The need for speed 4(G, that is)

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For the past month I’ve been using Vodafone’s 4G network in
Auckland and recording speed tests around the city – 27 in total.

Partly I’ve been doing this for the greater good – it’s an
ongoing test of the service and the results might be of interest – but partly
I’ve also been doing it for the “ZOMG do you see how fast that goes?” fun of
it.

And it is fast. My best result was 88.69Mbit/s down and 47.22Mbit/s
up on April 4 outside SPQR on Ponsonby Road at midday.

That’s pretty outstanding (seeing the result made the Irish
waiter say something Gaelic) and I have to admit my eyes bugged out of my head.
Speeds like that have been the purview of point to point fibre until now –
having that speed available on a handset is just astonishing.

But that’s the peak – at its worst I hit 3.30/1.39 a few
days earlier, again in Ponsonby. Typically, though, I see something in the
20-25Mbit/s range, which is not half bad for real world use.

Two things have become apparent, however. Firstly, the
network footprint is still rather small – sitting at Depot on Federal Street
this morning (an area I’d assumed would be soaking in LTE) I got only 3G (not
even HSPA) which is quite a surprise.

Secondly, it’s foolishly easy to chew through your data.

I have a plan that gives me 500MB/month and because I whined
like a jet engine to the call centre I got an extra 1GB added on for free (no,
that makes no sense to me either). I’ve blown through that, and through the
500MB bump pack I bought and now, with four days left, I have no data. The call
centre again has come to my rescue (Vodafone’s iPhone app doesn’t let you buy
data directly – you have to go to the website which wouldn’t let me buy any
ring in, which worked a treat but seems so very 1973) and now that I’ve
conducted my 27 tests, I’ll resist the urge to try any more. I’ll stick to
email, calendar and Twitter from now on.

But if we’re to really embrace this whole mobile broadband
revolution – and the StatsNZ Household use of ICT survey suggests we really are
– we’re going to need more data. I’d start with 3GB and look for 5GB and 10GB
packs in a hurry.

Telecom is about to launch its own 4G service and 2Degrees
is testing its own capability in this area – with any luck competition will
kick in at that point and we’ll see what the service really can do.

The Household Use survey makes for very interesting reading.
We’re taking to online shopping like ducks to water (yet we’re also told
roughly 30% of New Zealand businesses don’t have a website) and if you’re
waiting for the smartphone revolution to arrive, you’ve already missed it.

Smartphone use is up 26% since the 2009 survey and ¼ of all
individuals have a smart mobile device. Mobile use has increased hugely – 55%
of recent internet users connected via a mobile device at a time when the use
of a desktop computer is in terminal decline.

There are still some hold outs who don’t have an internet connection
– but only one in five households. Rural has picked up hugely, but there are
still a (thankfully declining) minority who see no value in having an internet
connection. But while that group is declining, the “costs are too high” group
is increasing, something which suggests to me another case of the digital
divide and something that needs to be addressed.

The Digital Dividend is here, (but isn’t evenly distributed)

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The government has announced its plan for auctioning off the 700MHz digital dividend spectrum that will become available once analog TV is discontinued next year.

700MHz spectrum is highly sought after as a way of delivering 4G speeds, especially in rural areas. The lower frequency means the signal travels further, copes with buildings better and generally is seen as the best frequency range for LTE mobile services.

The government has decided to hold a straight forward auction rather than any kind of beauty contest as happens elsewhere in the world. It’s also decided that the sale will be organised in spectrum blocks “according to the Asia Pacific Telecommunity band plan” but there’s no word on how many blocks there will be, how big they’ll be or indeed how the auction will run. That’s yet to be decided, apparently.

In our submission to the MED (now MBIE) on the whole issue, TUANZ pushed for some kind of discount or other form of preferential treatment for rural deployment. Telcos traditionally roll out new networks in the CBDs of their largest target cities, and slowly deploy deeper into rural areas. We’d like to see that circumvented and suggested offering a lower price for telcos that offer to do just that. The government has decided not to follow that model.

Vodafone has indicated that it will deploy LTE on rural towers once the 700MHz spectrum is made available, which is a good thing for rural users.

There is one major issue outstanding, however, and that is Maori access to spectrum.

In 2000, as the 2100MHz auction approached, Maori pointed out to the government of the day that no ownership of the airwaves had been established and that Maori could challenge the government through the Waitangi Tribunal.

Then-minister Paul Swain side-stepped the issue by putting aside one block of the four blocks being sold and giving Maori interests first right of refusal on taking up those management rights at a 5% discount. He also sweetened the pot by putting up $5m to help set up the Maori Spectrum Trust (now the Hautaki Trust) and to help it find a commercial partner.

Today, that Trust is a shareholder in Two Degrees and without that discounted spectrum we probably wouldn’t have a third player in the market today.

In an ideal world, the government would probably have reached a similar deal today. Perhaps a chunk of spectrum could have been given to the Trust in order to shore up its shareholding in the company that runs Two Degrees, thus ensuring strong competition from our newest telco alongside encouraging Maori investment in the high tech sector.

Instead, the government “is investigating” setting up a $30m ICT development fund to assist Maori to “leverage the potential benefits from new technologies and promote and support the language and culture in a digital world”. That’s a laudable goal but I can’t help but feel the government has missed an opportunity to do a lot more on a pragmatic level.

It also opens the door to a challenge to the spectrum sale through the courts and potentially the Tribunal itself. That could delay the auction and potentially mean we spend a lot of money on lawyers and economists instead of where it should be spent – on rolling out faster mobile broadband, something the government says is worth $2.4 billion over the next 20 years.

Guest blog – Where to for universal service

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Guest post from Hayden Glass from the Sapere Research Group.

And broadband for all

Now everyone has access to a telephone, the question is how to get everyone great broadband.

Next year, the government will review the rules about universal service, ie, the questions of what minimum level of telecommunications service should be guaranteed to everyone, and how best to make that happen.

The legislation requiring the review is quite specific about what to cover, including whether existing universal service rules are still needed, how they should be delivered on, and funding arrangements.

Successive governments have required Telecom to make basic voice services available to everyone. These historic requirements are now out of date, overtaken by competition and by technology (especially mobile). The real questions for the future are about broadband, as the government’s Rural Broadband Initiative (RBI) recognises.

Part 1 of this post looks at what the universal telecommunications services are, and how the requirements have fared over time.

Part 2 will consider the future, explain why the RBI is a big improvement, and looks at what remains to be done.

What is universal service

The universal service programme in New Zealand suffers under the moniker of the Telecommunications Service Obligation for Local Residential Telephone Service (TSO). Fundamentally its job was to ensure that everyone had access to a fixed-line telephone that they could afford. (There are also separate arrangements for a text relay service for the deaf, confusingly also called a TSO, that are not the subject of this post.)

The latest incarnation of the TSO is a deed (WARNING: PDF) agreed in December 2011 as part of the separation of Telecom and its network arm, Chorus. The TSO imposes four main requirements on Telecom.

* Never raise the price of basic fixed-line phone service for residential customers faster than the rate of inflation, unless Telecom can show its profitability is “unreasonably impaired”.
* Never charge more in rural areas than in urban areas for “basic residential service”, which in effect means Telecom’s standardHomeline service .
* Continue to offer fixed-line phone service to all customers who were connected in December 2001, and
* Provide free local calling as part of the basic phone service for residential customers. Via an exchange of letters with the government in 2000,  Telecom was also required to provide slow-speed dialup services to most customers.

Chorus, the network company, has obligations to maintain its fixed network coverage to ensure that Telecom can continue to meet its obligations.

These obligations have changed only slightly since they were put in place on Telecom’s privatisation in 1989 despite radical changes in the industry in the meantime. The slow-speed dial-up data requirements were put in place in 2001, when Telecom was given the ability to bill its competitors for some of the alleged negative profit impacts of having to meet these obligations. The Commerce Commission checks each year whether the obligations have been met .

The 2001 requirement for the industry to compensate Telecom was never going to be a popular policy in the industry. It led to a verylong-running legal dispute eventually won by Vodafone, although as between Telecom and Vodafone the case had already been settled before the last court decision came out. Vodafone was essentially arguing that the Commission had not followed the law properly and as a result had substantially overstated the cost of the TSO obligations for Telecom. Soon after, the government announced it would get rid of the contribution system, particularly in light of evidence cited by the government that Telecom had not spent the money it had been given by Vodafone and others on rural network infrastructure in any case.

Universal service anyway

The TSO obligations have worked so far as they went, ie, the fixed-line network is as no smaller than it was in 1989, the price of basic fixed-line phone has gone up at almost exactly the rate of inflation, and free local calling remains part of Telecom’s Homeline package (as seen in the Commerce Commission’s helpful report).

But thanks to competition and technological change, these obligations are now chronically out of date.

* Ensuring access to a fixed-line telephone is no longer the problem. Just about everyone has access to a fixed line and a mobile phone, coverage continues to expand through competition, philanthropy (Vodafone’s community tower build programme), and the RBI, and local calls are cheaper and cheaper on prepay mobile plans with no minimum spend.

* The price cap on residential phone service was insufficiently tough in the first place. The Commerce Commission thinks that free local calling has retarded competition, and that New Zealand has one of the highest prices for standard residential service in the OECD. The price of standard residential phone services has risen even while prices for other phone services have collapsed.  Local calling is only “free” for customers who pay the high monthly fee, which might be why the now-renamed Ministry of Economic Development calls it “charge-free local calling“.

In short, the existing TSO is a solution to a problem that no longer exists. The real issue now is broadband for everyone. As we shall see in Part 2.

Hayden Glass is a consultant specialising in telecommunications with the Sapere Research Group, one of Australasia’s largest expert services firms.