Telecom exec talks 4G

Telecom CMO Jason Paris
Telecom Retail chief executive Alan Gourdie

KeallHauled

Chris Keall

The amount of data sloshing through Telecom’s mobile network during November doubled year-on-year, CMO Jason Paris says.

In February, it tripled year-on-year.

(In August, Vodafone told NBR mobile data traffic on its network had grown from around 60 terabytes in June 2010 to 135TB - or 135,000 gigabytes - for the month of June 2011. The carrier declined to update its figures yesterday, but said it would give an update next month).

Smartphones now used by 25%
Mr Paris said the increase was driven by a jump in the number of mobile customers using smartphones.

Of the company’s total mobile customer base, 25% now use a smartphone (such as an iPhone, Google-Android based handset, BlackBerry, or a Windows Phone devices such as Nokia’s new Lumia series).

Telecom finally became an official iPhone carrier in November last year as the 4S was released.

Mr Paris said the addition of Apple’s handset had helped the cause. But strong sales of Android phones like Samsung’s Galaxy SII meant the segment was already growing strongly.

Before the iPhone was added to its line-up, smartphones were used by around 20% of Telecom customers.

Worldwide, Telecom says around 10% to 12% are on cellphones - but account for 85% of mobile data traffic.

Post-pay gain, overall loss
Smartphone strength helped Telecom to a net gain of 27,000 post-paid (contract) customers during its December quarter, Mr Paris said.

Expanding smartphone sales also meant mobile ARPU (average revenue per user per month) increased by 8.6% to $29.18 - a number that didn't escape the notice of analysts like Deutsche Bank's Geoff Zame, who rates Telecom a buy.

However, in terms of total mobile numbers Telecom lost a net 92,000 customers in the December quarter as it lost ground to 2degrees in the pre-pay market, where so-called feature phones (or dumbphones) dominate. (Telecom recently launched its Skinny sub-brand in an effort to staunch defections, and speed transition from its old CDMA network. 2degrees is pushing back in the other direction with business plans and other post-pay initiatives.)

Vodafone and 2degrees would not say what percentage of their customers used smartphones (Vodafone has promised an update next month; 2degrees said smartphone numbers were “growing exponentially")

Thankless commoditisation?
Like his competitors, Mr Paris sees mobile data as key to his company’s growth.

The CMO – naturally - sees Telecom having the best overall offering the best overall customer experience, from sign-up through to support, the best value plans, the best range of smart devices and its recently announced "Smart Caps" (pre-set limits and warnings) for global roaming (an area where all carriers rates and practices are subject to a joint-investigation by transtasman regulators).

But is that all just window dressing?

The telecommunications trade press has been filled with stories recently on the topic of how telcos can avoid mobile data being commoditised. The fear (for telco shareholders) is a blunt new world in which data hungry customers simply choose whoever’s got the cheapest per-gigabyte rate.

NBR put this to Mr Paris, who said, "In more developed markets than even New Zealand, they’ve seen the data explosion and in some instances they’ve made bad calls and they commoditised that data by simply bolting unlimited [data] onto existing plans and not really understanding what the consumer needs are at any point in time."

Echoing a point recently made to NBR by Vodafone NZ boss Russell Stanners,Telecom head of retail Alan Gourdie (incidentally, the only publicly-declared candidate for Paul Reynolds' job) added that carriers in the US, and elsewhere, were now moving toward the New Zealand model, and starting to place limits on mobile data plans (for example, Vodafone Australia’s tasty all-you-can-eat iPad data plan has disappeared).

Mr Paris also saw telcos pushing past the mobile network war. The Telecom exec points to a China Mobile presentation at the recent World Mobile Congress in Barcelona, for example, in which the giant carrier detailed an arrangement that sees it co-developing mobile apps with around 2000 universities. 

Speed wars - and hints of LTE
Asked if Friday's release of the 4G-capable new iPad would focus customer attention on the new technology, Mr Paris said it would focus attention on who had the fastest network (the new tablet will trip down to 3G speed in NZ).

Of course, one way to beat mobile commoditisation is to offer the fastest service.

XT had a famously inept launch. In December, Mr Gourdie told NBR that Telecom had "gold plated" its new mobile network since. Certainly, $40 million in "supplier compensation payments" (widely assumed to be from Alcatel Lucent) would not have hurt the effort.

Mr Paris said anedotal evidence pointed to Telecom's network leading the pack (a verdict shared, for the large part, by independent benchmarking by new Commerce Commission tester TrueNet, but challenged by Epitiro testing commissioned by Vodafone).

"We’re proud of the leadership position we’ve taken and we want to maintain that over the next few years and a part of that will be around LTE. Our customers are demanding faster connectivity and they want us to stay best-in class," Mr Paris said.

However, Mr Paris would not be drawn on a specific timetable for an LTE (or “4G”) upgrade to Telecom’s network (like Vodafone, 2degrees and others, Telecom will bid for 4G-friendly 700MHz spectrum freed up by the analogue TV switchover at a government auction scheduled for later this year).

Like Vodafone, Telecom has been conducting LTE trials (LTE/4G offers the potential of landline-like broadband speeds, but in practice some of the extra bandwidth will be used to add extra capacity as customers' individual use becomes much more intensive).

Vodafone would not comment on its LTE/4G upgrade timetable. Neither would 2degrees (which uses Vodafone’s network outside main centres).

2degrees spokesman Michael Boulliane did offer that, “Our entire network is HSPA+ capable [HSPA+ being a turbocharged version of 3G, also supported by Telecom and Vodafone].  All parts of the 2degrees network are currently either HSPA or HSPA+.”

He added, “While 3G took longer to get to market and be used by consumers in New Zealand than was initially expected, exponential growth in the use of data means that 4G will arrive sooner rather than later.” (For close watchers of the industry, the new emphasis on speed is notable; it represents an interesting change in tone. 2degrees has previously focused on pitching its network as the most cost-effective and reliable. 2degrees will bid in the 4G spectrum auction later this year, but is also asking the government to allocate it a chunk of 4G spectrum at a "fair price" to keep the market competitive.)

Most use only 40% of their data cap
Surely people would prefer unlimited data? (At least, at the right price.)

Mr Gourdie said at the moment, the average Telecom smartphone owner only used 40% of their data cap.

The company wanted to stay ahead of the curve; for now, it clearly was, he said.

NBR is not so sure. Many smartphone users seem cowered by mobile data pricing from all carriers and/or IT departments who browbeat them on the importance of staying inside their monthly data limit. Many are becoming and becoming increasingly acclimatised to wi-fi substitution. Telco industry backers - and anyone who likes mobile data anywhere, not just inside and office or home - will hope Telecom and others will push back by continuing to raise cellular data caps.

80% of tablet connections through wi-fi
In the US, The Wall Street Journal has both praised the new iPad's 4G/LTE support, saying it negates the need for wi-fi - at least in performance terms. In financial terms, it can lead to bill shock - as one customer found when he chewed through his monthly 2GB data cap in two hours while watching a video on his iPad.

Here, Telecom says only around 20% of iPad data connections are made via cellular; the rest go through wi-fi (and IDC said yesterday that most tablet buyers are now choosing a wi-fi-only model).

It'll be an interesting balance to watch as smart devices get get ever thirstier for mobile data.

This article is tagged with the following keywords. Find out more about My Tags

Post Comment

3 Comments & Questions

Commenter icon key: Subscriber Verified

3G data uptake took longer to take off than expected because mobile networks led by Vodafone group had the wrong idea of what consumers wanted their 3G devices to do. We didn't want video calling and Sky Mobile TV, we wanted to browse full websites, read news, watch YouTube, tweet and update Facebook.

Mobile data uptake has been driven by compelling devices first form Apple then from Android manufacturers, and by affordable call/txt/data plans which came with the iPhone.

The iPad is not the right device to encourage uptake of 4G services as its usage patterns lend themselves to indoor (wifi) use. Unless a compelling reason can be found for having 4G speeds delivered to smartphones, I foresee LTE uptake being similarly slow.

Networks need to look at promoting actual practical features that require the high speed of 4G, like for instance cloud sync/backup of mobile devices along with current and future social networking trends.

Reply
Share

Mr Paris may fancy himself as being all that and a bag of chips but after seeing this guy in action at telecom I am unimpressed. He joins Alan Gourdie as the two least liked execs inthe company

Reply
Share

agreed he helped trash TVNZ and now its Telecoms turn good luck to them

Reply
Share

Post New comment or question

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.

NZ Market Snapshot

Forex

Sym Price Change
USD 0.7842 -0.0078 -0.98%
AUD 0.8914 -0.0023 -0.26%
EUR 0.6203 -0.0015 -0.24%
GBP 0.4896 -0.0010 -0.20%
HKD 6.0810 -0.0622 -1.01%
JPY 85.2860 -0.3520 -0.41%

Commods

Commodity Price Change Time
Gold Index 1229.0 2.000 2014-10-28T00:
Oil Brent 86.0 -0.650 2014-10-28T00:
Oil Nymex 81.4 0.410 2014-10-28T00:
Silver Index 17.2 0.065 2014-10-28T00:

Indices

Symbol Open High Last %
NZX 50 5338.3 5367.6 5338.3 0.33%
NASDAQ 4551.4 4564.4 4564.3 -0.33%
DAX 9139.0 9157.6 9068.2 0.16%
DJI 17005.1 17065.5 17005.8 -0.18%
FTSE 6402.2 6475.4 6402.2 0.81%
HKSE 23704.0 23855.7 23520.4 1.27%
NI225 15442.4 15595.3 15329.9 1.46%