Reluctantly falling into mobile network line

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Telecom has unfortunately decided to pull up the drawbridge on the issue and stonewall everyone instead of engaging with the public

By Juha Saarinen | Auckland | Tuesday, 5 June, 2007

The worst kept secret in the regional telco industry is out: Telecom intends to spend $300 to $400 million on building a hybrid mobile network, with GSM/UMTS for voice while retaining EV-DO Rev A for data.

As was widely predicted, the contract went to Alcatel-Lucent. The Franco-American giant is well entrenched in Telecom, and industry insiders say the appearance of China’s ZTE was just a play to get Alcatel-Lucent to lower its bid. The firm requirement to be compatible with existing Lucent-supplied hardware in the network meant that in reality, there was nobody else in the running.

Speed was of the essence, and despite protestations to the contrary, Telecom could not afford to remain the CDMA loner in the region. Its US partner Sprint is moving towards a technology Telecom can’t deploy on the same scale, namely WiMAX, and it wouldn’t address the all-important roaming issue that needs to be sorted out now, and not in a few years’ time, to prevent customers from jumping the fence to Vodafone.

There will be much picking over whether or not Telecom made the right choice years ago when it deployed the US-centric CDMA standard instead of the more widely used GSM. That question will be decided by how well Telecom handles the switchover to GSM: will the new handsets appeal to customers? Will the overseas and, equally importantly, inbound roaming, a $200 million or so market, work well?

There are many telemetry customers on CDMA: how will these be served in a couple of years’ time? Switching out embedded transponders is not an easy task, ditto all those meter readers, couriers and other mobile workers in their thousands with handheld terminals.

Telecom has unfortunately decided to pull up the drawbridge on the issue and stonewall everyone instead of engaging with the public. Make no mistake — this is a big changeover, so the right thing would be to engage with customers and media, and produce a solid roadmap for the next few years to quieten speculation. As it is, Telecom is playing into the hands of Vodafone, which is able to offer customers certainty.

Shareholders in Telecom must be scratching their heads over the silence as well. As of writing, Telecom shares are being traded on the New Zealand and Australian bourses, without any sort of explanatory message from the incumbent. You would think that a move like the GSM switch would warrant at least a notice to shareholders.

A second GSM network should also open the door for TelstraClear to finally enter the mobile market in force. In fact, the Tauranga Unplugged fiasco is said to be a direct consequence of Telecom forging ahead with a GSM network. Obtaining a wholesale deal on a national network built by Telecom is, naturally enough, a far more attractive proposition for TelstraClear than a tiny 3G deployment in a provincial town.

Overall, the switch to GSM should be positive to customers. It means Telecom can finally compete with Vodafone on roaming without kludges such as loaner GSM handsets and WorldMode phones with two radios. Furthermore, it gives customers a little bit more power. Two GSM providers should mean easier and less costly switching, provided the devices are unlocked. This is an area the regulator should look at to ensure competition benefits for New Zealand customers finally arrive.