Christchurch skylineSpark says it is on track to begin rolling out a 5G mobile network in 2020.The company says services will go live later that year.This confirms the date the company has already said it would begin its next generation network build. It depends on the spectrum becoming available, then an auction or other form of allocation taking place in the next 18 months or so.The confirmation comes after the company conducted trials earlier this year. Spark says the Wellington outdoor trial was a success with customers getting download speeds of up to 9 Gbps. An indoor trial in Auckland saw speeds as high as 18.2 Gbps.While some telcos overseas are building new networks from scratch, Spark says it will start by adding 5G services to its existing 4G and 4.5G networks.Spark says it will extend this when there is enough demand.With existing cell sites there’s a smooth upgrade path. At least there is if a carrier sticks with the same equipment supplier.Spark managing director Simon Moutter says the company is working on mapping expected cell site densities to learn where there is a need for new cell sites.He says: “We have already begun a build program to increase the number of cell sites in our existing mobile network – which will enable us to meet near-term capacity demand as well as lay the groundwork for network densification required for 5G.”

No extra CapEx

The company says it is expects to fund its network through its existing capital expenditure programme. This does not include buying any extra spectrum needed for 5G.Spark spends around 11 to 12 percent of its revenue on capital expenditure. Spark’s 5G briefing paper says:
As Spark responds to demand we will be investing just ahead of it. Cost efficiency that will deliver ever-greater output with the same investment inputs is the primary driver of early 5G deployment.By 2020, we expect our wireless-network specific capex to be between 25-35 percent of Spark’s overall capex envelope. This implies intended annual wireless network investment of approximately $100m to $140m, compared with an average of just over $100m for the past five years.This excludes spectrum purchases and any material move towards widespread rollout of new cell sites using mmWave band spectrum. During this period, we expect our total capex (excluding spectrum) will remain in line with our desired range of 11 to 12 percent of revenues.
This is something of a surprise.5G network equipment tends to be less expensive than 4G hardware. But to deliver the next generation network’s full promise, a carrier needs more spectrum and at higher frequencies it will need more small towers.Many of these towers will be smaller than existing 4G towers – in some cases they can fit on lamp posts or telegraph poles, but even so, Spark’s comment about capital expenditure suggests one of two possibilities.

It won’t happen overnight

The first possibility is that Spark’s network roll out will be incremental and relatively slow. This follows the pattern of the company’s roll-out of 4.5G.It is two years since Spark first installed a 4.5G tower in the centre of Christchurch. There are more today, but coverage is far from nationwide.It looks likely the 5G roll out will begin before Spark has upgraded every worthwhile cell site to 4.5G. Presumably many sites will go straight from 4G to 5G.The second possibility is that Spark isn’t aiming for the same high density network being planned for large urban centres elsewhere in the world. At least not at first.Neither of these are important in the short-term.Indeed, today’s mobile phone users can’t tell the difference between using a 4.5G tower and a 4G tower. There’s no pressing need to upgrade the network on their behalf.And places like Eden Park in a test match aside, New Zealand doesn’t have the density of people you might find in Hong Kong or New York.Spark may want to push forward on plans to offer 5G-driven fixed wireless broadband as an alternative to fibre. It already does this with 4G. This is a strategic business decision. If there’s enough demand for more fixed wireless then the internal business case for increased capital expenditure is easy to make.

5G innovation lab

Spark plans to open a 5G Innovation Lab later this year in Auckland’s Wynyard Quarter. This will let companies test their applications on a private 5G network before the full roll-out.The company says:
“Providing early access to a pre-commercial 5G network through our global relationships with leading equipment vendors like Huawei, Cisco and Nokia will give our local partners a competitive boost, fast-tracking these businesses’ 5G developments.”
Significantly Spark has not named the network equipment provider it will work with on the programme.The company used Huawei to build the 4G network and has previously worked on 4.5G and its test site  with the Chinese equipment maker. Huawei has to be in consideration for the contract despite the political problems the company faces getting business in the US and Australia.Yet Spark deliberately named Nokia and, surprisingly, Cisco. The latter is not known as a technology provider for cellular networks. This could be a way of putting pressure on Huawei in order to get a better deal.Spectrum is a potential concern.In a briefing paper Spark called on the government to make more spectrum available. All the carriers are pushing hard. They have a case.This is already in motion, but the company wants this done in time for the new network to be running ready for the 2021 America’s Cup in Auckland. Hence the earlier comment about the need to get this wrapped up in the next 18 months or so.Spark says it needs large blocks off spectrum in the C-Band, that’s 3400 to 4200 MHz. It says it needs at least 80 MHz blocks and preferably 100 MHz blocks to build networks with 5G performance. It also calls for even larger blocks at higher frequencies.

In 2015 I travelled to Shenzhen in China to learn more about 5G mobile technology at Huawei’s headquarters.Huawei’s brand is best known in New Zealand for phone handsets. That is only part of the company’s story. Huawei is also the world’s largest telecoms-equipment-maker and a world-scale economic powerhouse.Spark New Zealand and 2degrees use Huawei kit to power their cellular networks. Moreover, Huawei is leading the charge towards next generation mobile networks.
Huawei headquarters – Shenzhen, China

5G was always going to happen

Everyone in the phone business always knew there would be a generation to follow 4G. Cellular technology is far from done.Yet at the time of my visit 5G was still a new idea only starting to take shape. In 2015 many telcos around the world were still finishing their 4G networks.The hype machine hadn’t kicked in and technologists were still batting ideas around.Some concepts were just that: concepts.

Huawei’s 5G perspective

During the visit I got my first comprehensive overview of the Huawei’s perspective on the technology from Alex Wang, the company’s VP of wireless marketing.This is from the NZ Herald story I wrote about the trip:
“Dealing with more connections is one reason telecommunications companies need 5G. Wang says the formal definition of 5G has yet to be agreed, but one of the items of the list is for it to support massive connectivity.The goal is for cell sites able to cope with one million connections in a square kilometre — effectively that means one mobile device per square metre. By comparison today’s 4G cell sites might handle 1000 to 3000 devices.”
Wang also said the goal was to get latency down to 1 ms and to support data speeds of up to 10 Gbps. This second goal has since been changed to 20 Gbps. Most of the other numbers remain as planned in 2015.

Phones at the speed of light

As any physics student will be able to tell you, light, or radio waves, travels through a vacuum at about 300 kilometres in a millisecond. The speed through air is not much different.The original 5G target speed of 10 Gbps is ten times the speed of today’s fastest home fibre connections. The newer 20 Gbps target is twenty times faster.Without getting deeper into electromagnetic physics or engineering, these goals are ambitious.You can’t push wireless data that fast with the existing mobile radio spectrum. There isn’t enough free bandwidth for three carriers to hit these targets in densely populated areas.

More spectrum needed

Which means carriers need to find new spectrum if they are to deliver 5G. Or, more to the point, government’s have to reorganise existing spectrum allocations. In most cases they then sell it to carriers in an auction.New Zealand’s Radio Spectrum Management, part of the Ministry of Business, Innovation and Employment, is already working on 5G plans.So is the Commerce Commission. Telecommunications Commissioner Dr Stephen Gale said:“We believe the power to regulate remains an important competition safeguard, especially with 5G networks and potential new entrants on the horizon”.

A costly exercise

Spectrum isn’t cheap. Governments usually auction it in blocks at a time. Each block sits in a separate band of spectrum.The last New Zealand government wisely decided not to cash in on the last big spectrum auction for blocks in the 700 Mhz band. That left carriers with the funds to exploit the new bandwidth almost straight away.Contrast this with the UK where bidder spent £1.4 billion buying 5G spectrum. This was more than twice the anticipated cost. The winning bidders spent money they could have used for the capital expense of building a network. It’s likely to mean a slower build and higher costs for users.

Aggregation

In the past different services have run in different frequency bands.One of the features of 5G is that carriers will be able to mash together greater amounts of bandwidth from different bands. Or to use their language: aggregate spectrum.This already happens a little with 4G. Spectrum aggregation is central to 5G. Aggregation opens the door to merging what now may seem like different technologies, in particular cellular and wi-fi. How that works in practice will be interesting.In the next post on 5G we’ll look more at the spectrum issue.

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.

The Commerce Commission wants to continue regulating mobile roaming. At present it can make Spark, Vodafone or 2degrees give a new network owner wholesale access. This is part of the Telecommunications Act.

The Act also says the Commission faces a review of its responsibilities every five years.

Wholesale access to existing networks helps a new network get a foothold in the market. Something similar happened when 2degrees started and customers could roam on Vodafone’s network. At the time 2degrees only had coverage in four centres.

Roaming matters

Telecommunications Commissioner Stephen Gale said in a press release:

National mobile roaming helped 2degrees deliver a nationwide service for its customers from day one, in advance of rolling out its own national network infrastructure. We believe the power to regulate remains an important competition safeguard, especially with 5G networks and potential new entrants on the horizon.

The key phrase in that quote is “potential new entrants“.

After all there is little prospect of a new mobile carrier entering a saturated market. Yet that doesn’t mean there isn’t a potential new entrant looking to enter the cellular market.

That would be Malcolm Dick’s Blue Reach. The Commerce Commission mentions this company in its review of the market.

The allocation of 5G spectrum may influence mobile competition:
The allocation provides a potential opportunity for a new entrant to purchase spectrum. A new mobile provider will almost certainly require a NR arrangement while it rolls out. We note that Blue Reach Services has entered as a fourth provider and has publically stated intentions to roll-out 5G.

Dick is a wealthy man who has succeeded in telecommunications before. He is a co-founder of CallPlus and an investor in the Hawaiki Cable network. The latter is set to start operating next month.

Blue Reach

His Blue Reach project has been public for a couple of years. Early on Dick described Blue Reach as a 5G wholesaler. The idea is that it will offer fixed wireless broadband to retail service providers. In some ways it is like the failed Woosh Wireless operation. That company was ahead of its time.

At the time of writing carriers around the world are building the first 5G networks. Both Spark and Vodafone have trials here in New Zealand. The technology still hasn’t settled. More to the point, the extra spectrum needed to make it work is not ready in New Zealand. We can expect that to happen over the next 12 months.

Blue Reach plans a service resembling Spark’s fixed wireless broadband. Both Spark and Vodafone sell a similar RBI wireless product to rural customers. So do wisps (wireless service providers). Presumably the wisps are among the retailer Dick hopes will buy his services.

The Commerce Commission’s review hints that we are about to see more competition. Bring it on.

The Commerce Commission has called for submissions on the issue to before July 30. It expects to release a final decision on September 4.

Clare Curran says: “We have to do more than better connectivity”. The minister for broadcasting, communications and digital media was speaking about the digital divide at last month’s Tuanz Rural Connectivity Symposium in Wellington.

https://twitter.com/clarecurranmp/status/1011468050825007104

Curran names ‘closing the digital divide by 2020‘ as one of her two big goals. The other is for technology to be the second biggest contributor to GDP by 2025.

Both are fine goals. Neither will be easy.

Digital divide

There are at least two types of digital divide. The first is geographic. To use Curran’s words, that issue is one of better connectivity. People in rural areas don’t have the same easy access to communications networks as people who live in towns.

Blame economics. The cost of getting fibre to a city dweller is lower than the cost of connecting someone living in a remote area.

Both types of customer pay the same price for a connection if they are on the regulated UFB fibre network. This means people living in easy-to-connect areas subsidise those elsewhere. Almost no-one complains about this subsidy. It’s a step towards bridging the digital divide.

And anyway, a flat rate simplifies billing for service providers. Billing is expensive, so simple bills help keep costs down.

Clare Curran at Tuanz rural connectivity symposium - digital divide

Drawing the dividing line

By the time the UFB project completes, 87 percent of the population will be able to connect to fibre. while the other 13 percent are more at risk of being the wrong side of the digital divide, they won’t all have second rate connections.

While the 87 percent cut-off point seems arbitrary, it is a reasonable place to draw a line. At least for now. Beyond that number each extra fibre connection gets more expensive to build.

Theory says that some point fibre isn’t economic. It’s not clear where that point is. When our ancestors built the copper phone network they managed to cover 99 percent of the population. We weren’t richer in those days, if anything the job was harder. So the choice about where to draw the line is as much about social priorities and politics as economics.

Beyond 87 percent

One day we may stretch the network further than 87 percent. There are already plans for still more fibre. Getting to 90 percent coverage wouldn’t be economic unreasonable. Getting to 100 percent would be.

As things stand there are more cost-effective ways of reaching the most remote 13 percent. Most involve wireless. That’s the approach favoured by the government subsidised Rural Broadband Initiative.

The problem is that wireless technologies are not as good as fibre. They offer slower speeds, are contested and they not as reliable. They are, in theory at least, cheaper. It costs less to beam radio waves across paddocks than to build fibre lines over them.

Contested

Contested means that users on a wireless network share bandwidth. If a lot of people are online at the same time everyone’s speed can drop. In contrast UFB fibre is uncontested. Contracts between fibre companies and the government guarantee performance.

Another problem with wireless is there is less network capacity. To get around this service providers impose data caps on users. Most fibre connections have uncapped plans. Wireless users get a set amount of data each month.

Although some fixed wireless data plans are generous, life is not carefree when you have to limit, say, your television viewing towards the end of the month to be sure of having enough data left for other uses.

Rugby World Cup

These issues could come to the fore during next year’s Rugby World Cup. Spark and TVNZ won the broadcast rights. Spark intends to stream games, the technology is like Netflix. We love the game nationwide, but Rugby’s heartland is rural New Zealand. Will fixed wireless networks cope when every connection on a tower is streaming high-definition television? Spark doesn’t say so in public, but some insiders have voiced fears about how this might go.

Wireless plans often cost as much as fibre plans. They offer less. Not a lot less. Yet on a like-for like basis they are more expensive than fibre plans. The extra cost may be an annoyance, but it doesn’t put a customer on the wrong side of the digital divide.

There’s a handy proof for this. Spark offers fixed wireless to customers everywhere on its network: rural and urban. Thousands of city dwellers have chosen fixed wireless.

If fixed wireless was dreadful you’d hear more about it. There would be a lot of angry people. Sure, there are some unhappy fixed wireless broadband customers. Yet citizens aren’t marching on Spark’s headquarters with pitchforks and burning torches. For many people it’s not bad.

Fixed wireless broadband may be inferior to fibre, but people who have it are on the right side of the digital divide.

Not there yet

It isn’t quite that simple. There’s a limit to the number of connections a wireless tower can accommodate. This means its possible there are some rural users who can’t get a connection because their local tower is full. Carriers can add capacity, but it may not happen immediately. A handful of people may miss out.

A bigger issue is that fixed wireless broadband doesn’t reach all the last 13 percent of the population. Not yet. The exact number is hard to gauge. At the Rural Connectivity Symposium, someone said there could be as many as 100,000 homes still out of reach of RBI. That’s about 5 percent of total connections. I’m afraid I didn’t make a note of who said this.

Moving goal posts

There’s another aspect to this. A decade ago when the Rural Broadband Initiative was being set up, the aim was 5Mbps. That’s enough for web surfing, email and movie downloads. Today’s acceptable broadband threshold is the 30 to 40Mbps needed to stream HD video. RBI towers can and do deliver these speeds. Wireless internet services providers do a terrific job getting connectivity to remote places.

Today’s rural network performance is way past the 2009 test of acceptable broadband. Also, thanks to the wisps, today’s broadband network reaches further into valleys and outlying areas than the 2009 RBI architects expected.

Yet the question mark hanging over the Rugby World Cup tells us there is still a rural-urban divide. Today the bar isn’t 5Mbps or even 40Mbps. It’s “is there enough broadband for people in rural New Zealand to enjoy the Rugby World Cup on an HD screen?”

And that’s the rub. The urban-rural digital divide is a moving target. Some rural New Zealanders will always feel they have second-rate broadband right up until the fibre network reaches them. Whether that’s reasonable or economic is a political matter, not one for the industry. Are we as a country willing to spend what it takes to get fibre as far as we managed to spread those copper lines?