Last week Vodafone New Zealand chief executive Russell Stanners caused a stir when he called on the government to scrap the roll-out of fibre-based ultrafast broadband in much of Wellington and
Christchurch.
He makes a good case for saving taxpayer money by not overbuilding an existing network.
The HFC (hybrid-fibre coaxial) cable network Vodafone picked up when it acquired TelstraClear isn’t the company’s only
fast broadband network. The company also owns a fast wireless broadband network.
A year has passed since Vodafone launched its 4G network. Telecom has a similar network, 2degrees says it expects its 4G
service to start later this year.
While no-one is going to claim any of the 4G networks are equivalent to the UFB fibre network, comparing the projects
provides some useful insight into the relative performance of the government-subsidised project:
Taxpayer involvement
Government is investing $1.35 billion of taxpayer money to built the UFB network. The government received $259 million plus GST when it auctioned the 700MHz spectrum. That’s
not the only spectrum used for 4G, at a conservative estimate carriers have paid the government $500 million for
bandwidth.
Industry disruption
Building the UFB network meant breaking up Telecom NZ - at huge expense and disruption. It also meant rewriting
telecommunications legislation.
The government didn’t get that right the first time, so a second round of disruption is coming. In contrast, Vodafone,
Telecom and 2degrees just rolled up their sleeves and got on with building 4G networks.
Time to build and reach
If everything stays on schedule, it will take nine years for the UFB network to reach 75 percent of New Zealand.
Vodafone says by next month its 4G network will reach more than 2.5 million people that’s roughly 60 percent of the
population covered in a single year. In the long term 4G will reach more New Zealanders.
Network speed
Direct comparisons between fibre speeds and 4G speeds are difficult. A fibre connection is a direct link from a building
to the nearest node. If you buy a basic UFB plan you get the 30/10 Mbps service. In practice you’ll get something close
to 30 Mbps down, 10 Mbps up. Pay more and you’ll get 100/50.
Wireless bandwidth is shared. I’ve seen 4G speeds of around 70 Mbps down and 40 Mbps up, but in practice speeds are
lower on busy cell sites and at busy times of day. The key point here is that in terms of performance, 4G is in touch
with low-end UFB. That’s significant.
Cost of data
UFB plans vary. There are low-cost plans with only gigabytes of data. At the other extreme are unlimited plans. Vodafone
offers a 30/10 UFB plan for $95 that includes 80GB of data. Snap offers 100Gb for $75.
Pay roughly the same amount for a Vodafone 4G service and you’ll get just 1.5Gb of data - although that package includes
unlimited voice calls and texts. Telecom has a plan with 3Gb costing $119 and the company’s Wi-Fi hot spot network can
add another 1GB per day.
Demand
The last report from Communications Minister Amy Adams says 19,000 have connected to UFB. Vodafone says it has signed
30,000 prepaid 4G customers in the eight weeks since it launched a prepaid option. The company has a total of 300,000 4G
customers. Telecom hasn’t announced numbers, but sent out tens of thousands of 4G sim cards.
Need for fibre?
Fibre is essential for businesses who need bulk data and sold, consistent bandwidth. 4G isn’t an alternative, it’s a
complementary service. Smart companies will buy both.
Things are more complex with home broadband. Not everyone needs lots of data, nor do they want to pay for it. Many
would be happy to stick with copper. For most people, buying fibre services only makes sense if it opens the door to new
entertainment options. There was a danger the residential component of the government investment in fibre would do
little more than give Sky TV a taxpayer subsidised delivery mechanism - that no longer looks to be such a risk.
So what does Vodafone (or Telecom for that matter) know about Ultrafast Broadband?
First of all they know how to sell fast internet services. They also know how to build vertically integrated data
networks. They know how to give people the products and services they want.
I can’t help wonder what the 4G carriers might have been able to deliver if they had a $1.35 government subsidy instead
of having to pay the government $500 million for spectrum.
And, in hindsight, their success with 4G calls into the question the idea of separating network operation from retail
services.
So when Russell Stanners comes calling with ideas about delivering Ultrafast Broadband, it would pay to at least give
the man a hearing.