When it comes down to it, our competitive advantage revolves around our relationship with around three million New Zealanders who engage with Spark’s products and services up to hundreds of times every day. This gives us the scale required to build the best digital services and technology platforms. It gives us the rich data to develop a deeper understanding of New Zealanders and their needs. And as a result, it gives us a powerful opportunity to provide the best customer experience in market and carve out a locally-relevant position that none of our competitors – local or global – can match.
Providing high quality connectivity and services to homes and businesses throughout New Zealand is no mean feat.
In mobile services, Spark is one of three major mobile network operators who each compete for customers over their own network of cell towers, utilising radio spectrum licensed from the Government. Sometimes we co-locate our electronic equipment on another operator’s cell tower, to save the cost of building a separate tower. Additionally, Spark, Vodafone and 2degrees have formed the Rural Connectivity Group (RCG) to share a wireless network that will provide wireless coverage under a programme to extend mobile and wireless broadband coverage to remote areas of rural New Zealand as part of the Government’s Rural Broadband Initiative.
When it comes to fixed services provided over fibre or copper lines, the industry structure is quite different. The local line networks (sometimes referred to as the “last mile”) are owned by wholesale companies which must be separate from the retailers like Spark that provide services to customers. It’s a bit like the network companies own and maintain the train tracks, while Spark runs our trains over these tracks.
The national copper line network is owned by Chorus while the fibre network being built in cities and larger towns under the Government-sponsored ultra-fast broadband (UFB) programme is owned by four different companies, each with a monopoly in their region. Ultrafast Fibre is responsible for Hamilton and other towns in Waikato, Taranaki and Whanganui; Enable in Christchurch and parts of Canterbury; North Power in Whangarei; and Chorus in the rest of the country including Auckland, Wellington and Dunedin.
Chorus and the local fibre companies are required to provide the same access to their networks, and charge the same, to Spark and any other broadband retailer (these line charges, which are set by law, make up about half the cost of a typical fixed broadband plan). They are also responsible for installing fibre into a home or business when a customer places an order with Spark.
Spark transmits data, content and voice traffic to and from end users, across our own core data network around New Zealand and via international internet cables to places right around the world. We are an investor in some of those international cables – the Southern Cross Cable system that connects New Zealand with Australia and the United States, and the Tasman Global Access cable between NZ and Australia.
Telecommunications is a regulated industry sector in New Zealand, with the Commerce Commission overseeing the industry. As part of this regulation, telecommunications companies are required to pay an annual Telecommunications Development Levy, which is used to pay improve New Zealand's telecommunications infrastructure (especially in rural areas which are economically challenging to service). The current levy is $50 million annually, of which Spark’s share is approximately $19 million.
Rapid advances in technology are driving transformational changes as our products and services become increasingly important in the daily lives and businesses of New Zealanders. These advances have seen the telecommunications industry collectively investing $1.6 billion each year on average to deliver new services and network technology to New Zealanders. At the same time, fierce competition is delivering more value to consumers at lower prices, meaning New Zealand is now in the enviable position of having world-class networks and services, at below OECD average prices, for both fixed and mobile communications.
Spark’s ongoing success requires us to meet the needs of our customers by adopting new technologies that let them communicate and do business - in New Zealand and on the global stage. 5G - the fifth generation of wireless technology - is a key element of that. Just like previous generations, 5G will be a step-change as businesses, entrepreneurs, innovators and everyday users explore and develop its potential. Its deployment will be critical to our national infrastructure. Planning for our 5G network started some time ago. In 2016, Spark was the first operator in New Zealand to deploy 4.5G technology, as a pathway towards 5G. During 2018, we accelerated that preparatory work and launched an extensive cell site deployment programme that will increase the density of our mobile network in preparation for 5G. In March 2018, we conducted New Zealand’s first ever live 5G tests in Wellington and Auckland, achieving speeds of 9 gigabits per second (Gbps) outdoors and 18 Gbps indoors – hundreds of times faster than the typical speeds experienced by most New Zealand wireless device users today. There is still much to be done to bring a commercial 5G network to reality in New Zealand – importantly, the Government is yet to allocate 5G spectrum. However, our 5G network planning is well advanced and global device manufacturers are gearing up to produce 5G-capable devices from 2019.
Services are increasingly competitively priced. Unlike almost every other type of household expenditure, consumer telecommunications costs have declined, and mobile pricing decreased by 46% in the two years to 2014. The price of a monthly bundle of voice calls and data in New Zealand, whether broadband or mobile, is less than the OECD average, and customers on entry-level broadband plans now get more data than before.