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over is: “so our customers can take advantage of the benefits of this technology as it evolves versus languishing on an outdated network.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 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.
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.
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.
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.
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.
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.
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.
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.
Earlier 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.
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.
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.
Vodafone 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”.
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.”
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.