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.

Unpicking AWS’ New Zealand numbers

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.

Mystery

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?

Electricity

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.

Data transit

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.

Market share

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?

Datagrid

Datagrid is a $700 million project to build what may still be New Zealand’s first hyper-scale data centre. The business is headed by Remi Galasso and Callplus founder Malcolm Dick.

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?

Scale

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?

In March Spark told Computerworld’s Sarah Putt it estimates total cloud revenue at around $730 million.

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.

Unknowns

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.

Efficient

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.


  1. A speculating person might wonder if Datagrid will become part of AWS. ↩︎

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.

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

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.