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A group of Rakon shareholders are getting impatient with its undervaluation and want directors to put the company on the block.

In Tech company shareholders frustrated at low value RNZ reports:

A group representing 14 percent has written to the board asking it to immediately market the company to international investors through a tender, amid reports that some Australian investment funds have been showing interest.

“[We] believe the company is significantly undervalued and the company is failing to highlight this value to outside investors,” the letter said.

The story doesn’t carry a byline.

Rakon’s disgruntled shareholders want the company sold to international investors as a way of unlocking their investment. They make it clear they don’t think they will get a big payout from what should be a boom as the 5G mobile telephony market gathers momentum.

Waiting for 5G acceleration

RNZ goes on to quote Rakon chief executive and managing director Brent Robinson. He says:

“As 5G accelerates, so will Rakon and its financial position will be more attractive.

“Be patient, it’s early days for 5G and I believe Rakon’s performance should improve a lot, as far as profits are concerned over the next few years.”

Rakon is a 50 year old New Zealand technology company. It makes frequency control components including quartz crystals. Telecommunication accounts for over half the company’s revenue.

On paper, Rakon is well placed to profit from the worldwide 5G roll out. It appears to be the kind of company New Zealand’s economy needs.

Mobile carriers are spending billions building 5G networks and will continue spending vast sums for the best part of a decade as they build out 5G further and further. Rakon sells its components to 5G equipment makers like Huawei and Nokia. It should be a bonanza.

Not fast enough

The problem is that despite the huge investments in 5G, the roll-outs are not proceeding at the predicted speed. Asia is moving fast. Vodafone has already built a network here, Spark is about to follow. Other countries are not moving as quickly.

It doesn’t help that Rakon’s customers are caught up in a trade war, possibly an espionage row, between the US and China. It is possible that Rakon can supply one team, but not the other. That would hurt its market.

Rakon’s share price has languished to the point where it is a possible takeover target. The shareholder letter suggests at least some of Rakon’s owners want out.

 

A bill introduced in parliament this week aims to tackle extremist content.

The Films, Videos, and Publications Classification (Urgent Interim Classification of Publications and Prevention of Online Harm) Amendment Bill introduces new criminal offences. It hands power to a chief censor who can make immediate decisions to block content.

It also allows the government to create and deploy internet filters. The filters would screen out material the chief censor decides is objectionable.

Response to Christchurch terror live-streaming

The bill matches the proposal first tabled in cabinet last December by Internal Affairs Minister Tracey Martin.

It aims to update the Films, Videos, and Publications Classification Act 1993 after last year’s live-streaming of the Christchurch terror attack.

The focus is on stopping the people or organisations from livestreaming objectionable content. It does not target companies who provide the infrastructure used to distribute content.

Take down notices and filters

Yet carriers and hosts will need to acknowledge government imposed take-down notices. This includes removing links to objectionable content. Failure to do so could result in civil action and fines.

The legislation will allow the Department of Internal Affairs to create internet filters. The DIA must consult with internet service providers before it launches a filter.

InternetNZ opposes the filter plan. In a media statement CEO Jordan Carter says there can be dangerous side effects from a filter.

He also says: “The proposed filters would work at the network level, in a way that is a mile wide and a millimetre deep.

“People who want to get around these filters can easily do so by using a VPN, technology that many Kiwis have been using when working from home recently.”

Filters can be ineffective

As Carter points out, the problem with filters is that they often don’t work as intended. Determined people who want to see or distribute objectionable material can workaround them. Everyone else may suffer a degraded internet experience.

Internet filters are, by their nature, blunt tools. There’s a trade off between failing to block bad material and blocking harmless content.

The same goes for artistic content. Filters are incapable of drawing lines in the right place.

False positives, false negatives

In the past researchers have found that filters designed to shield young people from pornography might block 90 percent of adult content. At the same time they can block up to a quarter of inoffensive pages.

Tinker with algorithms to permit more inoffensive material generally means letting more porn through.

Filter advocates talk about artificial intelligence helping, but that often makes matters worse. Filters don’t understand context or nuance. AI is usually terrible at context or nuance.

Risks elsewhere

Much of the focus with internet filters is on dealing with web pages. These days they account for a fraction of online material. Peer-to-peer networks, instant messaging and social media platforms are a bigger problem.

There are other issues with filtering. Protecting children might be straightforward, but teenagers are often more tech-savvy than adults.

Filtering can create a false sense of safety. It’s the same when not-very-tech-savvy people install security software. They feel safe from malware threats but can relax and fall victim to phishing or other scams.

While filters they are often set up with good intent, they can be used for broader censorship, even shutting down political opponents.

On the positive side

In practice, the slippery-slope argument doesn’t wash. New Zealand already has successful voluntary filters blocking child abuse material. That appears to be working well. There has been no slippery slope effect.

Determined viewers can bypass these filters. Yet they stop everyday users from stumbling over the objectionable material.

New Zealand’s child abuse filter gives service providers the option to opt-in. There is independent oversight.

The planned filter in the new legislation would be compulsory. There is no mention of formal oversight.

If you look at the latest International Telecommunications Union affordability rankings you’d get the impression that New Zealand is doing better than Australia at mobile, but is behind on fixed broadband.

That’s not the case, but it looks that way because of the methods used to create international table rankings. The rankings are not meaningless, but they are hard to interpret and make sense of.

The ITU ranks New Zealand at number eight in the world for high-consumption mobile-data-and-voice. Australia sits at 22.

Meanwhile New Zealand is 41 for fixed broadband while Australia sits at 36.

Not the lived experience

These two rankings are opposite to the everyday experience of telecommunications customers in the two countries.

These kind of ranking tables are often a little strange. That’s because they tend to use artificial user cases to illustrate difference between markets where in reality there is a lot of nuance.

Remember here the tables are about affordability. The ITU measures and compares the prices of entry-level fixed broadband plans.

It then compares these prices with a nation’s gross national income (GNI). This is a way of relating prices to people’s earnings.

Affordability

As a rule countries with a lower income pay proportionately more for telecommunications services. Which is a way of saying they are less affordable.1

It turns out New Zealand’s entry level plan is a 50mbps fibre plan with a 60GB cap. Prices are converted to US dollars. In this case it comes in at US$44.97. The price also includes 15 percent GST.

That may well be the lowest plan on offer in New Zealand, but it’s a plan almost no-one buys.

Australia’s entry level plan is 20mbps with a 100GB cap. It sells for US$52.30. Australian GST is 10 percent. In other words the plan used for comparison is far slower and more expensive, yet includes more data.

According to the ITU when the GNI is taken into account Australia gets an affordably score of 1.2 while New Zealand gets a score of 1.3. So we sit a few places behind Australia in the fixed broadband table.

Mobile voice and data

The same methodological weirdness works in New Zealand’s favour when it comes to measuring high consumption mobile voice and data plans.

New Zealand’s plan costs US$14.53 and buys 200 voice minutes, 500 SMS messages and 1.8GB of data. Australians get unlimited calls, unlimited SMS and a whopping 15GB of mobile data for US$36.61.

Going back to the affordability scores, New Zealand gets 0.4 while Australia gets 0.8.

These ITU tables are useful when comparing, say, New Zealand’s year-on-year performance. That tells you if telecommunications is becoming better or worse value.

They are also useful in aggregate. The latest report tells us that entry level mobile-voice is affordable in most countries. It tells us prices have fallen in the last few year relative to income.

It also says that while fixed broadband prices around the world have remained more or less stable, download speeds have increased.

Yet when it comes to benchmarking, say, New Zealand’s performance against other countries, it’s hard to tease out useful data. Anyone who has operated in Australia and New Zealand knows our fixed broadband is better priced, while Australian mobile data is less expensive.


  1. Economists reading this may think this explanation is too simple. ↩︎

Sky TV outside broadcast camera

After months of speculation Sky says it will enter the broadband market next year. The move is one of the industry’s worst kept secrets.

Sky says it will start by targeting its existing TV customers. Then it will focus on homes that are fibre-ready but not yet connected.

In a media statement, chief executive Martin Stewart says: “We want to provide the best possible sport and entertainment experience to New Zealanders. A high-quality, high-speed broadband service built specifically for entertainment helps us do that.

Rumours about Sky’s entry into telecommunications have swirled around the sector for months.

Make that re-entry. The Vodafone merger turned down by the Commerce Commission would have got it there earlier.

And that wasn’t the only attempt. In 2006 Sky took a look at buying ihug. It asked for an exclusive due diligence period. Ihug refused, opened the process and sold to Vodafone for $41 million.

Analysis: Slow moving Sky

Sky entering the broadband market is welcome. The company has much to offer and understands how to deal with customers.

That said, next year is ages away in internet years. Everything internet moves faster than other industries.

By 2021 Spark will have 5G towers1. Most likely, it will sell fixed wireless as an alternative to the fibre services Sky aims to sell. Vodafone may have extended its network and its fixed wireless offering.

It is also possible next generation satellite broadband services will be available2.

Fibre is a better broadband experience that fixed wireless or satellite. Yet not all customers know that. ISPs will carpet bomb marketing for the alternatives.

Stuff Fibre, the missed opportunity

Likewise, New Zealand’s broadband landscape could look quite different. Last week Vocus picked up the 20,000 or so Stuff Fibre customers. A wave of consolidation is long overdue.

The acquisition is not enough to move the market share dial.

Even so, a larger base gives Vocus more scope for economies of scale. And more customers to crosssell energy and other products to. It gives Vocus momentum.

Sky is short of cash. Buying Stuff Fibre may not have been easy for the company. Yet, Stuff Fibre would have been a good fit for Sky; a better fit than for Vocus.

And anyway, Vocus is not awash in loose change either. If the hard-up Australian-owned telco could cut a deal, Sky could have found a way.

Reasons to buy Stuff Fibre

Buying Stuff Fibre would have done three things. First, Sky would enter the market with a crash and a roar, wrong-footing rivals. Never underestimate the value of shock and awe in a competitive consumer market.

It could also have brought the expertise needed to kick-start Sky’s plans.

The third reason Stuff Fibre would have been a good buy for Sky is that, Stuff is also a media company.3 They share some characteristics. While the Stuff Fibre customer proposition is different to Sky’s, it’s not so different.

A virtual ISP

It is not well known outside the sector, but Stuff Fibre is, in effect, a virtual ISP. Stuff looks after the brand, sells subscriptions and counts the money. Meanwhile, in the background, a company called Devoli handles the technical side.

This is an ideal model for Stuff with a well-known brand and few in-house technical skills. The Virgin brand does something similar overseas.

The virtual ISP model would almost certain work as well for Sky. Maybe it still will.

Tick-tock

Every day that ticks by is another wasted day for a would-be ISP. By this time next year about two-thirds of all people who can connect to fibre will be using it. Of the rest, some will have chosen fixed wireless broadband. Others may choose never to buy broadband.

Other ISPs will have picked almost all the low-hanging fruit by the time Sky gets its act together.

Sky’s second strategy is to “focus on homes that are fibre-ready but not yet connected.”

Take away the two-thirds of home that will be connected by 2021. Take away the people who don’t want or can’t afford broadband. Then take away the fixed wireless broadband users. However you cut the numbers, that does not leave much of an addressable market.

More intense competition

Which can only mean that Sky will need to woo customers away from other ISPs. It still has sports right, it still commands a lot of entertainment programming.

The company says it will use these to pull in customers. Maybe.

The obvious case to look at here is Spark. Spark’s Spark Sport and its Rugby World Cup streaming have been high profile. Nothing draws in New Zealand customers more than the promise of seeing the All Black in action.

Now here’s the bad news for Sky: Spark’s fibre broadband market share fell during the last year. That’s the time it was giving away RWC streaming to new customers.

This tells you that Sky has a mountain to climb. It never looked easy, but Sky has to put its foot on the gas. It won’t get a second chance.


  1. The South Island trial run doesn’t matter in the big picture ↩︎
  2. Cheaper perhaps, but unlikely to be as cheap as fibre ↩︎
  3. Media triva fans might recognise the two companies share common roots. Both stem from Wellington Newspapers in the 1980s. ↩︎

Tech is perhaps five years away from actual deployment, we’re told

At the Register: Record-breaking Aussie boffins send 44.2 terabits a second screaming down 75km of fiber from single chip. The news from Monash University shows there is still plenty of headroom for fibre broadband.

Katyanna Quach writes:

Australian scientists say they have broken data communications speed records by shifting 44.2 terabits per second over 75km of glass fibre from a single optical chip.

The five-by-nine millimetre prototype gizmo is described as a micro-comb in a paper detailing its workings, published in Nature Communications on Friday. Light shone into the micro-comb is looped around a ring to produce 80 beams at various infrared wavelengths. Each beam carries a stream of data.

Elsewhere the report says the technology is perhaps five years away from deployment. It’s possible it could be used on New Zealand’s Ultrafast Broaband network, although we may have to rethink what we mean by ‘ultrafast’ in this context.

At the time of writing Chorus is rolling out Hyperfibre, which boosts broadband speeds on the UFB network to 4 Gbps and will later extend to 8 Gbps. These speeds seemed unattainable and abstract a decade ago with the UFB network first started operating.

So 44.2 Tbps may seem exotic now, but could be everywhere in time for the next but one Rugby World Cup.