Survival of the fittest in mobile phone war

Telecom's new mobile network has sparked a legal challenge from rival Vodafone. Photo / Herald Graphic

The invites to the launch party have been posted and at 6.30pm on May 13, Telecom is due to flick the switch on its brand spanking new network. But late yesterday, news broke that Vodafone would begin legal proceedings, citing network interference from Telecom's new service.

It is a clear indication of how serious the mobile battle has become.

Telecom chief executive Paul Reynolds says the new network means "world-class 3G mobile service is available, for the first time, in 97 per cent of places where Kiwis live and work".

Telecom has a mere 18-day jump on Vodafone's network expansion to "97 per cent of the places New Zealanders live, work and play" - up from 63 per cent 3G coverage.

The launch of Telecom's XT Network marks the first time both mobile companies will be using the same mobile technology - global system for mobile communication or GSM for short. Up until this point Telecom has used an alternative network technology - code division multiple access or CDMA.

Despite the CDMA element in the network name, WCDMA and CDMA are completely different technologies which require consumers to change handsets to switch networks.

Popular in Asia and North America when Telecom launched its CDMA network in 2001, CDMA technology has gradually lost market share to the alternative GSM - CDMA had slightly more than 10 per cent of the global market in 2008 - and handset makers have also lost interest. It is reminiscent of the VHS versus Beta battle in video recorders.

By 2006, phone giant Nokia announced it would no longer make CDMA-compatible phones, instead providing cheap handsets with a Nokia badge.

Sony Ericsson makes only low-cost CDMA phones, mass-produced for the developing world and Asia where the CDMA technology is still used. Software and services developers followed suit, focusing on GSM.

"The downfall for Telecom and the CDMA players is they don't have access to the really cool development that has been going on in the GSM world," said technology reporter Peter Griffin.

He said the Richard Hammond-fronted adverts prominently feature a high-end Sony Ericsson phone.

"It's been years since Telecom has really had a strong association with Sony Ericsson because it hasn't been able to offer the sexiest Sony Ericsson handsets," said Griffin.

He said that not only would consumers start to see the smartest Sony Ericsson phones on offer by Telecom, but the company would rekindle its relationship with Nokia.

"Once again, Richard Hammond is holding a Nokia in the ad. That relationship obviously went pretty cool when Nokia pulled out of its CDMA business."

Griffin said it did level the playing field but the problem was that Telecom was years behind Vodafone, which has always had a suite of high-end devices, including the iPhone.

He said Telecom staff were very tight-lipped about the devices, but were excited about the yet-to-be announced phone line-up, "which makes me think they have done an exclusive deal with the likes HTC from Taiwan, which has been a strong partner of Telecom to date".

"I've seen the new Palm Treo that they're going to have, which is very nice, but there's got to be something else to give the 'wow' factor."

Griffin suspected Telecom might be at the forefront of the Google phone push in New Zealand.

Industry analyst Nathan Burley of Ovum said the move by Telecom to jump to GSM network technology had come two years too late.

Telecom's Australian counterpart, Telstra, switched off its CDMA network early last year, after spending A$1.1 billion ($1.4 billion) on the move to WCDMA.

With its main roaming partner gone, Telecom customers needed to buy or borrow a WorldMode handset capable of working on Telecom's network as well as GSM technology networks more common overseas, including Telstra's new "Next G" mobile network. The range is limited, with Telecom currently offering a BlackBerry, two Samsung models and the Okta Mondo.

There is no data roaming on the WorldMode phone.

Burley said offering super-fast data for the business market was a key platform for Telstra in its Next G launch.

When Next G was launched more than two years ago, fast data services were not widespread and Telstra did very well, said Burley.

"Businesses really saw the productivity advantages they could get from mobile broadband, and really because Telstra had such a lead in its network - its network was far superior end-to-end both in the access network and what it had done ensuring there was a lot of capacity for data - meant that the others couldn't follow and couldn't compete."

Griffin said there were parallels between Telecom's campaign with its high-speed imagery and Telstra's launch of Next G.

He said Telecom appeared to have kept a keen eye on Telstra's network switch - which saw the company dramatically increase the average amount consumers spent on mobile calling and services - with its focus on speed.

Griffin expected a turf war in the data market - doing things on your phone other than voice and text - which Vodafone was attempting to "own" with its prepay and on-account deals.

Network speeds and devices are finally matching the expectations of customers wanting to access high-speed internet services from their phones - hence the phenomenal success of the iPhone and other high-end devices.

Add to the mix the imminent arrival of NZ Communications, running a network based on a mix of 2G and 3G technology.

While NZ Communications is giving away very little detail - although more will be revealed at its branding launch on May 11 - the company is likely to focus on the price-conscious end of the market for which high-speed data is not a "must have".

- additional reporting by John Drinnan