Opinion: Coming, ready or not

Paul Brislen, CEO of the Telecommunications Users Association of New Zealand, reckons 2013 could be a make or break year for the ICT industry

Predictions are tricky things, and the telco industry is doubly tricky because years where you think everything will happen tend to be damp squibs and years when you’re not paying much attention tend to be the ones where everything goes off.

When I sat down to think about 2013 I figured it would be a quiet year. We’re not going to be much further on in terms of UFB rollout, we’re not going to have any cool stuff in the spectrum auction space to consider just yet and we aren’t likely to see a new international cable built (although hopefully we’ll be celebrating the launch of one or more alternate providers anyway).

But then as I thought about what’s likely to happen, I realised there’s quite a bit going on. Not least of which is the merger of Vodafone and TelstraClear and the new strategic direction for Telecom.

For Vodafone and TelstraClear there is a lot to consider.

The two companies don’t overlap in many places so there shouldn’t be too much bloodletting outside the back office areas, but even if it goes smoothly and without hiccup, it’s still a mammoth undertaking.

It’s important that Vodafone doesn’t think it will just bolt TelstraClear on the side of the existing business. Vodafone and TelstraClear as we knew them are both gone from the market now and a new beast must emerge, with new structures and new priorities. Without that sense of change throughout the business, the merger will flounder along and deliver little benefit to anyone I suspect.

Telecom has a new CEO, an extremely large staff, a new regulatory environment and a desire to take Vodafone on in the mobile space. Assuming Telecom can slim down to a trim fighting force in a hurry, we should see Telecom deal to Vodafone in mobile in the same way Vodafone hopes to deal to Telecom in the fixed line space.

The latest announcement from Telecom on data roaming (flat daily rates) bodes well – it means the company is willing to try new things and to shake up the existing revenue lines and I for one welcome that wholeheartedly. More please.

All up, this should be good for customers, but I do worry about what it means for smaller single-market players like 2degrees. We will need to see how they cope with the new world order with one eye on making sure they’re not trampled in the rush.

The mobile market will also introduce faster network technology and we will finally get speeds that deliver the kinds of services we’ve been talking about since 3G was first introduced in the mid 2000s.

Long Term Evolution, LTE, is the fourth generation of GSM cellphone technology and with all three network operators in New Zealand now fighting on the same technology base, the race is on to offer high speed services to customers.

The big issue here is spectrum and while all three have copious amounts of spare capacity in the 1800MHz and 2600MHz bands, they’ll be fighting for the yet-to-be-released 700MHz spectrum that comes from when we switch off analogue TV.

There will yet be political blood split on this – Maori interests are up in arms over the government selling off rights to radio frequency without paying due attention to the Treaty of Waitangi. You’ve got to say they have a point – Paul Swain introduced a precedent for putting aside spectrum for Maori use in 2001 with a deal that means 2degrees is in the market today.

The deal Swain put together was for one block of spectrum to be put aside for Maori use at a small discount over and above the average asking price for the remainder of the spectrum. The Maori Spectrum Trust (now the Hautaki Trust) was established and given $5million in seed funding to find a commercial partner.

Without that spectrum, without that seed funding, without Tex Edwards, we wouldn’t have 2degrees Mobile in the market today and we’d be poorer for it.

I’d encourage the government to look more favourably on the issue of spectrum and Maori involvement, but I fear they won’t.

I’d expect 2degrees and Vodafone to aggressively market LTE as both have networks that enable quick, relatively cheap deployment. Telecom’s technology partner Alcatel Lucent can do LTE, but the cost of deployment is greater, which puts Telecom in an difficult spot. Interestingly, the pilot scheme Telecom is running has two technology partners listed – Alcatel Lucent and Huawei (which built 2degrees’ network). It looks entirely possible that Huawei will win the bid, assuming the government doesn’t join the Australians in parroting the US line that all Chinese telcos are to be avoided.

The landline market should start to heat up but only if you’re in the right place at the right time. The fibre to the home project (Ultrafast Broadband) is now well underway and we should start to see services coming on stream from all the major ISPs in 2013, but don’t expect it at a house near you any time soon. Schools, hospitals and businesses are the priority targets for the UFB rollout with the residential build really kicking off in 2015. Still, if you live on a fibre deployment route, you might be in a position to take advantage of the work being done, so check with your ISP.

Which leaves most of us firmly in the hands of the copper market until closer towards the end of the decade and so we find ourselves in the oddest of positions of having to make sure copper lines are regulated and priced appropriately so that customers can buy better services and do more with their broadband than they can today. That way, when fibre does come to your street you’ll be more willing to upgrade, knowing you’ll be able to make full use of the faster speeds.

Without an increased demand, the UFB will be a white elephant and having been declared as such we in the telco geek community won’t be able to get another brass penny out of government for a generation or more.

And what will drive that demand? For large businesses it’s the same thing that’s always driven them – cost. For SMEs it’s the opportunity to take advantage of some of the services their bigger competitors have used for years, and to digitise their supply chains accordingly. For rural customers it’s the chance to finally get online and play a part in the knowledge economy – something they’ve been denied for far too long.

For the home users, however, content remains king and without access to legal, decent downloadable content, we’re not going to rush to dig up our driveways and bore holes in the wall by the TV set any time soon.

More than ten years ago I wrote, in this very publication, that New Zealand was standing on the cusp of a new era, a digital future that would challenge the farming sector for value to our economy.

I still believe we can achieve that, even if we appear to be rooted to the spot. We’re still on that cusp, but while we watch the panoramic view before us and sigh contentedly, the rest of the world is moving online at a rate we cannot comprehend. Today, more than a decade on, we still have a chance, but that door is closing fast.

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