4G wars

Telecom has announced it’s launching its LTE network in
October and will steadily roll out services throughout the country using Huawei
equipment.

There are several aspects to this that are worth discussing.
The impending 4G war with Vodafone – data caps and the $10/month premium charge
that Vodafone adds on your bill for 4G are all up in the air now.

Then there’s the choice of Huawei over incumbent
Alcatel-Lucent which while not surprising is still quite telling.
Alcatel-Lucent will continue to manage the 3G network (Telecom’s much vaunted “faster
in more places” XT network that famously hit a wall at high speed and caused
Telecom no end of embarrassment and not a small amount of money) but basically
this is the end of the line for ALU’s relationship with Telecom. I put that
down not only to the XT debacle but also to Alcatel’s lack of a single-RAN
solution. That is, to roll out 4G Telecom will need new boxes on the poles
rather than just changing out the cards in the existing boxes. That makes the
deployment much more expensive than either 2Degrees or Vodafone’s similar
rollouts and that’s a problem.

(EDIT: As has been pointed out, Alcatel will continue to run Telecom’s fixed line network and its operation centres and has just won the contract to upgrade the optical transport layer. I’m just talking about the mobile side of things here)

This also will mean trouble for 2Degrees – it now has to
spend yet more money rolling out 4G just to keep up. This at a time when it’s still
deploying 3G, with a looming 700MHz spectrum auction and when pundits are
suggesting it should probably look around and buy a fixed line operator (Orcon,
for example) or face being marginalised.

But I’m more interested in Telecom’s promise to roll out LTE
on the rural towers built by Vodafone as part of the Rural Broadband Initiative
(RBI) which is very exciting news for all concerned.

Currently the RBI deployment is flying somewhat under the
radar, predominantly because of the road crash that is early UFB deployments.
There are no stories of customers being cut off for days, of Chorus techs
standing around in clumps staring at holes in the ground, of cost blowouts
because of the difficulty of digging through footpaths.

Instead, we hear very little about RBI. Vodafone and Chorus
presumably are rolling out network coverage. Presumably customers are
connecting and presumably they’re reasonably happy with the service.

Vodafone promised the rural broadband pricing would be on
par with urban prices, and while the price points are not too dissimilar ($100
for phone and broadband being one example) the data limits are woeful. You have
a choice of 5GB or 15GB a month – neither of which comes close to urban levels.
That same $100 in the city would get me 100GB of data. Given we want to
stimulate the rural economy, you’d hope there would be pricing for business
users on the RBI, but while I can get 1TB of data for $20/month from Vodafone
in Three Kings, that level of use on the RBI would require me to sell the
entire South Island to pay my debt.

There’s also a lack of competition in rural New Zealand.
Aside from Farmside (the obvious candidate) there aren’t too many other
resellers of Vodafone’s service, nor are there partners clamouring to add their
equipment to the RBI towers – or rather, if there are they’re keeping very
quiet about it.

Both Telecom and Vodafone have said they will go all out on
the RBI towers once it secures some 700MHz spectrum and hopefully once that
starts we’ll see some actual competition for what could be a lucrative market.

Interestingly, I’d expect to see faster speeds on the rural
LTE network than on the urban.

I’ve been using Vodafone’s LTE for the past couple of weeks
and while my peak speed was an impressive 88Mbit/s down and 47Mbit/s up, most
of the time it’s around the 15-20Mbit/s down range, with upload being slightly
less.

I’m putting it down to my being forced to share the network
with others, something that’s a perennial bone of contention (ha) among
wireless users.

Rural customers would, hopefully, have less to worry about
because there are fewer of them per tower.

Given the towers are being built under a government subsidy,
they’re going in to places where commercially there just aren’t enough
customers to justify deployment. That means the number of customers per site is
likely to be far fewer than in an urban environment. Which should mean you’re
more likely to see the higher speeds in rural areas (backhaul notwithstanding
as it’s fibre-based capacity from Chorus).

When you add in some of the cool stuff Huawei showed me in
China (NB: I flew there courtesy of Huawei) – things that will come up in the
next round of revisions to the LTE standard – rural customers will be well
placed to go mobile.

All told it’s an exciting time to be a mobile user. I’m
hopeful we’ll get some decent pricing out of the two main players (and of
course, 2Degrees will be there by default as it roams on Vodafone’s network)
and that can only be a good thing for rural New Zealand.

3 replies
  1. George Elder
    George Elder says:

    Good post Paul and good to see we are creeping in a direction that recognises the commercial value of broadband to the economy.
    I am surprised to see you so enamoured of the competition provided by having 3 providers. While there are benefits we are getting from the competition of the 3 providers, there is also a strong tendency for them to copy each other and therefore limit the true level of competition available. In services, this can at times be caused by the availability or cost of the bulk service to the provider and therefore each operator is restricted in how competitive they can be.
    However looking at the pricing models for mobile data we see a common model where the data access is priced with a huge range of prices which seems to be solely dependent on what each telco believes the market will accept. So long as no other Telco offers a different model then the competition is limited to small margins on a basic model and all telcos are benefiting from pseudo colaboration.
    It seems for lack of “true” competition, all Telco’s including 2 Degrees have chosen to price mobile data based on monthly volume caps and penalty pricing for exceeding this cap. This creates an environment where customers must predict their usage and if they get it wrong by either too much or too little, the Telco takes a premium, often for a service which is not used. It would be interesting to know what the true usage cost was for all users when the underutilised but paid for band width plus the penalty over cap usage is factored in. It could be that the true usage cost is almost double what people are paying.
    If we had to purchase fuel or electricity this way there would be an outcry. Why do we tolerate it with bandwidth? We are supporting a model designed for the user to lose regardless of the choice they make and for real unit prices to be hidden from view.
    If the wool was not being pulled over our eyes by “all competitors” offering only 1 form of pricing, we might have a very different perspective on what constituted true competition and value for mobile data. Who will be first to abolish monthly caps and allow a user to pay monthly for what they used.

  2. Nick White
    Nick White says:

    Great post Paul! Fascinating insight into 4G/LTE wars which is bound to be repeated in a similar form elsewhere in the world. Regards Nick White, EVP INTUG

    • Paul Brislen
      Paul Brislen says:

      Thanks, Nick. I’ll have some results from the first week or so of testing to share on Monday as well. 4G/LTE really is a game changer for the industry as well as for New Zealand in particular.

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