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Bill Bennett


Vodafone NZ: about your 4G business model

Vodafone NZ has stolen a march on its competitors rolling out 4G mobile to parts of Auckland earlier today.

Although coverage is limited, only 30% of Auckland gets the faster service at the time of writing, the company is getting runs on the board while rivals seem to be months away from a full launch. Vodafone plans a fast ramp-up with Christchurch getting a service in May, Wellington in August-September and a further 15 towns by year-end.

4G will give users faster data downloads and smoother experience with data heavy applications like   video conferencing and gaming. On a good day and a uncrowded tower, 4G sends data at around 10 times the speed of 3G networks.

How will Vodafone make its 4G investment pay?

First the company will charge most customers an extra $10 a month on top of their existing plans. Big spending customers – those already paying $120 a month or more – won’t pay the surcharge.

The second part is more subtle. There’s no increase in monthly data allowances. Given that 4G makes it easier and quicker to shovel bits into a phone that could see customers bust their existing limits and begin paying for more data. Extra data typically costs more per unit than bundled plan data, so Vodafone has an opportunity to extract more from customers this way.

Or possibly not. Vodafone chief executive Russell Stanners told the NBR’s Chris Keall faster speeds don’t necessarily mean users will download more data. He said overseas users only get through one or two GB a month.

And the business model?

Carriers like Vodafone often treat 4G as a bigger pipe for selling mobile broadband by the gigabyte. That appears to be what’s happening here. Over time Vodafone will collect hundreds of thousands of $10 per 4G account per month and will sell bigger data plans.

There’s another opportunity that Stanners and his executives must have considered: how to boost revenues by adding paid-for applications and extra value-added services to the mix. Carriers around the world struggle with this – can Vodafone’s New Zealand operation come up with some answers?

Meanwhile Australia’s Stilgherrian offers this reflection on mobile broadband:

It’s the same kind of freedom you can expect on prison day-release. You can wander a little bit, but you’ll have to be back on your fixed-broadband leash by nightfall.



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