No T-Day for Telecom’s B-list partners

Telecom’s mobile virtual network operators, TelstraClear and newcomer Digital Island, will be shut out its new 3G network. But Digital Island’s boss has a cunning plan.

Two companies have gained the right to resell access to Telecom’s current CDMA mobile network, under their own-branded plans: TelstraClear and Digital Island.

Telecom confirms to NBR that both will be shut out of its new 3G W-CDMA mobile network, launching in June on the as yet undisclosed “T-Day”, and remain locked out until the first quarter of 2011.

Digital Island chief executive Blair Stewart says his company’s strategy will be to sell a rebadged Telecom CDMA service at a 20% discount to the telco's own plans, with the same selection of business handsets that Telecom offers. (TelstraClear’s strategy is also discount-driven, with mobile plans sold at $20 a month if you sign up for other services with the telco.)

There are a lot of tradespeople and others out there, who don’t know or care about the difference between CDMA and W-CDMA - aka 3G, says Mr Stewart.

That may well be the case today.

But in the led up to T-Day, expect an avalanche of hype from Telecom about 3G W-CDMA, and a raft of new, SIM-card packing Telecom phones (and, naturally, many a parry from Vodafone about its own 3G network).

Suddenly, Telecom’s current CDMA network (which will be operated in parallel with the flash new 3G network until at least 2011) will look very passé.

Yet that’s where Digital Island and TelstraClear will be stuck, like chumps.

The Keallhauled take: Telecom is not required to resell access to its mobile network, but given the heat applied by the Commerce Commission in other areas, it’s found it politic to do so. But it’s providing the most minimal access it thinks it can get away with. It’s hard to see why Digital Island signed up to such a technology-limited wholesale deal - or why Telecom can't quite hook a second, much bigger fish: CallPlus.

By contrast, Vodafone is granting the companies that sell rebadged versions of its service - Black+White, and, soon, Orcon and Compass Communications - full access to its 3G network already being rolled out.

Gearing up
Digital Island has been around as a business-focussed telecommunications services company for several years, and has “several thousand” customers, according to its chief executive, Blair Stewart. In 2007 was named a Deloitte/Unlimited Fast 50 company.

From July, Digital Island is set to become Telecom’s second mobile virtual network operator (MVNO in the excruciating industry jargon) selling a mobile phone service with its own brand that runs over Telecom’s network.

Digital Island will join Telecom’s existing major MVNO, after TelstraClear, which has been reselling Telecom's network for almost a year. (TelstraClear used to be a Vodafone MVNO until an acrimonious falling out two years ago.)

TelstraClear had no comment on the T-Day lock-out, other than that it is in ongoing negotiations with Telecom.

Mr Stewart says, “One of our top topics with Telecom is access to W-CDMA.

“But initially they want to deliver through their own retail channel and Gen-i and give them some advantage - and I can understand that.”

Maybe so. But can a start-up wait 18-long months before it has a technologically competitive product?

A cunning plan
Mr Stewart has a clear strategy to weather the drought ahead of 3G access.

He says Digital Island will concentrate on selling mobile plans to its existing base of customers. Given the number of people working for each company in its installed base, Mr Stewart reckons he can sell 10,000 phones, and accounts, within 12 months.

Digital Island is known for offering any given telecommunications service at a 20% to 25% discount to the mainstream telcos and delivering it well, Mr Stewart says, and its customers will have confidence it will do the same in mobile - and could be more price than technology focussed, given the recession.

Turning the tables on Telecom
More so, selling a rebadged mobile service is far from Mr Stewart’s only growth initiative.

The Digital Island boss says he wants his company to be seen as the key player in premium IP services, typically involving fibre connections.

“As an independent we’ve got a huge advantage,” says Mr Stewart. Fibre optic cable is so sparsely laid, says the chief executive, that an IP service for a Digital Island customer might involve Telecom fibre at one end, and Telstra fibre at the other. Or maybe Citylink at one end, and Vodafone/Vector fibre at the other. Or maybe FX Networks. Or Velocity. It’s mix and match to find the best connection, and best service and price as Mr Stewart’s crew synthesises cross-network deals.

“Whereas Telecom only sells Telecom,” says Mr Stewart.

So there you go: the man does have a point of difference after all.