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Brislen on Tech

Paul Brislen, Editor. 17 May 2019, 3:00 pm

Here's a weekly breakdown on this week's tech news that matters, by TechBlog editor Paul Brislen.

Vodafone sale and the future of mobile

Finally the truth has been revealed. All those journalists who rang me all those times to tell me Vodafone was about to be sold have been proven correct. The secret is out. It's as if a weight has been lifted.

Honestly, I used to get at least a call a month from some breathless wonder or other telling me the deal had been done. Well, it was almost done. Well, it was as good as done. Well, they really want to sign it. Well, they're signing it next week.

Finally, they have. Vodafone Group has sold Vodafone New Zealand to a consortium lead by local investment giant Infratil for a tidy $3.4 billion. They'll retain access to the brand and that juicy global roaming market and will have to pay an annual fee but basically that's that.

If the Vodafone story was mapped onto that of the British Empire it would line up at many points along the way. Start small, grow quickly, take over the world, then parcel off the untenable bits, then parcel off the tenable bits. Finally you're left with the mother country and a Commonwealth of Nations and that's the point we're at today.

Vodafone New Zealand has always been something of a jewel in the Group for two reasons. Firstly, we're large enough and keen enough on mobile technology that growth was pretty much guaranteed and Vodafone New Zealand became the first competitor to overtake a former government monopoly in this space. Secondly, the region that Group put Vodafone New Zealand into is a basket case. New Zealand lined up alongside Australia, Fiji, Turkey and India. Australia never fired, Fiji was so small it doesn't count (and was sold off), Turkey was so large it was a nightmare to manage and India was a money pit into which vast fortunes were poured.

Vodafone New Zealand, by way of contrast, was a going concern, growing and dominating the mobile market and Group needed at least one so in its quarterly reports it wasn't all gloom and doom for the outlier region.

But that's all history now and the new Vodafone will no doubt be floated on the NZX (as Infratil did with Z Energy) in order to raise the capital for the next wave of spending.

Rumours are already flying of Vodafone opting to sell off the landline business it acquired when it bought TelstraClear (which it needed predominantly for the fibre backbone) and which has never really done much of anything except get the company into trouble with the regulator. That would be a massive rollback to the Vodafone Plus strategy of being a total telecommunications provider, but in this day and age that's pretty much a moot point anyway.

It does set the bar for how much a telco is worth in New Zealand and that will be of huge interest to those sellers in the market. Sellers like the owners of the Vocus Group that wanted quite a bit more than the market thought was reasonable, or the owners of 2Degrees which now have a clearer picture of what the assets are actually worth.

All told, there's opportunity in the New Zealand market for a buyer with deep pockets and a willingness to shake up the market. Perhaps the next rumour we can start spreading is that they're all for sale.

It'll be true, eventually.

Stuff - Vodafone NZ sold for $3.4 billion to Infratil and Canadian investment firm

NZ Herald - Vodafone NZ sold to Infratil, Brookfield for $3.4b

 

Gee, that's expensive

So what happens next in the mobile market and are we well served? The Commerce Commission is seeking feedback on its report into the competitive nature of the marketplace and says pretty much we're well served. Speeds are pretty good, prices are pretty good, data growth is pretty good and usage is pretty good.

So that's pretty good.

Two areas of concern stand out, however.

The first is the lack of mobile virtual network operators (MVNO). These are companies that come into the market and have no network or billing system but which buy capacity from network operators and sell a service to customers.

The most obvious example globally is Virgin Mobile which offers products and services all over the globe but which doesn't own a network.

In New Zealand our three mobile network operators (MNOs) account for 99% of all connections and the largest MVNO is operated by Vocus group and accounts for less than 30,000 connections.

It's all a bit paltry really.

MVNOs come in two basic forms - thick or thin. A thin MVNO is little more than a rebadged retail product taken from a provider. There's no margin to speak of, but there's little cost either and the difference between MNO Product 1 and MVNO Product 1 is minimal.

At the other end of the spectrum is the thick MVNO, where the new player buys bulk minutes, data and TXT messages each month and builds its own product set, offers its own support services and disrupts the market with new and unusual products that the incumbents may not offer.

Margins tend to be greater and the differentiation is much more marked. MVNOs in this camp can mix and match products and build a suite or portfolio approach that customers like.

A good example of this is the UK's supermarket chain, Tescos, which offers landlines, mobile, fibre, TV, movies and other content offerings and can combine and mix or match them as the customers want.

That we don't have a strong MVNO market here is usually put down to market size: we have three network operators and around five million users, so the spread is pretty much sorted at this point. An MVNO would have to be something out of the ordinary to gain traction in such a saturated market.

The second area of concern for the Commerce Commission is in the future - the cost of building a new network, probably a 5G one, is suddenly up in the air because of the Huawei issue and that's going to put pressure on the network builders that could cause trouble in the competition space. On top of that, the networks have to buy spectrum and traditionally the government has seen this as an opportunity to rub their hands with glee and declare "let the market decide who is most worthy" by seeing how gives it the most cash.

This has always been a very poor metric for how best to apportion out the spectrum that's available if you're looking to grow competition. The most competitive spectrum is of course the free stuff - wifi, baby monitors et al use unlicensed space and there's a huge demand for it. But in mobile it's regulated and that means buying a licence.

The last time I thought about this was when Sky City announced it would build a new convention centre in Auckland in exchange for an extension of its monopoly over gambling in the city. Superb, cried the government, we won't charge you for the licence if you build the building.

If we applied the same logic to the mobile space you could say "we won't pay you a penny for the spectrum rights and in exchange we'll build you a shiny new mobile network that reaches out to 97% of the population" or similar.

Think what that would do for rural broadband speeds.

But of course it's all for naught because 5G will kill us all and is an experiment in mind control and must be stopped before anyone else dies from radiation poisoning or something.

Yes, it's that time in the news cycle when well meaning but uninformed tin-foil hat wearers come down out of the hills to complain about radiation because of a thing they read on Facebook. Mr and Mrs Potato Head demand that we turn off all sources of radiation because radiation is all bad and we Just Don't Know what Damage It Will Cause.

Well, we've had 30 years to study electromagnetic frequencies and their use in mobile phones and with 25,000 scientific articles published in that time, the World Health Organisation can find no link between cellphones and any kind of ailment.

I think we'll be OK, but what is alarming is news from the New York Times (republished by the New Zealand Herald) that suggests these stories aren't accidentally emerging now but are being driven by a Russian news agency that has been the source of many a hoax news story over the years. That's really not good to see because every time one of these stories comes out it undermines the years of accurate reporting about real scientific study and makes people worry unnecessarily.

It's really not on.

 

NZ Herald - 'Disgraceful. They've missed the mark massively' - telco on ComCom report

ComCom - Mobile Market Study

Stuff - 5G will fry your brain? I don't think so

 

We'll always have Paris

The Prime Minister's trip to Paris has delivered an agreement on a way to move forward, buy-in from a number of countries and, importantly, a number of tech companies, and the barest minimum public relations-driven response from Facebook.

Literally, it is the least the company can do.

Facebook has introduced a "one strike" policy for people posting or sharing extremist content (which is undefined) in that they will be blocked from posting Facebook Live video content for a period of time (also undefined) and with no suggestion as to what happens if they break this rule more than once.

On top of that the company that announced a nearly $7 billion profit (profit, not revenue) for the last three months of 2018 is to put $7.5 million into research that will look at how to train AI to spot objectionable material in online video.

Look at the deckchairs, see how they're arranged!

Facebook and YouTube have a major problem that they are unwilling to resolve and it's all to do with the way the companies make money. They don't care what content is shared so long as it attracts eyeballs. That's the only metric they care about - will you watch it and will you watch more of it.

This simple measure sends us down the rabbit hole whenever we click on a video on YouTube. Once it's done we're offered more like-minded videos. Watch a Bill Bailey clip and your feed fills up with stand up comedians. Watch a car review and your feed fills up with car videos. Watch a video about whether migrants cost Kiwis their jobs and your feed will fill up with extremist content at an astonishing rate.

Facebook and YouTube want to keep your eyeballs on their sites so they can sell your eyeballs to advertisers.

I don't mind targeted ads really. I search for "holidays in Europe" and next minute I'm getting advertising for cheap flights and accommodation. When it works it works well.

But Facebook in particular has gone one step further and now charges the content creators to share their content - so Facebook not only clips the advertisers' tickets, it also clips the content creators' tickets. It also means anyone can publish any content they like to Facebook (so long as it meets the ill-defined and ever changing community guidelines of course) and if you pay enough money it gets pushed into millions of users' feeds.

Facebook makes a lot of money by doing this and won't stop unless it's regulated. It can't. Legally it has to maximise its shareholders' investments and so it won't stop until it's forced to.

Paris is a very good first step but we have to be cognisant of the fact that it is only the first step, and what is before us is a marathon.

Techblog - Christchurch Call - two views

NZ Herald - Facebook restricts livestreaming, invests in AI on eve of Christchurch Call Summit

NZ Herald - Christchurch Call: Be brave, Prime Minister - big tech can be regulated

Stuff - Christchurch Call: No easy fix to social media regulation

Stuff - Collaboration between tech companies and governments mooted in Christchurch Call

Stuff - We need laws with real teeth to protect our online safety

New York Times - Jacinda Ardern: How to Stop the Next Christchurch Massacre

Stuff - Facebook: Jacinda Ardern's Christchurch Call is a small win, but a way forward

NZ Herald - Feeble Facebook should have followed YouTube's move

Newsroom - How to regulate social media


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