New customers signing for Vodafone’s home fibre plans can get an Ultra Hub Plus modem as part of the deal. This means they get a connection on the carrier’s mobile network straight away. Lucky customers will connect via 4G. Less fortunate ones may have to do with a 3G connection.

Ultra Hub Plus is an interim fix while customers wait for fibre. It means their connection is not disrupted during the installation. Once they are on the UFB network, it then acts as an always on backup connection. Like a lot of these things it is good in parts.

Vodafone’s press release says the Ultra Hub Plus makes for a smoother switch to fibre.

It goes on to describe the Ultra Hub Plus as a “game changer”: isn’t everything these days? The release also says it is super easy to set up and use and a seamless experience.

I tested the device and found Vodafone isn’t exaggerating on those counts. Yet it’s not all wonderful. The Hub’s fixed wireless broadband performance is only so-so.

Vodafone Ultra Hub Plus

Easy as

When you sign up, Vodafone dispatches an Ultra Hub Plus modem by courier. Open the box and along with the modem and its power supply are a couple of sheets of paper. One says: “Five minute easy start”.

Experience says that a marketing department that uses words like “game changer” then adds both ultra and plus to an otherwise straightforward product name might not take a lot of care over a claim like five-minute easy start.

In practice, Vodafone’s claim is modest. I had a working connection in four minutes.

You plug the device in, then hit the power button. The instruction sheet says the modem’s wi-fi is active in around 90 second and the 4G or 3G connection is ready in three minutes and thirty seconds.

Both sets of indicator lights switched on more or less on schedule.

Wi-fi router

The next step is to connect wireless devices to the modem. Vodafone includes another sheet of paper with a QR code. All you need to do is point an iPhone or iPad camera at the code and those devices will connect.

If you use Android, you’ll need to download a QR app first. Depending on your circumstance, this could take you past the five minutes. But not by much.

With Apple devices, you only need to scan once, all your other Apple kit learns the password by what seems like telepathy. In truth this is one of those Apple features which feels a little like magic.

Ethernet

There are three Ethernet ports on the back of the Ultra Hub Plus, so connecting a laptop or desktop with a port is a breeze. Connecting by wi-fi is also straightforward. Either use the scan code or press the WPS button and find the Hub in your wi-fi router list.

This is as easy and fast as Vodafone’s marketing promises.

It is not the end of the set up story.

While the set-up speed for Ultra Hub Plus is impressive, the broadband speed is not great.

As you can see from the screen shots, I get around 13 mbps down, less than 5 mbps up.

Throttle

While higher speeds are possible in theory, Vodafone says it throttles the speed to 12 down and 6 up. At the same time, it tweaked the hardware to deliver a decent level of service.

How decent? In practice the throttled, optimised throughput is plenty for acceptable high-definition television streaming. When I first tried, we saw plenty of buffering. Once things started the modem seemed to cope with the stream.

Next I tested Sky’s Fan Pass and BeIn Sport on an iPad. In both cases the apps stumbled at first. Each gave me an initial error message. Fan Pass thought there wasn’t a network connection for a few seconds. BeIn went blank.

None of this happens with my normal connection. It might scare less tech-savvy users, but everything worked fine only seconds later.

In both cases the picture was acceptable soon after. There was a little stutter at first, then it settled down. I even managed to get two streams running at the same time. Which says a lot about acceptable baseline speeds for non-specialist home internet users.

Vodafone Ultra Hub Plus verdict

There’s a clever balance here between ‘enough broadband to tied you over’ and ‘not clogging the mobile network with fixed wireless traffic’ or ‘encouraging customers to choose this instead of fibre’. Vodafone has the mix spot on for what the Ultra Hub Plus promises on the box.

The Ultra Hub Plus’ ability to act as a back-up connection for when fibre fails is also smart.

Fibre doesn’t break down often, except in a power cut which, ironically, would also take out the Ultra Hub Plus. In that case then you’ll need to use a mobile phone. Many of us are so dependent on broadband that an alternative channel, that’s still able to handle Netflix is an insurance policy.

Vodafone says it will offer fixed wireless broadband to customers who are ‘frustrated’ waiting for a fibre connection. Customers signing for 12 months of the Vodafone Ultimate Home Fibre plan get an Ultra Hub Plus modem as part of the deal. In a media release, Vodafone says this will give them a “mobile broadband connection over Vodafone’s 4G/3G mobile network while they wait for their fibre broadband to be installed.”

The release quotes the outgoing Vodafone consumer director Matt Williams. He talks about “significant installation delays“.

According to Chorus, the average wait for a fibre connection is now 13 days. Enable says it generally connects customers in stand-alone buildings in under two weeks. These numbers do not sound like “significant installation delays”.

Installations can drag on longer for people in apartment blocks and more complex housing. So it is possible Vodafone’s wireless broadband offer will help in these cases.

Wireless broadband is a backward step

Most people who order a Vodafone Ultimate Home Fibre will either be on copper or Vodafone’s FibreX. Many will already have broadband speeds far faster than they could get from a 4G/3G fixed wireless network.

Broadband Compare reports Vodafone Home Basic 4G has a 36 Mbps download speed. It uploads at 10 Mbps.

Yet, the press release announcing the Vodafone Ultra Hub Plus modem deal promises less than that:

Maximum speeds will apply while the customer is connected to the mobile network through their Vodafone Ultra Hub Plus (up to 12 Mbps Download / up to 6 Mbps Upload).

Vodafone’s own Everyday Home VDSL plan has a Broadband Compare listed speed of 50 Mbps down and 10 Mbps Up. The company’s Smart Connect FibreX plan runs at 200 Mbps down and 20 Mbps up. Even Vodafone’s ADSL plan is 10 Mbps down and 1 Mbps up.

These speeds are only estimates. I have a Spark VDSL connection that runs at around 70 Mbps down and close to 20 Mbps up. There is a range of speeds, but the Broadband Compare figures are realistic averages. We can take them as a guide.

Life in the slow lane

Many Vodafone customers waiting for fibre will get slower broadband if they opt for Ultra Hub Plus.

That’s not all. The 36 Mbps speed is what you should get with a 4G connection. As Vodafone’s own marketing makes clear, some users will be on a 3G connection. Vodafone’s press release announcing the Ultra Hub Plus modem deal says (my emphasis):

The Vodafone Ultra Hub Plus 4G/3G connect and mobile backup are only available in 4G/3G coverage areas with sufficient capacity. 4G/3G not available everywhere.

The small print also says:

Traffic management and fair use policy applies.

In other words Vodafone can cut you off if you use it a lot. The copper plans mentioned above all have unlimited data options. So customers used to unlimited data might find this aspect frustrating.

Vodafone’s Ultra Hub Plus modem wireless broadband deal is not much of a drawcard at all.

Disconnection

Williams is on more solid ground when he says: “…others say they are putting off a move to fibre because they simply don’t want to be disconnected while they wait”.

It’s not as connection cuts anyone off for long. Most fibre installs only take a few hours. And if they are Vodafone customers then there’s a good chance they’ll have mobile phones. It’s not hard to get internet access on a modern mobile phone.

If that’s not enough, then, at a pinch, they can tether. That way phoned connect laptops or desktop computers for an hour of two while a connection goes in.

Another part of the press release says:

In addition to enabling customers to be connected while they wait for fibre installation, the Ultra Hub Plus modem will also provide a mobile backup connection allowing customers to stay connected in the event a fault affects their fibre service.  Once the fault is repaired, the modem will automatically switch back to fibre, which ensures customers are always connected.

This is a good idea. Automatic failover is a good way of handling problems. Although fibre networks are more reliable than copper or fixed wireless broadband. Back-up is a nice-to-have. It would be wonderful for people who can only get a copper connection. Most people on the fibre network will never use it.

Mobile phone handsetA Commerce Commission investigation into mobile market competition is underway. The carriers think they’ve seen enough regulation, with some justification. And yet there are areas where New Zealand’s mobile market does not work as well as it might.

Spark managing director Simon Moutter has a point when he says New Zealand’s mobile market is competitive.

On the most obvious level, the mobile market works well. Prices for monthly accounts, calls and texts have fallen. Consumers pay less and get more.

New Zealand is no longer an expensive place to own a mobile phone. Cellular voice and text prices are in line with those in comparative overseas markets.

2degrees not lobbying for regulation

It speaks volumes that 2degrees is not asking for further market structure changes. The third carrier is profitable and continues to put price pressure on Spark and Vodafone.

2degrees CEO Stewart Sherriff says his company invented competition in New Zealand. His company has certainly made the mobile phone sector price competitive in a way that it wasn’t before.

Prices from the larger carriers didn’t start to fall in earnest until 2degrees got market traction. Sherriff’s company is often the first to move on price. 2degrees is innovative and aggressive when it comes to pricing bundles of mobile services.

In Moutter’s eyes, the tough price competition at this level is enough to prove the market works. Yet we could do better.

Where the market doesn’t work

There is one clear way New Zealand’s mobile market competition isn’t functioning as well as it might. Customer service is, at best, indifferent. Often it is appalling.

If the market was truly competitive, carriers would not be able to get away with leaving customers on hold for hours or failing to solve trivial technical problems.

That’s not something the Commerce Commission can address in a direct way. Complacency about customer service is a clear sign a market could be more competitive. We replaced a monopoly with a duopoly and then an oligopoly. From a consumer point of view: worst, worse and not good.

Areas the Commerce Commission should address

There are three areas the Commerce Commission needs to address in its mobile market review. All three have the potential to improve competition.

  • First, New Zealanders still pay too much for mobile data.
  • Second, there are warning signs of collusion between carriers that should worry the regulator.
  • Third and top of the list is the lack of diversity in mobile phone service retailers.

A lack of retailer diversity is the issue that triggered the mobile market review. Last year the then Communications Minister Simon Bridges wrote a letter about it to the Telecommunications Commissioner Stephen Gale.

Bridges writes:

“I note that submitters raised concerns about the effectiveness of regulation at the wholesale level, particularly with regard to the provision of Mobile Virtual Network Operator (MVNO) services. In other countries, these services are an important part of the mobile ecosystem, and the widespread availability of such services has led to better outcomes for consumers.”

Where are the MVNOs?

The lack of MVNOs in New Zealand is beyond debate. In many markets, these alternative carriers account for a large slice of the total market. Here MVNOs barely register.

It is theoretically possible there are no MVNOs in New Zealand because the market competition is already so perfect and the incumbents look after customer needs so well that there is no room for them.

That argument doesn’t stand up for a moment.

When is an MVNO not an MVNO?

New Zealand’s biggest MVNO isn’t really an MVNO at all. Spark’s Skinny business exists to give the nation’s largest telco a budget brand without cannibalising its core market. Skinny is not a true MVNO because its parent company owns the network.

Skinny is Spark lite. Today Skinny customers get almost the same product as Spark customers but without the value-adds like Wi-Fi hotspots and Spotify. Otherwise, the plans are a few dollars less each month than equivalent Spark plans.

In effect, Skinny is another Spark mobile product line.

The Warehouse

New Zealand’s next biggest MVNO is the 2degrees-Warehouse tie-up. It is price competitive but hasn’t caused any waves in the market. The number of customers would be a rounding error on the numbers for the three big players.

The Warehouse isn’t pushing hard with its mobile option. If you walk into a store you’ll have to hunt to see where you can buy it and sales staff don’t seem motivated to emphasise it.

Vocus is New Zealand’s fourth largest telco. Unlike the three bigger telecom companies it doesn’t own a mobile network.

There are some Vocus MVNO customers, but not many. You could probably fit them all in a room. Vocus doesn’t make much money, if any from them and, like The Warehouse, it isn’t marketed.

Full telco service

In most other western countries a business like Vocus would be able to partner with a carrier and offer its customers a full telecommunications service including mobile. It would be able to bundle services and offer keen prices.

That’s not the case in New Zealand. Likewise, you can imagine other smaller telcos and even companies that dabble in telco like, say, TrustPower, would love to offer mobile as an add-on to power and broadband.

MVNOs perform two vital market functions. First, they often serve more specialist customer needs not catered for by the bigger players.

MVNOs are about choice

Second, they act as a pressure valve for the market. Many disgruntled customers leave one carrier only to find their new choice is just as annoying. The MVNOs give consumers a new set of choices.

Until MVNOs make up about ten percent of the market, preferably more, New Zealand does not have true mobile competition.

The Commerce Commission needs to look at the barriers to entry for MVNOs. If these are structural, then there is a need for new rules.

Skimpy data plans

The second sign that competition doesn’t work well in New Zealand’s mobile market is the skimpy mobile data plans on offer. In recent months carriers have begun selling what they call unlimited data, but the small print makes it clear they are anything but unlimited.

We pay a lot for mobile data. This is especially true when you look at data-only plans. We pay a lot more than, say, Australia.

On the other side of the Tasman, you can pay A$65 a month for 50GB of mobile data. In the UK £25 buys 100GB of mobile data. That’s around NZ$50.

At the time of writing the best deal in New Zealand is 2degree’s 25GB for NZ$70. That’s roughly twice the price Australians pay and, depending on exchange rates and taxes, around five times the UK price.

Economy of scale

While you can argue that Australia and the UK have economies of scale, it’s hard to imagine scale means the cost of supply in New Zealand is twice that in Australia or five times that in the UK.

It is significant that the Australia data deal quoted above is from Amaysim, a MVNO. These smaller MVNO players have put huge pressure on the prices charged by the network owners for data.

There’s another way you can look at New Zealand’s mean mobile data caps. The competitive pressure in other countries means carriers dedicate their spectrum to satisfying the needs of mobile customers. If they don’t, someone else will.

Fixed wireless broadband

Spark mobile customers share the company’s cellular bandwidth with 100,000 fixed wireless broadband customers. If the mobile market was competitive, Spark could not afford to risk degrading the mobile data experience.

How Spark manages its resources is the company’s own affair. It is certainly possible to run fixed and mobile broadband on the same networks without disappointing either group of users — that happens in lots of countries. It’s possible there is enough spectrum to satisfy both groups.

Spark may have a good explanation why 100,000 fixed wireless customers downloading gigabytes each month have nothing to do with mobile market competition. But it’s something the Commerce Commission investigation needs to take into account.

Is there a cartel?

A third area the Commerce Commission needs to consider is something from left field. The three carriers have banded together to build a rural mobile network with shared infrastructure.

The Rural Connectivity Group is an intelligent and innovative solution to what looks like a tricky problem: delivering broadband to small remote communities and filling in the mobile blackspot on country roads.

While it makes sense for rivals to co-operate on a project of this nature, it isn’t without risk. In his book The Wealth of Nations Adam Smith wrote:

People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.

Smith was no tin-foil hat conspiracy theorist, he is recognised as the father of modern capitalism. His name is forever tied to the ideas of free markets.

Rural Connectivity model

The danger with the RCG is that it could become the model for the next generation of mobile networks throughout New Zealand. There have already been whispers of the carriers considering acting together to build a 5G network.

When Chorus recently floated the idea of creating a UFB-style open access 5G mobile network the carriers were quick to shoot it down. A line hidden in a media statement from Vodafone could be interpreted as suggesting the carriers are thinking of building a shared 5G network:

There is no question that industry-wide collaboration makes sense in some instances, and the industry has already demonstrated working models for this.

You could see this as getting the regulator and others used to the idea of industry collaboration when it comes to 5G.

5G networks

Moutter takes the argument further. He starts by saying Spark can build a 5G network on its own:

No industry amalgamation was required for the transition from 3G to 4G, and none is required from 4G to 5G. Based on our current analysis, we think the investment for 5G will be manageable, as we will be able to leverage our existing 4G and 4.5G physical infrastructure.

Which sounds reasonable. He then goes on to say:

That’s not to rule out sensible infrastructure sharing where that can speed up deployment or address visual pollution issues that might come from the deployment of more network sites – we are supportive of those models. But to jump straight to a conclusion that we need a monopoly network would be crazy.

Sensible

Which could be another subtle softening up of the idea of a shared infrastructure. When you run a large partly vertically integrated business “sensible” can take on a lot of meanings.

As 5G networks are understood at the moment, they will need many more towers than today’s networks so the deployment issues and visual pollution he mentions are a given.

None of this is to say the carriers are planning to build a shared 5G network, nor is it to say the network structure will be inherently anticompetitive. It is something for a market regulator to consider and watch.

Competition or cartel?

It’s not the Commerce Commission’s job to second guess an as-yet-unsettled technology. Nor can it speculate about plans that may only be written on the back of paper napkins.

Yet it strains credulity to think the three carriers put their heads together to plan the RCG without at least mentioning how such a collaboration might work in the future.

At this point the Wikipedia definition of a cartel is useful:

A cartel is a group of apparently independent producers whose goal is to increase their collective profits by means of price fixing, limiting supply, or other restrictive practices. Cartels typically control selling prices, but some are organised to control the prices of purchased inputs.

No-one would suggest any of this is happening at present, but allowing the three carriers to build a shared network would be a step on the path to a potential cartel-like arrangement.

Vodafone says it will start moving all its copper landline customers to a voice over IP service later this month.

The Dominion Post reports Vodafone will move customers with VDSL connections first. Those on the Vodafone FibreX cable network and customers with older copper connections will move next year.

Vodafone consumer director Matt Williams says the move is a response to Spark’s planned PSTN shut down. In April Spark said it will close the old telephone network by 2022. Vodafone buys PSTN services from Spark.

No more languishing

Williams says the early change over is: “so our customers can take advantage of the benefits of this technology as it evolves versus languishing on an outdated network.

Vodafone customers with UFB fibre connections already have VoIP calling. Until now FibreX customers have used copper lines for traditional phone calls.

The company says it will send customers detailed information and provide support before the upgrades start. For most the change will mean no more than unplugging existing phones from the wall and plugging them into a broadband modem or router.

There may be issues for people with alarm systems that use copper phone connections.

Vodafone’s move to VoIP is a long way ahead of necessity. While Spark said it would close its PSTN service, that’s a five year process. It means replacing hundreds of telephone exchanges and network nodes with three new nodes.

New Vodafone VoIP business plans

Vodafone will offer business users new all-in-one packages that includes voice calling and internet. The Office Net Unlimited plan is for VDSL users, Office Net Unlimited is the fibre version. Both plans cost $100 a month but require customers to sign for a 24-month term. As the name suggests, the plans include unlimited voice calls.

Office Net and Office Net cost $110. They include 200GB of data and 500 minutes for calls to anywhere in the world.

This week the Commerce Commission published its draft numbers for the $50 million Telecommunications Development Levy. In a way the TDL acts as a report card on the shifting fortunes of the main telecommunications companies.

The levy is, in effect, an extra and, somewhat discriminatory, tax on telecommunications companies imposed by the outgoing National government. It adds up to a roughly one percent increase in telecommunications prices.

As in previous years Spark and Vodafone are the biggest contributors paying 35 and 26 percent. Chorus and 2degrees are three and four.

The big four players will pay more than 90 percent of the total levy. Another eleven companies will pay about eight percent of the TDL between them.

Investing in rural networks

The TDL helps subsidise investment in rural networks. Most of the money will go back to three of the biggest payers. Spark, Vodafone and 2degrees, as the Rural Connectivity Group, won the contract for bid the second phase of the Rural Broadband Initiative.

There’s a double whammy for Chorus investors. Not only does the company not get any of the TDL money back in the form of contracts, but unlike the telcos, Chorus can’t raise prices to fund the tax because most of its rates are regulated.

What the TDL says about the industry

Only companies with telecommunications revenue of more than $10 million pay the TDL. When deciding how much each should pay, the Commerce Commission extracts a number it calls qualifying revenue. This figure can often be well below $10 million.

The commission adds all the qualifying revenue. Then companies pay a share of the $50 million TDL based on their share of qualifying revenue.

You could look at the way the share changes as a crude, yet effective, measure of relative performance.

The total pool of qualifying revenue changed little between this year’s determination and last year’s. In both cases it comes to a little over $4.2 billion.

In other words, taken as a whole, New Zealand telecommunications industry growth is flat. Taking inflation into account, that means it is actually in gentle decline.

Spark still dominates, but falling

Spark remains the largest contributor to the TDL. In the 2016-2017 year its share was a fraction over 35 percent of the total. That’s down from almost 38 percent a year ago, a fall of around 2.5 percent.

Vodafone barely shifted position in the year at a little over 26 percent. Its share of the TDL total climbed by 0.1 percent. You could see this as closing the gap on Spark. In very round numbers Spark is around a third of the total market and Vodafone is a quarter.

Chorus saw its share of the total grow by half a percent. It remains the third largest telco with getting on for 23 percent of the total.

2degrees is a climber. Its share of the total grew from 7.25 percent to 8.38 percent. This reflects the company’s strong performance in the market. While it is still a long way behind Vodafone and Spark, to be almost a third the size of Vodafone after seven years in the market is a major achievement.

Vocus is down a smidge at 3.25 percent of the total. It is less than half the size of 2degrees and less than a tenth the size of Spark. The company’s relative size could mean few regulatory hurdles if other New Zealand telcos attempt to buy it.

The five largest telcos collectively account for almost 96 percent of the total TDL in this year’s determination. That’s down one percent from last year.

Fibre effect

This is because of fibre and the rise of the regional fibre companies. Ultrafast Fibre, Enable and Northpower saw their total share climb from less than one percent of the total to about 1.6 percent.

This happens because as customers move from the copper network to UFB fibre some of the money those customer pays switches from Chorus to the regional fibre company. As more sign up for fibre these companies will continue to grow their share of the TDL, but at some point they will stabilise.

Most of the other changes are down to what scientists might call noise in the numbers. Although there is a newcomer in the TDL list this year, Now only accounts for 0.13 percent of the total.