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Bill Bennett

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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.

PSTN interconnect, number portability, co-location stay regulated

The Commerce Commission says for now it will keep regulating PSTN interconnection, number portability and mobile co-location.

It hints that it not need to regulate these services in the long term. Yet, for now at least, the Commerce Commission needs to watch them because they help keep the market competitive. And that is good for customers.

Telecommunications commissioner Tristan Gilbertson says: “After consulting with the sector, and interested parties, our view is that these services continue to play an important role in the market and should remain regulated for now.”

The decisions about these services is part of a five yearly review of regulations. Under the new Telecommunications Act, the Commerce Commission has to revise all areas of regulation every five years to check oversight remains necessary.

How do these regulations help competition?

Number portability means a customer can keep their existing mobile or landline phone number when they switch from one telco to another.

Without number portability, moving between service providers is hard work. It’s enough of a chore to make people think again about switching to a plan from another company.

That decreases competition. It makes it extra hard for a new service provider to enter the market.

Traditional landlines are disappearing at a rapid rate. They will be rare, even non-existent by the time the next five year review rolls around. Which means landline number portability regulation could be meaningless by 2026.

Mobile phone numbers aren’t going anywhere in a hurry.

Mobile co-location

This is about allowing mobile phone companies to share cell sites and install hardware on towers built by rivals.

Allowing co-location means less waste. It lowers costs.

This is good for mobile customers. But it needs regulating. We don’t want the mobile companies to get too cozy with each other.

PSTN interconnect

When you make a call from one landline network to another, you use PSTN interconnection.

This has been a huge deal in the past. It needed regulation. Big powerful phone companies could make life hard for smaller rivals by messing with interconnect.

Landline calling is in decline. Spark is in the process of decommissioning its PSTN. These days the majority of calls are either wireless or voice over IP.

Yet there are user who remain dependent on the old technology and may do for years to come.

It’s a reasonable bet that when the next five year review rolls around, the Commerce Commission can drop PSTN interconnect regulation. It’s not a certainty.

Rural mobile closing the gap thanks to RCG

New Zealand’s rural mobile users face slower download speeds than people in towns. In almost every case the rural mobile experience is worse.

Although the gap between rural and urban has closed, it could open again as carriers roll out 5G networks.

Opensignal’s May 2021 mobile network experience report puts the improvement down to government-led initiatives.

Both the updates to the Rural Broadband Initiative and the Mobile Black Spot Fund have played a role.

Rural Connectivity Group kudos

Above all, credit must go to the Rural Connectivity Group. This is a joint venture between Spark, Vodafone and 2degrees set up to deliver rural network upgrades.

The three companies had government funding and invested their own money to build additional cell sites in areas needing extra coverage.

To date there have been 200 new RCG towers. Eventually there will be more than 500. If it seems like only yesterday there were 100 RCG towers, that’s because it happened less than a year ago.

RCG carriers share spectrum and resources. The towers are open access, other carriers can use them.

RCG delivering

Opensignal’s analysis shows the programme is already delivering results. There is more to come as further towers are added to the network.

To measure mobile network performance Opensignal collects data from handsets. The business is UK-based and produces similar research in a number of countries.

UK-based Opensignal says the gap between rural and urban mobile experiences is closing.

In its May 2021 report Opensignal says while disparities between rural and urban mobile remain rural mobile is improving.

Time connected to 4G

It reached this conclusion by looking at the proportion of time users spend connected to 4G networks.

In recent months this figure has increased at a faster rate for rural users than those in urban areas. Although rural comes from a far lower base, it is catching up.

Opensignal takes a competitive view of performance. It also zooms in on applications like video and mobile gaming. Yet the interesting angle is how the urban – rural mobile gap is closing.

It ranks the three carriers against each other. If you’re wondering about Skinny, that’s a Spark brand with customers using the Spark network.

2degrees shows the greatest improvement, Vodafone the least.

Customers on the Vodafone network saw the gap between urban and rural time on 4G networks fall 4.8 percent. For Spark users the drop was 5.8 percent. At 2degrees it fell 7 percent.

Closing the gap

Opensignal says before the Covid lockdown 4G availability for rural users was close to 25 percent behind urban levels. Now it sits at around 17 to 18 percent behind.

The report goes on to compare the mobile experience with different types of use. It says only 2degrees urban customers enjoy an excellent video experience. The company’s rural customers do better than Vodafone’s urban customers.

Meanwhile the mobile games experience is underwhelming everywhere. The three carriers deliver a ‘fair’ gaming experience in urban areas. This drops to ‘poor’ outside the towns and cities.

Opensignal scores for rural download and upload speeds are a long way behind urban speeds. Spark is fastest overall. Its urban customers can download at an average of 41.9Mbps. In rural New Zealand, 2degrees’ customers get less than half that speed: 20.2Mbps.

5G can close or open rural mobile gap

The report concludes that if carriers use 5G on lower frequency bands in rural areas, the performance gap with urban mobile would close.

Eventually carriers will be able to use a range of frequencies for 5G.

The distance a mobile signal covers changes depending on the frequency. Lower frequencies travel further, higher frequencies cover a small area. There’s more bandwidth the higher you go up the spectrum.

Alternatively, if they focus on adding high capacity in urban areas, the mobile digital divide will widen.

To date Vodafone has concentrated on building 5G in urban areas. That’s where it sees the greatest demand, not necessarily the greatest need.

Spark started its 5G build in small South Island towns. Now it is building capacity in the main centres.

If the government wants to narrow the rural mobile experience gap, it may need to impose usage conditions on 5G spectrum in future auctions.

How satellite broadband can hurt New Zealand ISPs

New Zealanders will soon have new, affordable satellite broadband services to choose from.

At the time of writing, there’s no clear threat to urban broadband service providers. It could be another story outside the cities and towns.

The further you are from established networks, the better satellite looks. 1

Satellite is not new

Satellite broadband has been available here for years. In the past it has been a last resort for people who can’t get a decent connection any other way.

Established services are expensive and need specialist equipment. They’re not easy to use. Even lining up a dish can be troublesome.

When you get a connection, it is slow by today’s broadband standards and has terrible latency.

Geosynchronous

Earlier satellites use something called a geosynchronous equatorial orbit or GEO. Geosynchronous means they stay in the same position above the earth’s surface.

As the other part of the name suggests, they orbit close to the equator.

For New Zealand users this means your dish need to be able to see the skies to the north. A GEO isn’t much help if you are south of high hills or buildings.

GEO satellites have to orbit at a great height. Which means they are a long way from a dish. Their signals may travel at the speed of light, but lone distances mean they have high latency.

In comparison, GEOs have a huge footprint.

Dig the new breed

The new wave satellites are LEOs. They fly in a low earth orbit. This reduces latency.

LEOs offer much more bandwidth than GEOs. The broadband experience is closer to, say, that offered by fixed wireless.

A satellite company can cover a lot of territory with one or two GEO satellites. LEOs have a smaller footprint.

To make LEOs useful, the companies running them need to have large numbers. You need enough so that customers are always covered as they fly past.

Coming soon

At least three companies plan LEO networks that can deliver broadband in New Zealand.

One, Starlink, has published a New Zealand price list and is taking orders. The others include Oneweb, which aims to start services later this year.

Amazon has Project Kuiper which is well behind its rivals, but brings the clout of a tech giant. And don’t underestimate the connection with Amazon Web Services.

Both the European Union and the State Grid Corporation of China plan LEO networks. These may not offer services here.

It starts with Starlink

The most advanced is Starlink. It has 1300 satellites at the time of writing. The company has permission to increase that to 4400. That is around 50 percent more than the total number of satellites currently in our skies.

Starlink plans to charge NZ$160 a month for an uncapped broadband plan. Customers have to buy the company’s earthbound hardware to use the network. That’s an upfront cost of more than NZ$900.

According to Starlink, customers can expect speeds of between 50Mbps and 150Mbps. Let’s take it as read that most users will be closer to the bottom of that range.

There will be times when there is no satellite coverage. Which ruins activities like streaming TV, especially live sports.

Competitive pricing

Given that uncapped fibre max plans cost around $100 a month, Starlink looks expensive. The proposed charge is high compared with fixed wireless broadband.

If you are a rural user beyond the reach of the mainstream broadband networks, NZ$160 is a bargain. The hardware cost is nothing compared to having fibre connected to a remote property.

While Starlink does not pose an immediate threat to mainstream ISPs, it will be a headache for the innovative Wisps who string local networks up and down remote valleys in rural areas.

The threat

Customers in these hard to connect rural areas will be the first targets for LEOs. One way or another, they will upset the Wisps’ business model.

Small local service providers have a get out. They may be able to set up as resellers of satellite services. They have limited, but concrete, options to add value. Margins will be low, but that’s often the way in the telecommunications sector.

Fixing the fixed wireless lottery

Another group of potential early satellite customers are those people on RBI fixed wireless broadband towers who don’t have good coverage.

Rural fixed wireless broadband is a lottery. If you’re on a non-congested tower and you can see the antennae from your property, then the chances are you get decent speeds.

If you are further away, or your tower is congested, fixed wireless speeds can be lousy. For many of these people, in particular, those who need broadband for work, that NZ$160 a month 50mbps uncapped satellite plan looks like a bargain.

Diluting RBI

It will take a time for those RBI customers to wake up to the charms of satellite broadband, but once word gets out, you can expect an exodus from poor quality fixed wireless connections.

Spark and Vodafone will be the most affected. Losing large numbers of fixed wireless customers can change the economics of operating rural towers.

It also changes the value of the spectrum used to serve these customers. They may be able to put those frequencies to better use elsewhere. It’s not inconceivable that one of the big telcos partners with a satellite company to retain customers if their mobile phone business is valuable.

Moving targets

While the costs and performance stay at NZ$160 a month for 50–150Mbps, satellite won’t make huge inroads in places where there is fibre. Nor is it enticing compared with the better fixed wireless connections.

Yet nothing is fixed. Starlink has said it plans to double speeds over time and to drop rates. And who knows what could happen if there are three competing LEO networks?

A 300Mbps connection for NZ$160 a month starts to look good against the better performing RBI wireless service.

If the price drops to, say, NZ$100 a month, then the satellite companies could eat into Spark, Vodafone and 2degrees fixed wireless profits.

Price war

We know the carriers have room to lower their costs. Look at the annual results for the carriers and you’ll see fixed wireless has reasonable margins.

It’s possible New Zealand carriers could find themselves in a price war with global scale satellite ISPs.

That could, over time, have a knock-on effect that reaches into the fibre broadband sector. Paying $100 a month for an uncapped fibre max connection looks good value against today’s fixed wireless plans. This might not always be the case.

A lot has to happen before satellite broadband has any local impact, let alone affect prices for terrestrial services.

The most likely outcome is that satellite will alter the economics of rural broadband and not change much in our towns. Yet, it will add a further layer of competitive pressure.


  1. Satellite is an excellent fallback option for people using other forms of broadband. ↩︎

Gigabit fibre fixed after Measuring Broadband report

Gigabit broadband plans showed much better speeds in the April 2021 Measuring Broadband report.

The Commerce Commission doesn’t like fast fibre described as gigabit. It prefers “Fibre Max”.

That’s because plan customers don’t see gigabit speeds. While the wholesale circuit runs at a gigabit, network overheads reduce the usable bandwidth seen by the user.

Fibre Max or Gigabit, either way it is fast broadband. The plans more than enough for all but the most demanding customers1.

The Commerce Commission publishes its Measuring Broadband monitoring reports four times a year.

Spotlight on Fibre Max performance

Ever since the UK-based SamKnows began monitoring broadband there has been an issue with Fibre Max performance. Customers see a wide range of speeds.

Measuring Broadband report showing poor Fibre Max perforamand in mid-2020

In cases the speed was close to half the nominal gigabit per second. At times it was even lower – see the chart. It was noticeable that performance was worse in the South Island than in the North Island. Hence the uneasiness with calling plans ‘gigabit’ fibre.

In December the Commerce Commission set up a working party to investigate the problems with Fibre Max. There was more than one issue to consider.

You can read the report for yourself, but the short version is that issues were identified and acted on.

Fibre max now 200Mbps faster

The April report clocks the average Fibre Max speed at 840Mbps. That’s more than 200Mbps higher than in earlier reports.

There is a performance range. Customers on the Spark and Vodafone networks see higher speeds than those on other networks. My Republic continues to lag its rivals.

The report says the differences are not statistically significant. There’s not enough going on to make anyone want to shop around for another service provider.

Customers on Fibre Max plans see a small, but noticeable performance dip during peak hours. The report goes on to say this is not enough to affect performance.

Upload speeds on Fibre Max plans average 500Mbps.

Measuring Broadband beyond Fibre Max

Vodafone’s HFC Max, that’s broadband based on the company’s hybrid fibre co-axial cable network, was measured for the first time. It comes in behind Fibre Max with an average download speed of 672Mbps. The average upload speed is 93Mbps.

When HFC Max was first introduced, remember FibreX?, speeds were behind the better fibre plans. It’s caught up. In practice customers will get much the same experience as they’d get on the UFB fibre network.

UFB customers buying 100Mbps fibre plans get exactly what it says on the label: connections running a tick over 100Mpbs.

VDSL performed better than fixed wireless broadband for downloads while fixed wireless was a little faster than VDSL for uploads. The average VDSL customer saw 41.9Mbps down while the fixed wireless average was 25.2Mbps. These speeds are in line with earlier reports.

Fixed wireless lottery

Fixed wireless broadband remains something of a lottery. It can be good. If you are in the right place you might get fibre-like speeds. But as the Measuring Broadband report says:

  • Fixed wireless has the highest latency of all technologies apart from satellite (not currently reported on by MBNZ).
  • Fixed wireless connections will be more likely to experience issues with latency-sensitive applications such as online gaming or video conferencing.
  • Fixed wireless connections can also be affected by congestion (for example average download speeds dropped by 25 percent in the March 2020 Covid-19 lockdown because of increased congestion).

  1. Fibre Max isn’t the fastest plan you can buy. Hyperfibre is four times the speed↩︎