Insiders have told the Herald there is a broad expectation that around 400 of 2800 roles could go.
Paris stressed in an earlier interview that there was no set number. Different departments would gain or lose staff depending on the outcome of the ongoing review.
And he while he has acknowledged the possibility that call centre jobs could be offshored, Paris also said no decision would be made that would hurt customer service.
As part of an international company, Vodafone NZ was able to tap into its parent’s “Centres of Excellence” in other territories.
Paris says Vodafone NZ fell short of targets last year. His brief is to get the subsidiary into shape this year for an IPO in early 2020.
As the story says Jason Paris’ job is to tidy up Vodafone New Zealand’s business so it is an attractive IPO. That way the parent company gets the maximum return on its investment.
Looking at cutting employee numbers is part of that. Compared with other similar sized technology companies1, Vodafone’s revenue per employee is low.
Taking costs out of a business can make it more attractive in the short term.
If Vodafone gets rid of 400 people out of a total of 2800, that’s almost 15 percent of the total. Potential investors will like that.
We shouldn’t forget job cuts are often devastating to the people involved. They are often also uncomfortable, even stressful for many of the staff who remain. It can hurt morale. If there are long term effects, they will probably show up after the IPO.
“Vodafone was the only provider that rated below-average on all our performance measures – from customer support to value for money,” Consumer NZ chief executive Sue Chetwin said.
About three-quarters of Vodafone’s broadband customers reported spending a long time on the phone waiting to speak to a rep. Nearly half said the service was poor once they finally got through.
The company that performed best in Consumer’s survey was Spark’s Skinny subsidiary. Ironically Skinny doesn’t promise much in the way of customer service. Maybe that’s the secret success formula. Either way, if I was Jason Paris, I’d be taking a closer look at what makes Skinny tick.
Vodafone has often talked of itself as a technology company. ↩︎
Vodafone has pleaded guilty to nine charges brought by the Commerce Commission over its “FibreX” service, but will contest a further 18 related to allegedly misleading marketing.
That’s total of 27 charges. In other words this is a big deal.
A rose by any other name
Most, but not all, the problems stem from the name.
I questioned the name when FibreX launched. A Vodafone executive explained with a smile that the name comes from the full version of HFC: hybrid FIBRE coaXial. He knew it was pushing things a bit.
HFC uses both fibre and copper cables. The network was first built almost twenty years ago. There are networks in Kapiti as well as parts of Wellington and Christchurch.
Vodafone inherited the network when it acquired TelstraClear in 2012.
Readers with long memories may remember that the cable network had appalling performance at that time. Yet it was capable of delivering television signals along with broadband data connections at a time the copper network would often struggle with video.
From outside it looked as if TelstraClear had under invested in the technology and even neglected the network.
The TelstraClear acquisition was a mixed bag for Vodafone. It accelerated the company away from being a mobile phone carrier into enterprise and fixed line markets.
It didn’t do much to grow Vodafone’s market share. The company’s overall market share in 2018 is the same as it was in 2009, despite swallowing a sizeable rival.
In some respects the HFC network became a millstone around Vodafone’s neck. It was a support nightmare and hurt the company’s reputation.
In order to recover some of its value, Vodafone beefed up the technology moving to a new, far faster version of Docsis. While this could put it on a performance par with UFB fibre in theory, the practice proved somewhat different. HFC networks can suffer from congestion in ways the UFB network does not.
Nevertheless, it looked like a plausible alternation to UFB fibre.
FibreX vertically integrated
There is something else. Vodafone’s FibreX network is vertically integrated. The company doesn’t need to pay anything to a wholesale network provider. Vodafone gets to keep all the monthly subscription.
Vodafone launched FibreX launched a the peak of the nationwide UFB fibre build. It priced it at much the same level and its marketing went out of its way to present FibreX as a like-for-like replacement. It’s not.
The fibre networks being built by Chorus, Northpower, UFF and Enable send photons along a length of glass fibre. There are fast, reliable and modern. Some FibreX users report UFB-like performance. Others don’t. What’s clear is that it is not as consistent as fibre.
There are stories of customers calling Vodafone asking for fibre connections being told FibreX is the same thing. There are stories of customers asking for fibre being told the only upgrade available to them is FibreX.
A lot of the Commerce Commission charges are to do with the way Vodafone sold FibreX.
Vodafone is no stranger to the Commerce Commission. Over the years the company has consistently pushed at the boundaries of ethical, legal marketing of its services.
The senior executives responsible for many of those incidents have now left the company. A new team has been left the task of cleaning things up. That’s going to take time. A good place to start would be coming clean about FibreX.
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.
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.
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.
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.
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.
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.
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.
A 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.
“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.”
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.
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.
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.
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.
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.