The story behind Vodafone's FibreX court ruling

At the Auckland District Court Judge Pippa Sinclair found Vodafone guilty of nine Fair Trading Act charges over its FibreX brand. Sentencing will take place later this year.

The judge said she found the branding and advertising was liable to mislead customers into thinking FibreX was a fibre-to-the-home service.

In this case, the branding is the name: FibreX. To a causal observer, the name suggests it is a fibre broadband product. As we shall see later, FibreX is close to being fibre, but it is not the full deal.

Vodafone advertised the FibreX brand all over New Zealand. The brand could be found on billboards, on radio, in in-store promotions, online and in direct marketing. It was hard to miss.

Commerce Commission action

The Commerce Commission brought the case against Vodafone. As a rule the Commission acts on matters like Vodafone’s FibreX marketing when it receives enough customer complaints to justify an investigation.

Its court case focused on the argument that consumers understand the word fibre means fibre-to-the-home. Vodafone planted the idea FibreX is fibre-to-the-home in the minds of customers during the advertising campaigns.

Judge Sinclair agreed. She rejected Vodafone’s claim that customers would understand FibreX meant the service was fibre-like.

Clear marketing is important

Commerce Commission chair Anna Rawlings says this case reinforces the importance of clear marketing to consumers.

“Businesses must take care to ensure that their description of the products and services they are offering is clear and unambiguous and is not liable to mislead their customers into thinking that they are getting something different from what is on offer.

“They must not operate under the assumption that consumers will make further enquiries to find out exactly what is being offered to them,” she says.

The case may not be over yet. A report by Chris Keall in the NZ Herald quotes a Vodafone spokesperson saying the company has not ruled out an appeal.

Confusing sales messages

Vodafone’s marketing message around FibreX was confusing. But there’s even more confusion when it comes to direct contact with customers.

I’ve had calls and messages from readers who say Vodafone sales staff play on the confusion. People who ask for fibre are sold FibreX. At least one correspondent was told FibreX is Ultrafast Broadband.

And that’s where things get difficult, because FibreX is fast, even ultrafast, and it is broadband. But it is not the same product as New Zealand’s government subsidised Ultrafast Broadband.

What is FibreX

Vodafone’s FibreX is hybrid fibre-coaxial or HFC. The technology is about 30 years-old. It was originally used for cable television. When you hear Americans talk about ‘cable’ they usually mean HFC.

Although it was designed to distribute television, it can deliver broadband.

As the name suggests an HFC network uses fibre and a coaxial cable. Fibre runs to nodes and a coax cable connects these nodes to individual homes.

Vodafone’s HFC network

Vodafone took control of HFC networks in parts of Wellington and Christchurch along with the Kapiti Coast when it acquired TelstraClear in 2012. The project was originally known as Kiwi Cable.

At the time it was mainly used to distribute TV. It could deliver broadband but speeds were not great. Over the years the technology improved.

When Vodafone relaunched the network as FibreX in 2016, the network was able to deliver fibre-like speeds.

The next best thing

The irony of FibreX is that it is a good service. Download speeds are second only to UFB fibre max plans, but it is priced at about $40 less per month that customers pay for a fast UFB connection.

Upload speeds are stuck at 100mbps. While this is far lower than fibre max that runs as 500mbps, fewer applications need fast uploads.

The Commerce Commission’s April 2021 Measuring Broadband Report clocks the HFC network averaging 672mbps compared to fibre max at 840mbps.

Latency

Latency, that’s the time taken for a signal to get there and back, is higher on HFC than on fibre. The Measuring Broadband Report puts it at 13.5ms compared to 7.3ms with fibre.

This might worry gamers but is more than good enough for video conference calls. To put it in perspective, fixed wireless broadband’s latency is 47.8ms.

FibreX performs much better than Vodafone’s fixed wireless broadband. It is, after UFB fibre, the next best thing. If it was the only broadband technology available in New Zealand we’d be reasonably happy with it.

Legacy network

It is telling that when Vodafone acquired TelstraClear and the HFC network, it did not decide to expand the network’s reach.

By 2012 the UFB fibre build had been running for two years. At the time HFC was already an old technology, superseded by fibre. The way Vodafone has boosted its performance since then borders on remarkable.

Vodafone has a problem. It costs money to run a network. The HFC network is matched by a more modern, government-subsidised open access rival that offers a wealth of competitive options.

The HFC network is never going to be a huge money-spinner. Yet it has one advantage. Vodafone owns it. There’s no wholesale access fee to pay, which cuts into Vodafone’s margins when it sells a UFB connection.

On the flip side, if Vodafone closes the network, it faces huge decommissioning costs that will run to tens of millions, if not higher. It makes business sense to keep the HFC network running for as long as it continues to break even and kick the decommissioning can down the road.