Vodafone NZ steals march, but 4G challenges remain

Vodafone is out in front in New Zealand's 4G race, but it will not be all smooth sailing.
Written by Darren Greenwood, Contributor

Hats off to Vodafone, which made its surprise launch of 4G in Auckland yesterday. But amid the glittering fanfare, questions still remain about this superfast and super-sexy new technology.

Vodafone has been trumpeting the fact that the speeds of its long-term evolution (LTE) technology are 10 times faster than HSPA+ technology, that it's more stable and reliable, and even that smartphone devices were created for such a network.

Now, you might recall me being somewhat sceptical about the needs for 4G when Telecom announced trials of its own 4G network last month.

The funny thing is, Vodafone has made similar admissions.

I had to smile when I read that its group CEO Vittorio Colao last month said that 4G is for "technofreaks" and "very early adopters", and that most users won't be able to tell the difference between LTE and HSPA+.

In New Zealand yesterday, Vodafone CEO Russell Stanners admitted its limitations, too.

After launching his new service, he said that 4G is not suited for moving large amounts of data quickly, due to data caps and prices.

Reality means "mobile warriors" using 3G and 4G for office- and business-related work when they are out on the road — the serious downloads, however, will effectively need office or home-based wireless systems.

Stanners also said that voice quality won't be better on 4G until the LTE systems are upgraded eventually to allow for this. 4G's focus is simply the faster download speeds and "better experience".

Consumers there are hungry for 4G and its data, but they are unwilling to pay much extra, so the telcos are struggling to make a profit from 4G — even 18 months after launching the technology. The Korean telcos spoke of the "curse of 4G".

Vodafone won't say what it is investing in 4G, but it admits to a capital spend of NZ$125 million in capital infrastructure during the last financial year. Telecom NZ is similarly coy.

With Vodafone's 4G "premium" being up to NZ$10 per month above 3G rates, you can see that it will take many more customers for Vodafone to recoup its investment.

Currently, Vodafone said its 65,000 devices in New Zealand can take 4G, and it expects this number to increase to 100,000 by the year's end.

On these optimistic rates alone, it will be sometime before the investment is paid off.

Obviously, much will depend on data take-up, and this looks to be where the telcos will make their 4G money, since 4G users tend to gobble up far more data than 3G users, a trend already experienced in New Zealand and elsewhere as data speeds increase.

But the Korean experience shows that people won't want to pay much for that extra or faster data.

This is also confirmed by New Zealand's slow take-up of Ultra-Fast Broadband (UFB) as it is rolled out.

With us seeing 4G offering UFB-like speeds, LTE also impacts the market for copper-based broadband.

Paul Brislen, CEO of the Telecom Users Association of New Zealand, wondered whether the government should still be regulating it if we now have 4G offering similar speeds.

With Vodafone saying that it will push 4G into country areas as part of the Rural Broadband Initiative (RBI), you might even wonder whether a nationwide 4G rollout of mobile might provide taxpayers better value than multibillion-dollar government fibre-based NBN/UFB broadband schemes. Without such schemes, I am sure 4G would also be more profitable.

In the meantime, we have Telecom NZ saying that it will not bring forward its 4G launch, due before Christmas, with it reporting much satisfaction from customers for its upgraded 3G/HSPA+ network, which has doubled download speeds. Certainly, I am finding HSPA+ acceptable for my needs.

Telecom NZ sticking to its timetable is a wise move, considering the debacle it suffered with its XT launch and related outages several years back. Telecom NZ could not afford a similar screw-up. It's best wait until its trials, announced last month, are completed to its total satisfaction.

Telecom might be letting Vodafone steal the march with 4G. But let Vodafone take the risks by being first adopter, let Vodafone create the market and I am sure that when ready, Telecom can easily piggyback off the greater awareness of 4G that Vodafone has created with its marketing.

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