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.

Vodafone TVYou need a fast fibre connection to use the new-look Vodafone TV. Less than 100Mbps won’t cut it. That means a UFB connection or Vodafone’s own FibreX alternative.

You also need a Vodafone broadband account. The service is company exclusive. CEO Russell Stanners says he hopes customers who like the look of Vodafone TV will reward his company with their business.

Vodafone has offered a TV service for some time. Its 2013 earlier incarnation was, in effect, a version of Sky TV’s My Box reworked for the internet.

The new version is something else. The hardware is a puck-sized box packaged with a remote control. In some ways it is like Apple TV.

It’s not about the hardware

There’s not much to the hardware because there doesn’t need to be much. The cloud does all the heavy lifting. An Amazon server stores all TV shows, movies and other video. It could be in Australia, but it could be anywhere in the world.

Cloud storage has the vast catalogue of material and the user’s own saved program choices.

There are also mobile clients for phones and tablets. Stanners says, you might be sitting at home watching the All Blacks test on a large screen before going on a trip.

When your taxi arrives, you can press pause on the big display. Load yourself in the car and resume watching the game from the point where you stopped en route to the airport. Pause again, dump your bags and find a seat in the lounge before getting back to watching the game on your tablet.

Stanners says the experience is seamless and brings all the screens together. Vodafone wasn’t able to show the hand-off at the Auckland event to show off the product. Yet staff were able to show how well Vodafone TV works on big screens and on mobiles. It is impressive and like all impressive technology has a faint whiff of magic about it.

Reverse electronic programme guide

Using the cloud has other advantages. There’s no likelihood of running out of local storage. And there’s a powerful reverse electronic programme guide.

This makes it easy to find the shows you want. One neat twist is you can use your mobile phone to cue big screen content. It’s a form of on-demand programming. Armed with the reverse programme guide, you can search back through the last week or so to find shows that you may have missed. The actual timespan wasn’t discussed.

Vodafone TV uses the company’s proprietary intellectual property. The company has a similar product in parts of Europe. Stanners says there has been a huge amount of local input into the service on sale here. Not least, is the work clearing the rights with content owners to build the reverse electronic programme guide.

Vodafone TV: made for Sky merger

The TV-as-a-service product was already in the pipeline when Vodafone planned to merge with Sky. It shows what Vodafone was able to bring to the party. Sky, meanwhile, owns the bulk of content. It will all be there on Vodafone TV, but it’s isn’t an exclusive relationship. The device is able to run apps and from day one there will be Netflix, YouTube and content from Mediaworks. TVNZ will join them soon after.

Vodafone was coy about the precise launch date and the cost. Stanners says it will be soon. There was a whisper at the event that soon means the next week or two. We could have the new Vodafone TV before we have a government.

He wouldn’t talk prices, but Stanners says they will be competitive. Again, the word around the event is that it won’t be expensive. There will be add-ons, some premium content and extras like Netflix subscriptions. At this stage customers will have to buy Netflix themselves, but Vodafone may yet offer it.

Party-on dudes

It doesn’t stop there. Stanners says one advantage of Vodafone’s approach is it makes distribution easy for smaller content providers. He says that means we could see the emergence of Wayne’s World-like niche channels.

The event made it clear there is still a strong relationship between Vodafone and Sky. Vodafone TV delivers most of what a merged operation could have achieved. It does so without causing regulatory ripples. There is no legal compulsion for Sky to offer the same content to other broadband suppliers.

Vodafone TV puts the company in a strong competitive position. It should be able to grow its share of the broadband market. Yet even with stellar growth it will struggle to match Sky’s satellite reach. It goes places fibre doesn’t.

Fibre is important to Vodafone TV. You need a solid, fast, reliable connection for it to work.

Chorus and the other fibre companies have graphs that show how fibre uptake took-off. It happened first when Spark introduced Lightbox. Then, again, when Netflix opened in New Zealand. There were two clear inflection points.

Inflection point

It wasn’t only uptake. The graphs also showing how much data users download. These also turned corners at the inflection moments. Expect a similar effect as Vodafone TV kicks in.

Close Vodafone watchers may have spotted a theme with the company in recent months. Vodafone group product director Sally Fuller was in town earlier this year. The main thrust of her presentation was that we’re moving to: “Everything-as-a-service”. She says the ownership of things is on the way out, instead we buy outcomes.

This is something you could miss in Vodafone’s TV announcement. Yes, it is a flash new product. It has the capacity to delight customers and win business from rivals.

At the same time it is another step closer to “everything-as-a-service”. This is the future world Vodafone refers to in its advertising. Vodafone TV is more than a product, it is a strategy.

cellular towerEarlier this year Communications Minister Simon Bridges wrote to the Commerce Commission asking it to investigate competition in the mobile market.

Last Friday the Commerce Commission confirmed the study will go ahead.

The Commerce Commission says study aims to “better understand how mobile markets are developing and performing, particularly around the competitive landscape and any emerging competition issues”.

In his letter, Bridges noted that, unlike many other countries, New Zealand does not have thriving mobile virtual network operators.

Mobile virtual network operators

MVNOs are a feature of many mobile markets around the world. They can account for a large slice of the market. In Australia MVNOs are about 10 percent of the mobile market.

Often run by well-known consumer brands, MVNOs buy wholesale services on existing mobile networks. They then sell them to customers without needing to invest in infrastructure.

MVNOs can increase competition and give consumers greater choice. They also tend to reduce prices and squeeze margins.

Carriers unimpressed

New Zealand’s mobile carriers are not impressed. Spark, in particular has spoken out. The company says there is no case for new mobile regulation.

The company’s general manager regulatory affairs John Wesley-Smith is quoted in a notice to the NZX on the study. He says: “We have three world-class networks delivering prices that are well below OECD averages and three mobile network operators that are ploughing significant investment into an intensely competitive market.”

This is largely true. Seven years ago before 2degrees entered the market, New Zealand mobile prices were high by international standards. Today prices are a touch below international averages.

Moreover, margins have dropped. While the mobile networks are solid businesses, they are not awash in profits. It took until this year for 2degrees to make its first profit.

That alone tells you the market is competitive.

It also speaks volumes that 2degrees, the relative newcomer and the smallest mobile carrier, is not calling for more regulation. In the past it has been the beneficiary of intervention.

Competitive enough?

You could argue, the carriers almost certainly will argue, that consumers are well served by the existing competition. From this point of view the market settings appear to be right.

And yet not everyone is happy. Last month the NBR carried a report saying Vocus general manager, consumer Taryn Hamilton believes his company cannot grow its mobile business without regulatory intervention.

Vocus has an MVNO agreement with Spark. The Vocus brands, Callplus, Slingshot and Orcon offer mobile services. There is also a 2degrees MVNO agreement with The Warehouse.

In market terms these deals are a freak show. The existing MNVOs don’t add up to more than about one percent of the total mobile market. And that estimate may be generous.

Elsewhere in the world MVNOs can be seen as a positive by carriers.

Often the customers who choose an MVNO are the ones who would already be looking to move away from their existing accounts. If they choose an MVNO on the carrier’s network, the bulk of the revenue they generate stays with the carrier. There’s churn, but not churn to a rival carrier.

A new kid on the block

The other carrier-point-of-view argument in favour of boosting MVNOs in New Zealand is that it would keep out a fourth network. None of the existing carriers would welcome a new competitor.

In the past that may have seemed unlikely in a small market like New Zealand. However the market dynamics have changed.

New Zealand has four sizeable telcos: Spark, Vodafone, 2degrees and Vocus.

Vocus’ parent company faces challenges at the moment and is focused elsewhere. However, Vocus has been an aggressive investor in the past. It could be again.

Unlike smaller telcos, Vocus can buy spectrum. It could bid for new spectrum licences. It could build a fourth mobile network.

If the company decides mobile is straegic and can’t get what it considers to be a reasonable MVNO agreement with existing carriers, this is a plausible strategy. Let’s face it, mobile is stratgic for every sizeable telco.

Given this, Spark, Vodafone and 2degrees might do well to see the Commerce Commission study in a more positive light. Being forced by the regulator to offer more generous MVNO agreements would be preferable to facing a new rival.

Who’d want that?

Vodafone rebrandsVodafone has a new version of its speech-mark logo and a new slogan: ‘The Future is Exciting. Ready?’

The bright red colour stays. Although there will be less of it. From today the white on red will become red on white.

The changes are all part of a global brand make-over. According to the company the new look shows that Vodafone is confident digital technologies and services are “going to make our lives better”.

New Vodafone logo
New Vodafone logo
Old Vodafone logo
Old Vodafone logo

Change of brand, change of emphasis

There’s a clear change of emphasis. Vodafone has positioned itself away from being a mobile phone network with add-ons, to being a more general technology service provider. In New Zealand this includes television.

This move was first noticeable earlier this year at the Vodafone NZ Gigabit Summit. The company held an Auckland event in August where there was little talk of phone networks and far more about how we’re going to live in the future.

At the Summit product director Sally Fuller outlined a world where drones make deliveries, we work from home and make occasional forays in driverless vehicles. There were smart devices and artificial intelligence, but barely any discussion of networks. All that becomes background.

Vodafone New Zealand Consumer Director Matt Williams says “We think the future of technology is very exciting. Our focus now is to ensure our customers are ready to make the most of it.”

Phone, network MIA at Vodafone

Actually Williams said a lot more words in the official press statement. Yet, once again, the words phone and network are conspicuous by their absence.

Vodafone’s brand strategy is global. Vodafone says it heralds the biggest advertising campaign in the company’s history. New Zealanders will be able to see this in a new TV commercial which will show from today. Australia doesn’t get the new advertising until later this month.

As part of the marketing activity Vodafone asked people in 14 countries about their views on the future. It says New Zealanders are more optimistic than Australians or the British, but all three come in behind India.

At the New Zealand Herald, Holly Ryan writes Vodafone axes email services – NZ Herald

Customers with a Vodafone email address will have to switch at the end of November, when the telco plans to axe its email services after 20 years.

Email addresses affected include its Clear and Paradise services.

Vodafone had about 200,000 to 250,000 active email users but many operate dual email accounts, a Vodafone spokesperson said.

The accounts would be switched off on November 30, however, Vodafone has promised customers it will automatically forward emails from the closed accounts to a new email of the customer’s choice, for as long as they are a Vodafone customer.

While 250,000 sounds like a lot, many accounts are unused. Other accounts are rarely used.

To grasp the scale of the problem, ask yourself how long it is since a mail message arrived from any of the Vodafone account domains listed at the bottom of Ryan’s story.

Few Vodafone customers will find it hard to move to another mail provider. Many already have Gmail or Outlook.com mail accounts. For them the change means nothing more than forwarding messages if they haven’t done that already. That won’t challenge most users.

There will be stragglers who depend on a Vodafone account. They have been through a lot. Vodafone says it is killing its mail service because of problems with spam and delays. Spark went through something similar with Yahoo mail.

Users won’t miss that pain.

Vodafone should offer support for those customers who struggle with the moving process. The problem here is that customer support is not a Vodafone strength.

The problem with ISP mail

Vodafone’s move is a timely reminder of why you shouldn’t use ISP mail services. The move is also one of the reasons. ISP mail users are at the mercy of an organisation that isn’t focused on providing a first class mail service. It’s better to find a specialist who wants to excel at mail.

At the same time, an ISP mail account ties your hands. Moving from Vodafone or any other service provider is difficult if everyone you’re in touch with reaches you via a vodafone.co.nz mail address. There are often good reasons to switch ISP, so the fewer chains binding you to one, the better.

Modern ISP-provided mail services often include a webmail option, it isn’t always easy to use these across all your devices. With a Gmail or Outlook account you can sync everything across your phone, computer and other devices. You can also read your email from someone else’s computer.

Another reason to use something other than an ISP mail address is that it signals a lack of computer savvy. It tells criminals and others that you may not be as on top of technology as those people with their own custom mail addresses. In this competence hierarchy, a Gmail or Outlook address ranks higher than an ISP address.

You can find better options than Gmail and Outlook. But that’s a subject for another post.