The arrival of Dense Air has big implications for New Zealand’s cellular market, apart from anything else it will spice up the next spectrum auction.

London-based Dense Air has purchased a considerable amount of New Zealand wireless spectrum from Malcolm Dick’s Blue Reach business and Cayman Wireless.

The company intends to set up a wholesale small cell mobile network. Dense Air says it will not compete direct with existing mobile carriers. It says it can begin operation “almost immediately”.

Dense Air now has rights to 70 MHz of spectrum in the 2.5GHz band. Of this, it acquired 30 MHz from former CallPlus owner Malcolm Dick who previously talked about running a similar wholesale cellular operation using his Blue Reach brand. The rest comes from Cayman Wireless which is a part of Craig Wireless, a Canadian company.

The New Zealand Herald reports Dense Air paid a total of almost $26 million for the spectrum. That is about 13 times the amount the owners paid for the spectrum in 2007.

Spectrum price

There are implications for prices when the government decides to auction 5G spectrum some time in the next 18 months or so. If Dense Air decides to enter that auction it will push prices higher and could edge out cash-strapped 2degrees and Vodafone.

Dense Air is unknown in New Zealand. The company began operation in February of this year and part of US-based Airspan.

The company says it is a new class of wholesale network operator. It aims to “enhance and extend” coverage and capacity for existing mobile carriers and says it will run as a “carrier of carriers”.

Small cell sites

In practice this means Dense Air will build and run a series of 4G and 5G small cell sites. The aim is to compliment existing networks. It says that in most cases these will extend existing networks in places that need denser coverage. This might be places such as shopping malls, office parks, campuses or sports stadiums. Dense Air says its small cell approach can dramatically improve performance and capacity.

That said, Dense Air has more than enough spectrum to compete with all three carriers in New Zealand. Should it choose to do so, it could offer MVNO (mobile virtual network operator) services. This could be of interest to telcos such as Vocus or MyRepublic, both wish to offer mobile services but own neither spectrum nor their own cellular networks.

It’s remarkable that Vodafone ever thought it could get away with calling its HFC cable network FibreX. It always look like the exercise would end in tears.

This was a law suit waiting to happen. And boy did it happen.

At the New Zealand Herald Chris Keall writes Vodafone pleads guilty to some FibreX charges, will contest others

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.

Performance woes

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.

Potential millstone

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.

Dodgy tactics

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.

Chorus fibre broadband buildingChorus says it now has 500,000 Ultra-Fast Broadband connections on its network. The wholesale network company also announced plans to cut wholesale prices for the fastest connection speed.

Fibre demand has accelerated in recent months. It took Chorus five years to connect the first 100,000 fibre customers. The most recent 100,000 joined in six months.

In September, Crown Infrastructure Partners released numbers showing there were 605,000 connections nationwide for all Chorus, Northpower, UFF and Enable. That total would be higher today.

Connection speeds rising too

Customer connections are rising fast, so are their connection speeds. Chorus says customers are moving from entry-level plans to higher speeds. In order to speed the move up-market, Chorus will cut the wholesale price of gigabit fibre broadband connections for home users.

From the middle of 2019 the wholesale price for a home gigabit connection will fall from $65 to $60. Chorus promises a  futher drop to $56 in the middle of 2020. This will reduce the price gap between a standard 100mbps plan and a gigabit plan, making the latter a more attractive proposition for many customers.

While dropping the wholesale price sounds like good news for consumers, it is up to retail service providers to decide whether they pass some or all of the savings onto customers. Some may do this, others may use the cut to fatten their margins.

Strange times at Spark

Writing at Stuff Tom Pullar-Strecker reports that Spark described the price cut as a step in the right direction. The company went on to say something quite strange;

…the wholesale price of fibre-optic broadband remained “far too high” and the retail prices Spark charged didn’t “allow for anything like an acceptable margin”.

This is bizarre as Spark is free to decide on its margin. If it thinks margins are not acceptable, it is free to raise prices. Any constraint on pricing comes from market competition, not the wholesaler.

The unvoiced subtext here is that Spark is annoyed that the Commerce Commission regulates fibre pricing. This means they have no leverage to demand a sharper wholesale price than other service providers. By law Chorus and the other fibre companies must offer the same wholesale price to everyone.

Unwelcome competition

Given that Spark accounts for getting on for half the retail broadband market it might normally expect to get a lower wholesale price than smaller competitors. In effect, you can interpret Spark’s complaint as it doesn’t like facing its competition on a level playing field.

This is all the more odd, because some parts of Spark are hurtling towards the fibre era with gusto.

In the company’s media statement, Chorus CEO Kate McKenzie says fibre broadband demand has been rapidly increasing. She says: “…even more so now as more content moves online and New Zealanders prepare to live stream the Rugby World Cup and other sporting events in 2019. The irony here is that Spark is starting to dominate streaming sport. Presumably the margins on Spark are ‘acceptable’ for the company. But they wouldn’t be achievable without ubiquitous fibre.

Chorus hits half million fibre connection milestone was first posted at billbennett.co.nz.

Bill Bennett edits The Download magazine for Chorus. He also writes a weekly telecommunications newsletter. That doesn’t mean he wrote this post On Chorus’ behalf, nor does it necessarily reflects the company’s option, although it might. It’s all my own work, blame him if you don’t like it. 

Communications Minister Kris Faafoi says New Zealand could ban Huawei from building 5G mobile networks. In New Zealand could bar Huawei Newsroom reports:

Faafoi said that companies had approached him saying they would like to use Huawei’s technology, but he said New Zealand could ultimately follow Australia in barring the company from contracts relating to crucial infrastructure.

“We’re obviously cognisant of the concerns the Australian authorities have had. It’s a pretty crucial piece of infrastructure for the future of the mobile network,” Faafoi said.

Australia and the US already ban Huawei from building communications networks.

Huawei is best known in New Zealand for its mobile phones. The new Huawei Mate 20 Pro is arguably the best Android phone on the market today.

Network hardware

The company’s main business is making the behind-the-scenes hardware that runs telecommunications networks.

A little Huawei equipment is in the UFB broadband network. But that’s small compared to Huawei’s role providing hardware for the 2degrees and Spark 4G mobile networks.

Huawei is a private company. It is Chinese. Some critics say it has links with the Chinese military. Huawei denies those links are active.

What it can’t deny is that it operates from a base in a totalitarian country where pressure can be applied to even the largest independent business.

That said, by law large US companies like Amazon and Microsoft must hand information stored on cloud servers over to US government agencies on demand.

GridAKL Huawei
Huawei’s GridAKL shows the company is keen to be a good corporate citizen

Spooks

Our partners in the Five Eyes intelligence alliance are uneasy about Huawei playing an important role in New Zealand’s key communications infrastructure.

There’s no evidence that Huawei uses its telecommunications equipment to spy on voice or data traffic. There is evidence of Chinese state-sponsored online intelligence gathering elsewhere.

China’s government doesn’t need to use Huawei to snoop, it has other options as Juha Saarinen points out in his NZ Herald story.

If anything, China’s government is likely to want to protect Huawei’s brand. After all, Huawei is a potent demonstration of China’s technical and economic prowess. It is a global giant with the potential to be as influential in technology as Apple, Google, Microsoft or, in its day, IBM.

Huawei New Zealand

Huawei has a close relationship with both Spark and 2degrees. Earlier this year, Huawei and Spark held an impressive demonstration of next generation 5G mobile network technology in Wellington.

Spark expects to build a new 5G network in time for the America’s Cup. It is negotiating with potential hardware partners. Huawei will be on the short list.

There is also trade protectionism behind the pressure for a ban. It suits US economic interests to spread doubt about Chinese equipment makers.

Nokia is not an US company, but somewhere in the conglomerate is the remains of Lucent, which was Bell Labs. At one time that was another American prestige brand. There are US jobs at stake.

Huawei ban problems

Banning Huawei is harder than it seems. The company dominates communications network hardware. Its products and services are often cheaper and better than those from its rivals.

Huawei has been so successful and risen so fast that today its only serious competitor for network hardware is Nokia. That company was Finnish and still has headquarters there. Nowadays Nokia is a multinational. It is made up of businesses that struggled to compete with Huawei on their own.

There’s also Sweden’s Ericsson, but that had faded from the scene before the Huawei spying fuss blew up. It has revived a little since with carriers unable to buy from Huawei looking afresh at its wares.

Meanwhile, Samsung has entered the network equipment market, in part to capitalise on the anti-Huawei sentiment.

Push up prices

Huawei is competitive on price. Ban Huawei and there’s less pressure for Nokia to sharpen its pencil.

A ban will increase the price of building next generation networks. It gives carriers fewer options and less opportunity to differentiate their networks from rivals.

Over the next decade or so New Zealand’s three main carriers will spend the thick end of a billion dollars upgrading phone networks. Equipment makers like Huawei only get a small slice of the pie. Even so we are talking in tens of millions. Keeping Huawei out of the picture will add millions to the cost.

Technology

You can also argue that Huawei has a technical edge over its rivals. Without Huawei we won’t be getting the best possible networks. Our carriers certainly won’t have as much choice when it comes to planning network infrastructure.

There is another practical argument against Huawei, although it is not a justification for banning the company. An unshackled Huawei is so strong that it could soon become a dominant near monopoly in network hardware in much the same way that IBM once dominated computer hardware. That’s not desirable.

Spyware?

Despite all this, the big question remains: Is Huawei spying?

We don’t know.

We do know the Chinese spy on communications networks. So do other powerful governments. Hell, our intelligence service does it too.

Whether a private company is helping the spooks is almost neither here nor there.

Even if it is not spying today, Huawei could be pressured by a future Chinese regime to hand over its keys to spooks. As mentioned earlier, US law requires the likes of Amazon, Microsoft and IBM to let American security agencies look at data stored in the cloud.

Huawei not alone

That said, there are no guarantees the other hardware companies are not also spying. We know Facebook, Google, Amazon and others collect vast amounts of information on us without much fuss. Perhaps this is how the world operates in 2018, that all information is, in effect, considered fair game.

There is one way we can guard against this and that would be to use strong encryption.

Weirdly under the circumstances, Western governments are moving to ban us from encrypting our data. They want to be able to spy on us. At the same time they warn us that other nations are spying.

If Huawei and China are such a threat isn’t that an argument for upping our encryption game?

Huawei phones

What message does a ban, even a potential ban, of Huawei network equipment send us about Huawei mobile phones?

Part of the deal with any Android handset is that you have to give over a lot of information to get the benefits of an operating system that knows your preferences.

Could some of that data passing through a Huawei handset end up with Chinese state security organisations? If anything, this could be a bigger worry.

Huawei is the third largest phone brand in New Zealand. It struggles to sell phones in countries where there is a network hardware ban. A government imposed ban will have a knock-on effect there too.

Everyone knows fibre is the best way to get broadband. It’s reliable and can deliver gigabit speeds. Soon it will be able to go even faster.

After 100 years on top, copper is on the way out for most people. But not for everyone. At least not yet.

There is still life in copper broadband. Scientists and engineers have squeezed every last electron of performance from wire-based data transfer to the point where, with the right conditions, copper can deliver fibre-like speeds.

For the most part, the right conditions means living no more than about 1.5 kilometres from a roadside cabinet or exchange.

VDSL interim until fibre arrives

This is good news because the second phase of New Zealand’s government supported UltraFast Broadband roll-out will not be complete until 2022.

People in areas at the back of the queue will have to make do with copper broadband for now. Fixed wireless broadband is also an option.

Those people in areas not yet scheduled for fibre will wait still longer. Eventually fibre will reach beyond 87 percent of the population, but not soon enough to keep everyone happy.

Chorus, Nokia crank up VDSL speeds

Relief is on the way. Chorus and Nokia are working on the latest version of VDSL2 vectoring which could see copper broadband users get speeds as high as 130 Mbps.

Vectoring uses noise-cancelling technology to remove the crosstalk interference found when many signals share the same copper connection. If that sounds too technical a description, focus on this: Vectoring means higher speed.

You’ll need to be close to a cabinet to get maximum speed. The further you are from the cabinet the slower it gets.

Existing VDSL2 users living next to a cabinet should see speeds of around 80 mbps. One kilometre away from the cabinet the speed drops to around 25 to 30 mbps. By the time you are two kilometres away, the speed is down to around 20 mbps, maybe a fraction lower.

The ratios are likely to be similar when vectoring is applied. So expect around 130 mbps near the cabinet and roughly 30 mbps two kilometres away.

Fibre-like speeds

This isn’t bad. When fibre first went on sale in New Zealand customers were offered 30 mbps plans.

To put the speed in context, Netflix recommends 5 mbps for HD television streaming and 25 mbps for ultra high-definition.

In other words, get ready to enjoy Spark’s streaming coverage of next year’s Rugby World Cup or Premier League football. If that’s not your thing, there are plenty of other streaming TV options.

VDSL fine in practice

Until recently I was getting around 50 to 60 mbps on a non-upgraded VDSL2 copper connection. I live around 700 metres from the nearest cabinet. This gives you some idea of the potential.

Chorus head of Network Technology Martin Sharrock says getting the fastest possible broadband experience to customers is a priority.

He says: “Vectoring has improved average VDSL downstream speeds by over 40 percent and upstream speeds by over 30 percent. This is especially important for rural New Zealand where fibre to the home has not yet been planned.”

Federico Guillén, president of Nokia Fixed Networks, said: “Nokia’s copper solution with vectoring technology compliments Chorus’ fibre roll-out and provides another way to deliver significantly higher speeds that enhance the way customers experience digital content.”

And then there is wireless

As mentioned earlier, fixed wireless broadband is an option for people in areas not served by fibre. Some wireless towers are full, they’re not open to accept more customers. This is the case in my Auckland suburb where fibre is an option.

While fixed wireless broadband can, in theory, deliver speeds faster than VDSL with vectoring to people further away from a cabinet, the speed tends to vary depending on how many others are using the same bandwidth at the same time. It will probably slow down at peak TV viewing times.

If you’re not on fibre, it’s worth investigating both technologies. You can find out if a copper VDSL2 connection is available at your address from the Chorus broadband checker. To get a bigger picture of all your broadband options use InternetNZ’s excellent National Broadband Map.