New Zealand has a unique fixed-line telecommunications market where fibre companies operate regulated local open access wholesale monopolies. It means retail telecommunications is competitive, some might say too competitive.
Spark and Vodafone dominate retail telecommunications. Vocus and 2degrees are the main challengers. Spark, Vodafone and 2degrees all have mobile networks. Chorus is the main infrastructure company.
Telcowatch says Vodafone is New Zealand’s mobile market leader.
There’s not much in it. Vodafone is one percent ahead of Spark on 36 percent.
The two were neck and neck for most of last year.
While the lead is real, it’s not dramatic.
Nor is it the whole picture. The way Telcowatch measures the market means that Spark’s Skinny business is counted separately from its parent company.
Adding that back into Spark’s figure puts the company well ahead of Vodafone with a 41 percent market share.
However you crunch the numbers both Spark and Vodafone have a clear lead on 2degrees. The third mobile carrier’s market share is stable at 23 percent. That makes it a little over half the size of Vodafone and Spark.
It probably suits everyone concerned to count Skinny as a seperate business.
Yet Skinny is definitely a Spark brand.
When Skinny started it was more distinct from its parent than it now is.
Today Skinny’s product alignment can be seen as rounding out Spark’s offerings. It’s a no-frills version. In supermarket terms it is PaknSave to Spark’s New World.
The two share the same network infrastructure. Skinny employees may be loyal to the brand, but they are Spark employees. Spark’s management decides Skinny’s strategy.
Skinny remains the smallest of the four brands. In December its market share was 5.6 percent. It has been between roughly five and six percent for the last couple of years.
The most interesting aspect of the recent report from Telcowatch is not the interplay between Spark and Vodafone, but the way Skinny has been growing its market share at the expense of the parent company.
Over the last year Skinny is the best performer in terms of market share growth. It has grown gradually.
It’s not hard to understand why. Despite all the fuss about 5G, the mobile phone market is mature. There’s less differentiation between brands and less of a premium in Spark’s brand when compared to Skinny.
There is, however, a considerable price difference. Slowly, but surely, customers are waking up to this. You can buy what amounts to the same mobile experience for less money. The big surprise is that more people have yet to realise this.
No single bidder will be able to buy more than four blocks in the first auction round. This is less than the 80MHz to 100MHz recommended for full 5G services by the GSMA, an international mobile operator trade association.
The rights are not tradable, are nationwide and buyers must use them for 5G mobile services.
More spectrum later
Licence terms start later this year and finish at the end of October 2022. The government will hold a further, long-term auction for the spectrum that year. The government says it expects to free up more spectrum later.
Bidders in the March auction will have to return existing 3.5GHz management rights to the government.
This affects Vodafone more than any other carrier. It is possible Vodafone’s existing 3.5MHz holding will fall. Returning existing spectrum will help flatten the playing field. There will be a refund for returned management rights.
Radio Spectrum Management, part of the Ministry of Business, Innovation and Employment, will use a simplified version’s of a combinatorial clock auction. In effect, this starts with the seller offering blocks at the reserve price. If the demand for blocks is greater than the supply, it increases the price.
Beyond the three mobile carriers
New Zealand has three existing mobile networks. There are 16 spectrum blocks on sale and each bidder can buy four in the first auction round. That means the government expects a fourth buyer to enter the auction.
This is a departure. The earlier auction for 700 MHz band spectrum was tailored to cater for the three mobile carriers; Spark, Vodafone and 2degrees.
The obvious candidate is Dense Air. The company owns 70 MHz of 2.5 GHz spectrum. At the moment Dense Air acts as a wholesaler to the mobile carriers. Spark’s tiny South Island fixed wireless broadband 5G project uses Dense Air spectrum.
Other parties may be interested in the spectrum. Few of New Zealand’s Wisps1 could afford the $500,000 deposit or the $250,000 per block asking price. Yet if they were to act collectively a bit might be possible.
If the government doesn’t sell all 16 lots in the first auction round, it may offer them to existing bidders.
Given that the amount of spectrum being auctioned is not enough for carriers to offer a full blown 5G service, it looks as if will be some time before New Zealand gets all the benefits of the technology. There’s enough bandwidth for fast data speeds, but, as things stand, maybe not enough for carriers to deliver the gigabit plus speeds 5G hype has promised.
Wisps are small, local wireless internet service providers. They cover rural and remote gaps in markets not served or poorly served by bigger telcos. ↩︎
“Capability takes a long time to put in place. Intent can change in a heartbeat, so, you have got to hedge and take into account the risk that intent can change in the years ahead.”
Malcolm Turnbull – Former Australian Prime Minister
Turnbull says Australia reached this decision without pressure from the US. That may be true, but it stretches credibility to suggest there was no lobbying. Even more so when you read the stories about US officials warning British ministers.
New Zealand may have also arrived at its own conclusions, but again, there will have been lobbying on both sides. And, at the very least, our politicians will be aware of The Australian decision.
Huawei locked out
For now, Huawei remains locked out of building a 5G network in New Zealand.
That was never going to affect Vodafone who built the first serious 5G network here. Nokia has been Vodafone’s long-term partner and has most of the 5G contracts.
It’s different for Spark and 2degrees. While 2degrees has announced nothing about its 5G plans, Spark has made a lot of noise over the last two years.
Until now, Huawei has been Spark’s main partner. The two built one of the world’s first 4.5G networks. For a long time it looked as if Huawei was on track to build Spark’s 5G network.
That now seems remote. On paper the door is still open. The two companies could still get the necessary sign-off under the Telecommunications (Interception Capability and Security) Act 2013. This is betterknown as TICSA.
The GCSB blocked Spark’s original 2018 5G upgrade proposal under the Act. At the time it said the proposal posed a “significant network security risk.”
Ministers have been careful to avoid talking of an outright ban. They say the GCSB judges each TICSA application on its merits. Officially it just happens that the proposed application wasn’t up to the standard.
Spark and Huawei could return with a fresh proposal. At times it sounds as if the government expected this to happen. Yet the first application was more than a year ago and there has been no word of a fresh attempt.
Otherwise New Zealand’s government has said little more about the affair in public. It doesn’t need to.
White House claims Huawei spies
Other governments are making plenty of noise. The US and the White House has maintained all along that Huawei spies for the Chinese government. Huawei has been adamant that it does not.
As Turnbull makes clear, Australia remains cautious.
In Huawei’s defence there is no evidence of any wrong doing. Nor is there a Chinese law in place that obliges Huawei to act on the government’s behalf. Nor is China seen as a likely aggressor. As far as diplomats, exporters and importers are concerned we are all the best of friends.
Yet, as Turnbull makes clear, there doesn’t need to be evidence of spying for there to be a potential future risk. Nor does there need to be a change in Chinese law. If tensions between the West and China ramp up, China could put Huawei under pressure.
As Turnbull points out, circumstances can change fast. Building a network, or an alternative network takes a lot of time and money. His point is not choosing Huawei is prudent.
Decision time in London
It’s not clear yet which way the UK will jump. It could still decide to go ahead with Huawei. Huawei’s prices are cheaper than rival network hardware companies.1 Huawei hardware is often the better choice for reasons other than money.
The problem the UK faces is much the same as the one facing New Zealand. Allow Huawei and there will be a diplomatic fall-out with the US. Shut Huawei out and China will take offence. There’s no fence sitting, nations are being forced to choose one or the other.
China has not helped matters. Since the question first arose, it has flexed its muscle in ways that alarm overseas observers. Hong Kong is the most obvious example.
One way or another New Zealand appears to have made a decision. Spark is pushing ahead with alternatives to Huawei with its 5G projects.
It will be interesting to see if New Zealand’s position changes if the UK give Huawei the green light. It may not. Yet a decision in Huawei’s favour will give the company ammunition in future New Zealand discussions.
A story unfolding on the other side of the world could yet have implications here.
Some argue the Chinese government subsidises the business. If true, that is more, not less, reason to be wary. ↩︎
Communications Minister Kris Faafoi says the government will offer spare 3.5GHz spectrum to mobile networks and Māori by the middle of next year. He should put some aside for the Wisps or wireless internet service providers.
Carriers need extra spectrum to offer fuller 5G mobile services. A full 5G service needs 80 to 100 MHz of spectrum to delver the faster speeds and other benefits 5G promises.
Vodafone has a 5G network, at present it only allows fast downloads. Among other things, it needs more spectrum for faster uploads.
Spark also runs a 5G network. It’s tiny and only serves a handful of South Island towns. At the moment it is only used for fixed wireless broadband customers. Spark is leasing spectrum from another company. It needs its own.
Next year’s auction is an interim move. The licences auctioned run until the end of 2022. Usually governments sell spectrum licences for 20 years or so. By 2022 the government plans to have a longer term alternative in place.
In an ideal world, both the temporary fix and the long-term 5G allocation will leave capacity for New Zealand’s Wisps.
Wisps are often owner-operator businesses. You might find the boss climbing a pole somewhere in the bush or driving a quad bike to a remote site. They are an important lifeline for some rural communities.
New Zealand has a couple of dozen Wisps, maybe 30. Most of them depend on the 3.5GHz spectrum to connect farmers and other rural customers. For many remote users this is the only practical way of connecting to the outside world.
The government is working with 17 Wisps to boost coverage in remote areas.
Radio waves in the 3.5GHz spectrum band are, in effect, line-of-sight.
From an engineering point of view it should be possible for Wisps to go on using these frequencies while the big telcos use the same spectrum in busier areas.
Yet that’s not how licences usually work. So we need a mechanism to stop the big guys from using their financial clout to muscle in on the smaller players.
In February Faafoi said there will be spectrum for Wisps to carry on operating. There needs to be. These companies are a vital link in New Zealand’s telecommunications chain. Their customers are the nation’s largest exporters. They could do with some answers now so they can plan.
Every year throws up a long list of news stories, product launches and events. This year was better than most. Here are six 2019 stories that resonated with me. It’s a personal, unordered list and it’s written from a New Zealand perspective. You may have other highlights. Feel free to share them in the comments below.
Apple AirPods Pro
Apple used a busy, noisy Auckland cafe to show off the AirPods Pro. By the time they hit New Zealand there was already an excited buzz about the noise cancelling ear buds. I expected a positive experience.
Even so, the sound quality was surprising. It wasn’t only the active noise cancelling, although that’s impressive enough. The AirPods sound is accurate. It doesn’t seem possible that something so small could sound so good.
Until 2019 it had been a long time since I left a product demonstration with a smile on my face. Then it happened twice in a short period. First with the Apple AirPods Pro, then a second time with the Samsung Galaxy Fold.
The price tag is be north of three grand (NZ$3400). Samsung’s first generation folding phone is a touch more fragile than I’d like. Yet here is the first major breakthrough in handset design since Apple’s first iPhone. Samsung has broken the mould and come up with real innovation.
Samsung’s Galaxy Fold is less a phone, more a small tablet that you can fold and carry in a pocket. You might even see it as a pocket computer. Either way, it is beyond impressive.
When folded it is a long slim phone, a little thicker and heavier than we’ve come to expect. Unfolded it is about the size of an iPad Mini and does much the same job.
Huawei showed its folding phone earlier at Mobile World Congress. A brief look confirmed it was a contender. So far, only one of the two models on show in Barcelona has made it to market in New Zealand.
No doubt there will soon be more, better folding phone designs. I’d love to see what Apple can do with this format: how about an iPhone that morphs into an iPad?
But for now, this is Samsung’s triumph.
Spark Sport, Sky Sport Now
Spark Sport’s Rugby World Cup service came in for flak and some cruel media attention. That’s what you get for interfering with New Zealand’s favourite sporting code.
In my experience the streaming service worked fine during the RWC. I’ve racked up well over a hundred hours with the app. A lot of that was watching Premier League football1.
There have been hiccups, yet it is better experience than the BeIN service it replaced. My only gripe was I enjoyed the preview shows and the run-up coverage before big games on BeIN. Spark offers less of that. Also, half time is not so much fun without pundits.
Spark’s entry into streaming sport services has seen Sky lift its game. The new Sky Sport Now app has 12 channels of sport around the clock.
Sky Sport Now has excellent cricket coverage. It fills the European and international football gaps left by Spark. Most of the time there are enough channels to cover every game. Although there was one Champion’s League round where my team, Chelsea, only showed up as a replay later in the day.
I’m not complaining. The service is excellent. It’s good to see Spark and Sky compete by offering the best customer experience. It would be great if we had more of this kind of competitive tension.
The two streaming sport options are great value. Buying Sky Now and Spark Sport works out less each month than an old-style subscription to Sky’s satellite service. By my reckoning, there’s a broader selection of content to watch. That’s a win.
Deebot Ozmo 900
Robot vacuums aren’t new. The Deebot Ozmo 900 updates the idea. It offers mopping as well as vacuuming. I had low expectations before I saw it in action. It impressed me once we used it. This is the only way to go.
The best part about the Ozmo 900 is that it’s low-slung body can get under beds, cupboards and tables. These are places where manual vacuuming gets hard. Another great aspect is, because it does all the work, you can vacuum more often keeping the house cleaner.
For me one of the clearest signs the original UFB project succeeded is that government found more money to connect another 169 areas. The so-called UFB2 takes coverage to around 85 percent of the country.
Another clear sign of success was Spark’s decision to stream Rugby World Cup coverage.
Next year, Chorus and central North Island fibre company UFF will offer 2Gbps and 4Gbps fibre. We’ve come a long way from ten years ago. Then a 30mbps fibre service looked like the last word in modern data communications.
The Vodafone giant awakes
In recent years it seemed as if Vodafone’s New Zealand operation wasn’t going anywhere. In part this was because the parent company felt it had better things to invest in than the second telco in a small, remote country.
There has also been an investment in customer support. That’s something that was an embarrassment in the past.
These initiatives are important, yet there’s more to the change. It’s as if Vodafone has had a vitamin injection. Now there is an energy to the business that wasn’t there before. It helps that Paris recruited fresh talent to senior positions, but it goes beyond that. It is as if the company has awoken from a slumber.
What it means in practice is that Spark faces greater competitive pressure than it did 18 months ago. Likewise the next tier of telcos; 2degrees, Vocus and so on, are also feeling the heat. Ten years after government restructured the industry we are seeing the competition those moves aimed to unleash.
Six of the biggest tech moments of 2019 are positives. The seventh is also a positive, but it’s a positive that came about because of an horrific negative.
In May Prime Minister Jacinda Ardern spoke at the Christchurch Call summit in Paris. It was a response to the Christchurch mosque shootings. The terrorist shooter filmed his crimes, streaming them online in real time.
The summit attempts to force social media companies to take more responsibity for material they publish. During the year, 48 countries signed an agreement to stop social media publishing terror messages. The US didn’t sign.
It isn’t clear if the initiative will work. Yet it is a first step towards wrestling control of online media away from the murderers and criminals who use it as a weapon. I suspect there is more to do, but the longest of journeys starts with a single step.
It could be more than 200 hours, I’m not counting ↩︎