Since the early days of the mobile industry, Vodafone has been determined to do things its own way — and that meant offering wireless services only. For all its independent spirit, the company's decision this week to resell NBN Co landline services has sealed the fate of both Vodafone in Australia and of carriers believing that you can run a top-tier telco on wireless alone.
Since the early days of the mobile industry, Vodafone has been determined to do things its own way — and that meant offering wireless services only. Yet, while it has become the world's largest multinational wireless telco, Vodafone's recent infrastructure meltdowns, mass customer defections and hell-for-leather network upgrade all suggest a company that was, simply, ill-prepared for its own success. And for all its independent spirit, the company's decision this week to resell NBN Co landline services has sealed the fate of both Vodafone in Australia and of carriers believing that you can run a top-tier telco on wireless alone.
It's a move not too far removed, philosophically, from the 20-something son who loses his job, gives up his shared flat and moves back in with mum and dad — reclaiming his room, hanging his Nirvana posters back on the wall, plugging in his headphones and promising he'll buy his own house once he gets a job and saves up the deposit. You know, someday.
And while it was likely a bitter pill for wireless-minded Vodafone to swallow, the decision to join its top-tier rivals by taking NBN services is fundamentally reflective of the new world order that is slowly emerging as Vodafone's initial business model simply runs out of steam.
Vodafone's problems are coming home to roost — but can selling out to the NBN fix them? (Teenager room image by James Cambridge, CC BY-SA 3.0)
It wasn't a bad idea, mind you — there was no real need for fixed phones, since these days it's all about mobiles. And when it came to voice services, the benefits were significant; Vodafone could maintain a global network that facilitated international roaming, enabled cross-subsidies to support aggressive pushes into competitive markets, and would build a large and diverse enough customer base that the law of averages would buffer its revenues from the effect of any single anomalous loss of customers.
The issue here, however, isn't that Vodafone pursued the wrong business model; with enough voice capacity and coverage, its original mission to build a voice-based global brand worked well enough. The problem was that the market fundamentally shifted — with data volumes absolutely exploding and set to do so well into the future, Vodafone's original model simply doesn't work anymore. All its changes over the past few months are a reflection of this fact, yet none so significant as its bowing to the concession that fixed services are important even when your main game is wireless.
The issue here isn't that Vodafone pursued the wrong business model; with enough voice capacity and coverage, its original mission to build a voice-based global brand worked well enough. The problem was that the market fundamentally shifted — with data volumes absolutely exploding and set to do so well into the future, Vodafone's original model simply doesn't work anymore.
The reasons why this occurred were already patently obvious, but were firmed into a government-led call for action this week as ACMA released a discussion paper that highlighted a quite worrying fact; based on current growth in demand for mobile internet services, our country will need to find and preserve an extra 300MHz of wireless spectrum by 2020 alone.
This may not sound like much, but consider for a moment that the entire "digital dividend" of premium 700MHz-band spectrum, which will be freed up when analog TV services are finally switched off 30 months from now, is only going to deliver an additional 126MHz of auctionable wireless spectrum. Even worse, that number is already being hotly contested by emergency services bodies that want 15 per cent of the spectrum reserved for their exclusive use. Telstra is hunkering down to exploit its 1800MHz band licences, and authorities are rapidly scrounging around to find other places where contiguous blocks of spectrum — large enough to provide meaningful space for LTE services to stretch their legs — might be secured.
It's the digital equivalent of pulling out the couch cushions to find enough coins to pay the pizza delivery guy, who's standing impatiently on your doorstep holding a dozen pizzas for your wayward son's party. In this context, can it be any surprise that Vodafone has shifted tack and jumped on the fixed-line bandwagon? Of course not — Vodafone is in crisis mode right now, and it needs to explore all avenues to ensure that it can not only rebuild its network for the future, but also convince customers that this time, it can do things better.
The ability to bundle fixed-line services with its offerings will be an important step here — and not just because Vodafone wants to expand into offering 100Mbps FttH internet and fixed-phone services. Vodafone's new network may be packing the latest and greatest Huawei 3G/4G gear, but its embrace of the NBN suggests that the company's new network infrastructure will be equally reliant on minimising network congestion using femtocells — those mini-base stations that you can install in your lounge room or company conference room to boost coverage within your home or business.
Optus and Dodo recently announced their femtocell home trials, and Vodafone is quietly introducing them for small businesses. I expect them to appear everywhere in the near future. There simply isn't enough private capital in these companies to provide the density of base stations and backhaul necessary to meet our expectations of 3G (and, in the future, 4G) services.
It's the telco equivalent of crowd-sourcing, and it seems to be the only way that tomorrow's networks can keep up with surging demand for wireless services that has already outstripped our ability to build, commission and connect new mobile towers.
We have already discussed at length (most recently in my still-unanswered wireless challenge to Malcolm Turnbull) how this shift debunks the myth that wireless services will provide a viable alternative to the NBN; as any level-headed technologist must concede, the future requires both.
It's the telco equivalent of crowd-sourcing, and it seems to be the only way that tomorrow's networks can keep up with surging demand for wireless services that has already outstripped our ability to build, commission and connect new mobile towers.
One wonders what implications this has on the strategies of 4G start-ups like vividwireless, which is building its own data-only wireless network but at least had the foresight not to try cramming it onto an already-overloaded 3G infrastructure. Vividwireless CEO Martin Mercer has already said that the company's network is complementary to the NBN — but as numbers increase, will it also need to adopt a hybrid strategy like that of Vodafone?
Whether Vodafone's hybrid solution can eventually win back customers remains to be seen — but its concession to the inevitability of the NBN already speaks volumes about the way that the industry must go from here.
Is Vodafone selling out its founding vision? Or was this move inevitable? And will vividwireless have to go down the same path, or will data-only telcos be able to keep their wireless vision intact?
