Virtual competition

In the UK Tesco is a major supermarket chain but also a serious player in the telco space. It’s gone from simply selling mobile phones in blister packs to the full suite of Tesco-branded services, from mobile to fibre. You can download movies, listen to unmetered streaming music, buy toll calling packages and so on.

Tesco isn’t alone in this. Virgin Mobile is one of the world’s leading mobile brands and has shaken up every market that it’s entered. It operates in eight countries around the world, including Australia, the US and UK, and it regularly scores highly in customer satisfaction surveys.

Neither company owns a network or ever intends to. They are virtual operators and I’m curious as to why we have nothing on the same scale in New Zealand.

Mobile virtual network operators (MVNOs in the parlance) are operating here, but are so far below the radar as to be non-existent.

Black+White launched with much fanfare but has almost vanished since then. CallPlus and Orcon –both big-name brands in the ISP space – have mobile offerings but you’d be hard pressed to find anyone using them. The plans seem uninspired somehow and certainly can’t compete with the big names, Vodafone and Telecom, despite using their networks.

In Australia MVNOs account for 13% of the market, yet in New Zealand the total for all MVNO offerings is probably in single figures.

I think I can see why – MVNOs in New Zealand are on account only, and New Zealand is predominantly a prepay market. Immediately, most of New Zealand’s customers are unable to consider switching to an MVNO provider because there is no prepay option.

Neither Telecom or Vodafone offer prepay MVNO services and I wonder why that is. Vodafone in particular has a large percentage of its customer base on prepay – could it be that Big Red doesn’t want to risk cannibalising its own customer base?

Until MVNOs have access to prepay services and can build their own plans and tariffs, we’re not going to see the kind of dynamic marketplace that the UK or Australia has and that’s a loss for customers.

We’ll be asking the government to explicitly include MVNOs in its review of the Telecommunications Act with a view to better understanding the barriers to competition and why it is that a model which works so well overseas simply doesn’t in New Zealand.