broadband when working from home during lockdowns.

That’s the case even if you buy fibre from Spark, which is among the most expensive options on the market.

What you will pay

Spark’s 5G Wireless Broadband Plan with nominally unlimited data – see below – costs $95. If you’re not on Spark’s 5G networks, and at the time of writing few people are, you can get a 4G fixed wireless plan for $85. Chances are it will be fast enough to meet your broadband needs, but, unlike with fibre, there are no guarantees.

In comparison no-questions-asked 100Mbps unlimited fibre plan from Spark is $90. You can buy similar plans elsewhere for up to $20 less. Flip has a fibre plan that works out at around $60 a month.

An all-you-can-eat 1Gbps fibre plan from Spark costs $110. A mere $15 more than the wireless plan. That’s a faster speed that most people need. Yet it means there will never be any limits on your broadband activity even with a house full of internet fanatics.

Uncapped – that word doesn’t mean what you think it means

While Spark describes Unplan Metro as either ‘uncapped’ or ‘unconstrained’ data, that’s not the full story. In the small print there’s mention of a Fair Use Policy.

This is vague. You have to dig around to get a clear picture of what it could mean. But in simple terms it means Spark can kick you off if it decides you are using too much data.

In other words, it is neither uncapped or unconstrained in the usual sense of those words. The Commerce Commission may yet have something to say about this description.

Spark, Vodafone pushing fixed wireless

Spark, Vodafone, and to a lesser extent 2degrees are both pushing fixed wireless broadband as an alternative to fibre.

Spark CEO Jolie Hodson said earlier this year she would like to move between 30 and 40 percent of landline customers to wireless by 2023.

It’s a lucrative business.

Wireless services piggyback off the cellular networks used to connect mobile phones. It requires extra investment to support fixed wireless, but that’s incremental.

The technology bypasses the wholesale fibre networks. More to the point they bypass the fees charged by fibre companies. Spark and Vodafone make a higher margin from wireless broadband than from fibre.

In the past customers have had a mixed experience with wireless. Network upgrades and the switch to 5G will improve that, but the technology is not for everyone.


  1. That may not be the case once the new satellite services get out of beta. ↩︎
  2. Local towers can be full although Spark is upgrading its network fast so you may not need to wait long ↩︎

Flip fibre versus uncapped fixed wireless broadband

Skinny, Vodafone and Flip all chase broadband customers looking for low prices. How do the uncapped fixed wireless broadband plans compare with the lowest cost fibre option?

Skinny now sells an uncapped fixed wireless broadband plan for $60 a month. It’s $10 cheaper if you are a Skinny mobile customer.

Vodafone has a similar product selling for $65 a month. Again, it’s $10 a month cheaper if you have a mobile plan.

These two new uncapped deals give the broadband market a new burst of competition.

At first sight they are roughly in-line with the least expensive fibre broadband plan. That would be Vocus’ Flip brand.

Flip will sell you an unlimited fibre connection for $14 a week. That works out at $728 a year. Skinny’s fixed wireless costs $720 a year.

Similarities

The two have more in common than price. Flip customers living in Chorus fibre areas get a connection running at 50 Mbps down and 10 Mbps up. In other parts of the country the down speed is 30 Mbps.

On a good day Skinny and Vodafone fixed wireless customers will see similar speeds.

In both cases the speed is more than enough to stream Neon or Netflix. There’s headroom for Zoom video conferences while others are online. Children should be able to do homework while parents work from home.

Differences

You’ll notice the last but one paragraph starts with “On a good day…”. That’s because fixed wireless broadband speeds can change over time. Everyone in an area shares the same wireless spectrum. If a lot of users connect at once, the performance drops.

The most recent Measuring Broadband Report notes the average speed of fixed wireless through the day is 25 Mbps, but the average goes down to 21 Mbps at peak times.

Average is an important word here. There will be people who get above average speeds while others will get below average speeds.

21 Mbps is enough

Even the lower 21 Mbps speed is good enough for streaming video. Yet you may run into problems, fixed wireless broadband is less reliable than fibre. The Measuring Broadband report found no regular outages on fibre. Fixed wireless did not do as well.

While this might spoil your viewing or online gaming, it’s not a big deal. Surveys show urban fixed wireless customers are almost as satisfied with their service as fibre customers.

Latency can be more of a concern. This is the time it takes for a signal to travel to its destination and back. Fibre is low latency. Fixed wireless is, in comparison, high latency. It means online games react slower to your actions. If you work from home it means more lag in video conference calls. Mind you, in video calls this lag is rarely a deal breaker.

The uncapped fixed wireless broadband small print

There is one huge difference between fixed wireless broadband and a low-cost fibre account from a provider like Flip.

When Flip says unlimited plans, there are no ifs, no buts, no qualifications. That’s not the case with fixed wireless.

Both fixed wireless service providers talk about fair use. Vodafone calls its plan Unlimited but that’s not the right word. It’s hard to find the fair use policy on the Vodafone site. This link will help.

The important part says:

“If your usage of our services materially exceeds the range of estimated use patterns, we will consider your usage to be excessive and/or unreasonable. We may contact you to advise you that your usage is in breach of our Fair Use Policy, and request that you stop or alter your usage to come within our Fair Use Policy.”

You couldn’t describe that as clear. Skinny uses different words but it amounts to the same thing. Both tell you unlimited does not mean there are no limits.

Location, location, location

You can buy Flip’s unlimited fibre plan anywhere on the nationwide fibre network. At the moment that’s over 82 percent of the country. In a couple of years it will be close to 90 percent of New Zealand.

Although the mobile data network has a broad reach, unlimited fixed wireless broadband plans is urban areas only. And there’s a limit on how many connections there can be in any given area. Fixed wireless service providers manage performance by limiting the number of connections.

In other words, you may not be able to get fixed wireless at your address.

Flip unlimited fibre costs about the same as today’s uncapped fixed wireless broadband plans. It’s usually faster and always more reliable. No-one is watching to see how much data you use.

The fixed wireless service providers have closed the price-performance gap with fibre ISPs. Wireless may suit your needs better than fibre, but for most people, Flip is a better deal.

Digital Boost, Productivity Commission and living standards

On Tuesday small business minister Stuart Nash kicked off the Digital Boost Alliance. On Thursday a report from the Productivity Commission told us why business needs a digital shot in the arm.

The Digital Boost Alliance is a group of 20 companies. It was pulled together by Craig Young who heads Tuanz.

There are multinationals like Microsoft and AWS in the mix. You’d expect that.

Business support

The local companies in the alliance are more interesting.

Money, an important part of the digital equation, is represented by the five main banks operation here. Then come local tech companies: Datacom, Xero and, if we accept Australia as local, MYOB.

New Zealand’s telecommunications sector is represented by Spark, 2degrees and Chorus. Vodafone is a notable non-starter.

CertNZ and MBIE are in the mix. So is The Warehouse. While founder Sir Stephen Tindall is a keen personal supporter of initiatives like this, the Warehouse Group sells a lot of technology and supporting products to small business.

Mindlab is a member. It hosted the launch event.

Access and training

Alliance members aim to improve small business access to digital technology. More important they will help businesses get the training needed to make use of technology.

Each partner offers something different. There are offers of discounts of products and services, extra support, employee training and research.

It’s a big, ambitious goal.

World beating

Nash says he wants New Zealand to have the world’s most digitally-enabled small business sector.

We have been here before. Other initiatives have had similar goals. The difference this time is there is more money, broader industry support. It is a public-private joint venture.

Nash says the government kicked-in $44 million for digital training and advice in this year’s budget.

He singles out cloud computing. He says it has great potential. “A 20 percent increase in the uptake of cloud computing could be worth another $6 billion to the economy.”

Small business web sites

One industry speaker said only half of NZ small businesses have a web site. The implication being this is a measure of how much further we need to go.

Having a web site can help small businesses. It’s an efficient way of finding and retaining customers.

Yet it is not always appropriate. Many small businesses are subcontractors. They don’t need to sell themselves online. Nor do they need to spend money advertising with Google or Facebook.

Their digital needs are elsewhere.

Small business barriers to digital

MYOB surveyed small business owners. The results are revealing.

  • 41 percent say cost is the barrier to technology adoption.1
  • 22 percent say staff training is the barrier
  • 21 percent say a lack of knowledge is the issue.
  • 23 percent say the problem is the time taken to implement.

At the event I spoke to a couple of blokes from Innate Furniture, a Christchurch small business who flew up for the launch.

I assumed their story was going to be about how they built a website and sales took off. Instead they told me how last year they moved all their backend systems to the cloud and how that made a real difference to the business.

This is where there are huge benefits.

Why Digital Boost matters

First, New Zealand’s economy is more dependent on small business than many other economies. Small business accounts for a larger share of our GDP and a bigger proportion of jobs.

Larger companies can afford to have technology specialists on the team. With smaller firms responsibility might be with the owner. Most likely it will be with someone without training or experience.

Second, New Zealand small businesses are smaller than you find in other countries.

We’re talking about companies with a less than a couple of dozen employees and the majority are much smaller than that. In other countries these would be called micro-businesses.

Productivity gap

Third, our productivity lags other countries. Today’s Productivity Commission report says New Zealanders work longer hours than people in other rich-world countries and produce less in each hour they work.

  • 34.2 hours a week compared with a 31.9 hours average in the OECD.
  • $68 of output an hour compared with $85 average elsewhere in the OECD.

These numbers affect our living standards.

Innovation is key

Commission Chair Dr Ganesh Nana says: “Innovation is the key to unlocking New Zealand’s productivity. There are only so many hours in the day that people can work, so creating new technology and adopting new and better ways of working is critical to achieving effective change.”

Which means the Digital Boost project is timely.

If there’s one area both the Digital Boost project and the Productivity Commission agree on is that we need to do more than move people to digital tools.

Show how

The key here is to show people how they can use these tools.

There is an echo with cyber security. Many managers and business people think spending money on security products will solve the risks.

It can help, but without educating employees on how to think in more security conscious ways, that spending is wasted.

Spending money on new computers, software and services is a start. Yet it’s crucial to set aside part of the tech budget for training.

Skills essential for digital boost

Skills are essential to unlock the potential.

Likewise, it is important to use technology where it has the most benefits.

It’s no accident that Xero and MYOB are behind Digital Boost, moving to digital account keeping, tax paperwork and electronic invoicing can have an instant pay-off for a small business.

If Digital Boost delivers, Nash says it can be worth billions of dollars each year to the New Zealand economy.

That’s great, but meaningless to individuals, what matters more is that it has the power to lift everyone’s standard of living.

Talking on RNZ about Digital Boost

You can hear me talking about this with Kathryn Ryan on RNZ Nine to Noon in new research into the impact AI could have on our work-lives. The broadcast also covers the potential to help shorten the working week and how CD-Roms are finally about to stop working…