Has One NZ stolen Spark's shine?

Saturday, 22 April 2023

New Zealand's Vodafone changed its name to One NZ in April, under a rebrand first announced last year.

ANALYSIS: One NZ, formerly Vodafone, appeared to get one over rivals Spark and 2degrees earlier this month, when it announced a deal with Elon Musk’s SpaceX to provide 100% mobile coverage of New Zealand.

One NZ and SpaceX should allow the vast majority of smartphones connect to the One NZ network to send text and multimedia messages, even if they are in areas outside of One NZ cellular coverage from late next year.

The service will be provided using a new generation of SpaceX’s Starlink satellites that will provide the equivalent of traditional cellsites, but “in the sky”, rather than on the ground.

According to One NZ, messages will be sent and received over radio spectrum in the 1800MHz band, which is commonly supported by smartphones, so no fancy equipment required.

* One NZ's satellite phone coverage welcomed by people in remote areas

A SpaceX Falcon 9 rocket carries a batch of 21 second-generation Starlink V2 satellites into space on Wednesday.

* One NZ inks deal with SpaceX to provide 100% mobile coverage of NZ

One NZ expects the service will be extended to provide voice and mobile data connectivity over time.

One of the selling points of satellite-based cellular coverage is that it should provide connectively in the event that cellphone towers on the ground experience an outage.

That can happen if a fibre-optic line is cut during roadworks or by a flood, or in the wake of a power black-out, such as was experienced in cyclone-hit Hawke’s Bay and the Coromandel in February.

The other big selling point, of course, is that it should provide coverage in remote areas that are currently commonly completely outside cellphone range, for example when tramping in the bush or even when boating a bit away from the coast.

So how significant is One NZ’s apparent coup?

Forsyth Barr senior analyst Aaron Ibbotson says it “could be more significant than many people have given it credit for in the long term”.

“There are large swathes of New Zealand where people may go for a week or two maybe every other year, and if you could have coverage, even if it's just for emergencies, that could be a differentiator,” he says.

If One NZ’s deal with SpaceX contains an element of exclusivity, which One NZ has clearly signalled it does, “I think it matters a little bit”, Ibbotson says.

Jarden analyst Arie Dekker notes there is little differentiation between the three mobile network providers at the moment.

“They all have very close to 100% population coverage and they all have ‘bundles’ for low mobile users through to higher users that are pretty similar and at quite similar price points.”

Spark is also promising to get into the space race, but its plans aren’t yet clear.

But that is perhaps rather the point.

In a market where terrestrial mobile phone services are all based on the same technology and much of muchness, why wouldn’t a customer who was newly shopping around for a provider, choose the one that was most likely to soon offer the security of satellite connectivity?

Spark and 2degrees have responded with their own announcements promising trials of similar technology.

Indeed, 2degrees slightly pre-empted One NZ’s announcement by announcing it planned a trial with US satellite start-up Lynk, which is attempting to build a business specifically around the opportunity for space-based cellular connectivity.

Lynk only has three satellites in space at the moment, but has been signing deals with telcos for connectivity, its latest being with Vodafone Ghana.

Spark’s intentions are less public.

It recently told investors that it would be “imminently launching a business-to-business satellite pilot” with some of its corporate customers and would have a satellite-to-mobile offer available for “customers more broadly by the time technology is available”.

But its partner hasn’t been disclosed.

This is a technology where “scale” does make a difference.

That is because cellular coverage can only be provided by satellites that are in low Earth orbit; ones that are at a relatively low altitude in space and circling the globe.

Lynk confirms it can’t be delivered from geostationary satellites, for example ones that might just be plonked above New Zealand, because geostationary satellites need to be located much further out into space, too far away for cellular connections to work.

It would be possible to provide connectivity for text messages from just a small number of satellites in low-Earth orbit.

But phones could only send and receive messages when a satellite happened to be passing overhead, which might mean messages being queued for many hours before being sent.

The more satellites, the more likely it is that one will be overhead at the “right time”, the less the lag, and the more useful the service will be, especially in emergencies.

All of which means One NZ’s deal with the biggest company in the space business could be quite hard to counter.

The explosion on Friday of SpaceX’s Starship rocket on Friday is an illustration that even the biggest companies can have set-backs, however.

One NZ says its 100% coverage promise is getting traction with customers.

Although the Starship rockets are primarily designed for deeper space missions, SpaceX envisages they will also be used to deploy its relatively heavy Starlink V2 satellites.

Spark had a few other observations on One NZ’s announcement.

A spokesperson said “what we are seeing from customers is an expectation that they can access ‘100% mobile coverage’ now”.

She also noted that coverage could be restricted in some indoors areas and patchy in cars and in dense vegetation.

“Overall we think it is hard to be absolute about the performance of a product that is not yet available in market and has not been tested, which is why we would encourage customers to be clear on what benefits they can access and when,” she said.

The latter point is reasonable of course, but in other respects Spark may be clutching at straws here.

Lower frequency radio waves are better at avoiding obstacles and the 1800MHz band is towards the higher end of the available cellular bands, but it’s certainly nothing extreme, so there seems no reason to think its propagation characteristics would be terrible.

People might find they had to step out of dense forest into a clearing and maybe out of a concrete building to send a text, and One acknowledges the service “wouldn’t work in a cave”, but in the context of the purpose of the service, that wouldn’t seem a huge consideration.

One NZ spokesperson Conor Roberts points out it has been quite clear about the likely availability of its service being towards the end of next year, though he adds it will hopefully be sooner.

Fellow spokesperson Matthew Flood says its 100% coverage promise is getting traction with customers.

“Our trading is commercially sensitive, but we can say we’ve seen an uplift in visitors to our stores and an increase in interest in our services, as New Zealanders understand that both they and their businesses will be safer with us.”

Only time will tell if that translates into a meaningful shift in mobile market share.

But that doesn’t seem impossible.

The mobile market has just been given a jolt and One NZ does have something to crow about.

Spark may need to quickly flesh out its satellite connectivity plans or pull something else big out of the hat, if it is to avoid resting on the back foot.