Rural ISPs attack ‘utterly insane’ Vodafone plan, ‘foot-dragging’ minister

Vodafone’s new $40 per month wireless broadband plan, launched on Friday, got the tick from Jarden.

Although Vodafone had been late to the party, it was now “starting to pull the price lever”, analyst Arie Dekker said. FWA (fixed-wireless access) competition was “starting to benefit users.”

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Dekker saw Spark replying with its own price cuts as it strives to hit its target of moving 30 to 40 per cent of its fixed-broadband customers to wireless broadband (which uses a mobile network to deliver fast internet into a fixed premise such as a home or office, negating the need for a landline).

Despite the heightening competitive pressure, Dekker saw further runway ahead for Vodafone and Spark in fixed-wireless – and by extension, further threat to dominant landline wholesaler Chorus. He noted that Spark’s 165,000 wireless broadband customers allow it to pocket more than $80 million per year that would otherwise have gone to Chorus.

But not everyone was such a fan.

“Vodafone’s new $40 broadband offer might create a short-term headline, but the ongoing concerted move by both Spark and Vodafone to convert customers off fibre onto scarce wireless resources is utter insanity from a national perspective,” said Mike Smith, chairman of a lobby group for small, mostly rural ISPs called, the Wireless Internet Service Providers Association, or Wispa.

“Radio spectrum is the broadband lifeline for 70,000 customers, mainly rural, who have no realistic alternative. More than half New Zealand’s farms get their services through about 40 regional wisps – they get Netflix and the Rugby World Cup at affordable prices and city quality.

“Radio spectrum is key to that. Unlike fibre optic, it’s a limited resource.

“Yet now we have the latest episode in an ongoing campaign by Vodafone and Spark to use scarce radio spectrum to replace abundant fibre. There will be a tiny financial benefit to a handful of urban users, at a huge cost to rural users who have no alternative.”

Smith told the Herald that giving the “celcos” (Spark, Vodafone and 2degrees) more spectrum would undermine billions of taxpayer investment in UFB fibre.

“There’s been a relentless attack, to the point that Chorus is now offering a bounty of up to $800 for customers to return to fibre,” Smith said.

“As taxpayers we should be scratching our heads. Why, when we have all shelled out billions for abundant urban fibre, are Spark and Vodafone scrambling to take urban customers away in favour of a scarce form of transmission?”

And that resource is even scarcer than usual because last year Communications Minister Kris Faafoi cancelled the 5G spectrum auction, in a bid to give the Crown breathing space to resolve a longstanding Treaty claim on airwaves.

Instead, a modest amount of 5G spectrum was directly allocated to the major players, at low cost, on a temporary basis before the auction-proper, rescheduled for October 2022.

But Wispa is sceptical even the revised date will be hit.

“Urgent government decisions on spectrum allocation have stalled. The industry is awaiting crucial decisions effective from October 2022, and investment is now stalling because Government appears to be making little progress,” Smith said.

Asked by the Herald if he could confirm timing for the full auction, new Communications Minister David Clark responded with the general: “I am confident that future spectrum allocations will be made in good time, to ensure that rural wireless services and other providers can continue their services. We are making good progress in our discussions with Māori about spectrum rights. As this work is still in progress, it’s not appropriate to provide further detail at this stage.”

Clark added: “Rural voices are extremely important in developing telecommunications policy and technology. Partnerships between wireless internet service providers [Wisps] and the Government are incredibly beneficial. We couldn’t have made progress on providing services into remote and rural New Zealand without them. The wisps are also a significant element in the Government’s thinking about future spectrum needs.”

Vodafone and Spark were a bit more front-foot in their response to Wispa’s Smith (who is being advised in the background by veteran telco figure Ernie Newman).

“We completely reject the notion that urban wireless broadband is degrading mobile connectivity in rural areas,” Vodafone NZ external affairs lead Nicky Preston said.

“This is simply not true, as we can’t repurpose radio spectrum being used in urban areas to increase rural capacity.

“Spectrum is a valuable resource that Vodafone has invested millions of dollars into, so we’ll continue to fully utilise this spectrum by providing wireless broadband in urban areas where we have spare capacity.

“Given the vital importance of spectrum in delivering improved services in rural areas, it’s important that further allocation progresses quickly and that all allocated spectrum is actually used to deliver service improvements.”

For Spark, corporate relations partner Elle Dorset said: “The wireless broadband services we provide to urban customers do not impact the broadband capacity we have available to rural customers in the vast majority of cases, because they are served by different cell towers.

“In fact there is currently capacity for around an additional quarter of a million rural addresses to take up Spark wireless broadband, recognising availability differs by location.

“We agree with WISPA that freeing up more radio spectrum for use by wireless broadband providers in rural areas of New Zealand will be critical to ensuring all New Zealanders can participate fully in the digital economy.The sooner we all know when and how long-term spectrum management rights for the key 5G spectrum band (the 3.5GHz band) will be made available the sooner we can get on with delivering 5G to New Zealand, which will have the additional benefit of freeing up 4G capacity.

“We make significant investments in rural capacity every year, both directly and through our joint venture with other mobile operators, the Rural Connectivity Group – which just built its 200th rural cell tower.”

The Rural Connectivity Group – or RCP is a Spark-Vodafone-2degrees joint venture that won the tender for the $150m second phase of the public-private Rural Broadband Initiative – although the Crown also awarded nine Wisps slices of the action.

Bread or broadband?

Complicating matters, Smith also mused “Perhaps the core problem is over-pricing by Chorus? Who knows?”

Vodafone NZ’s Preston was quick to seize on that point, telling the Herald, “We’ve been saying for a long time that the high cost of fibre presents a massive challenge for internet providers like Vodafone in being able to drop fibre broadband prices.

“We never want to get into a situation whereby New Zealanders need to choose to buy bread over broadband.

“But when Chorus charges more than $45 each month for the wholesale cost of fibre (for the most popular plan, Fibre 100) then our hands are tied, as we also need to enable the technical connections, provisioning, billing, customer support and marketing to be able to offer a retail fibre broadband service to New Zealanders.”

Although something of a whipping boy for both sides, Chorus has also played a key role in the second phase of the Rural Broadband Initiative. When the RCP was behind schedule in November 2019, the Spark, Vodafone, 2degrees joint venture drafted in Chorus, which designed a new fibre-based mobile backhaul product for helping to connect cell towers to the main network.”

Beyond griping about Chorus, the other common ground Spark, Vodafone share with Wispa is their desire for Clark to get a wriggle on allocating the next batch of spectrum.

The minister’s “In good time” response seems unlikely to satisfy any of them.

And then there's Elon

Meanwhile, all-comers face new competition in the rural sector from Elon Musk’s Starlink, which says it will offer “near-global” satellite broadband service for $150 per month (plus an initial $799 for a DIY-install dish and cable) with no data caps – still a bugbear for most rural service – and a respectable 150 megabit/sec download speed and 20ms to 40ms latency (in layman’s terms, meaning it’s easily good enough for Netflix and Zoom).

Smith said Wispa members have a degree of apprehension about the launch of Starlink, which can also be expected to eat into RBI 2 business.

Competition from Starlink could get keener, too, as Musk’s Space X throws more and more Starlink birds into orbit (at least in some rural areas. The lag inherent to satellite connections will always give fibre and wireless broadband the performance edge wherever they’re available).

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