With Chorus withdrawing its first copper line service from September, the fight is heating up over the best technology to replace it: UFB fibre (offered by Chorus in most areas) or wireless broadband from Vodafone, Spark or 2degrees.
Chorus CEO JB Rousselot makes technical arguments for his company's service. But today on a first-half results conference call, he told analysts that his company is also ramping up its efforts to win back customers who have already defected to wireless broadband - or yet to decide which direction they go after abandoning copper - by using bigger cash bounties.
Rousselot said his company is offering new bounties of up to $800 for retail internet service providers who can lure a customer back to Chorus UFB fibre after they've strayed to wireless broadband offered by Spark, Vodafone or 2degrees.
The Chorus CEO said that even with the UFB fibre rollout now 92 per cent complete, there were still around 500,000 households on copper lines. He said retailers who signed one of those late adopters to Chorus UFB fibre would continue to receive an incentive fee of between $50 and $300.
But Chorus is now also offering incentive payments of $600 to $800 if a retailer signs a copper line customer to one of its top-tier 1 gig or Hyperfibre plans - or the same in a "win-back" payment if a customer has been "off-net" (for example, using a Spark or Vodafone fixed-wireless broadband service) for more than six months but comes back to Chorus UFB fibre.
At the lower-end of the market, there's a new $104 bounty for a retailer who signs someone to a $60 per month, 50 Mbit/s plan - that is, the cheapest kind of UFB fibre connection.
A spokesman said it was up to individual retail ISPs if they passed on any of the bounty to a customer. Part of the sum could be used to pay any break-free on the customer's existing contract.
Rousselot mentioned the bounties on a conference call with analysts following his company's first-half result, delivered the morning, which saw slips in net profit and revenue. The fall was pinned, in part, on Covid-19 shutting the door on immigration, which in turn dampened demand for new fibre connections.
But analysts have also seen fixed-wireless as a looming threat. The technology - also known as wireless broadband - uses a mobile network to deliver broadband into a home or workplace as a landline substitute, cutting Chorus physically and financially out of the loop. Some 200,000 premises are now on fixed-wireless plans, with Spark the biggest player in the market, but Vodafone NZ also pushing the technology hard under its new ownership.
The fibre versus fixed-wireless fight will only come into sharper focus from September this year, when Chorus rips out - or at least withdraws service - from some 5000 copper line customers.
Under new legislation, which governs the post-UFB rollout landscape, Chorus will soon be able to dispense with copper lines in areas where fibre is offered, subject to a set of regulations - including "anchor pricing" set by the Commerce Commission.
Spark and Vodafone are pitching fixed-wireless as a cheaper, no-fuss broadband technology for some customers. Today, Vodafone launched the first widespread 5G wireless broadband service.
Last July year, Spark went on the front-foot with a pilot programme in Devonport and Miramar, giving its customers in both suburbs the choice of switching to fixed-wireless broadband or UFB fibre by December 18 (since extended) - or face losing service or switching phone companies.
Spark said it had to get a wriggle on. Copper technology had a limited life and it could just not support some of the technology components any more - because there were no longer being manufactured.
Technology Users Association head Craig Young told the Herald it was "a form of forced migration off copper".
Rousselot offered the broader comment at Chorus' AGM in November that retail ISPs "could not be relied on" to promote UFB fibre as copper was with drawn. They were not properly educating customers about the differences between fibre and fixed-wireless. He said Chorus would be taking its concerns to the Commerce Commission.
On Chorus' earnings call today, Rousselot amplified this theme, saying "urgent action" was needed against "inertia selling" tactics that were being used in NZ but were banned across the Tasman and under regulator scrutiny in Europe.
"Many consumers don't seem to realise they've been switched to a wireless technology. And many of them also report difficulties trying to have their copper service restored," the Chorus boss said.
Soon after the call, a Chorus spokesman told the Herald, "Our definition of inertia selling tactics that it has occurred when a broadband provider sends you a modem in the mail for a service which you haven't asked for or agreed to buy. The customer is then forced to call the provider to reject the offer and return the product and risk having their existing, often well-performing, fixed service cut off."
Rousselot pointed to Commerce Commission broadband monitoring reports as proof UFB fibre offered superior, more consistent performance to wireless broadband, particularly at peak times (Spark and Vodafone - who also offer fibre - argue wireless broadband isn't for everyone, and that new 5G technology address pain-points like latency or lag, and capacity issues in what has become a fast-moving market).
The Chorus boss said the level of customer disgruntlement could be tracked across the likes of Trade Me's message boards.
However, the Commerce Commission told the Herald it had received n15 complaints about Spark's Devonport and Miramar programme. However, Chorus had made a complaint (a Chorus spokesman clarified that while Chorus has "brought the issue to the Commission's attention" on a number of occasions, it has not, in fact, laid a formal complaint).
A spokeswoman for Vodafone NZ rejected Rousselot's description of fixed wireless, saying it was instead his company that was acting in self-interest.
"Of course Chorus is incentivised to promote fibre above other good internet access technologies such as wireless broadband delivered over our mobile network, so while we reject these comments, they are no surprise," she said.
"As an internet retailer, we want our customers to have the best possible internet experience for their individual situation. New Zealand has a sparse population in a long, thin countryside, therefore different internet technologies may be required depending on whether you live in the city, a provincial town, or rural Aotearoa – often dictating whether fibre cabling is viable or a mobile solution is necessary.
"Our customers tell us that both fibre and fixed wireless are great 21st-century broadband options for New Zealanders. Fibre is brilliant for high usage customers, while wireless broadband offers 'plug and play' convenience anyone can easily set up in a few minutes and is essential for rural connectivity.
"No matter what Chorus might allege, we believe Kiwis simply want internet choices that are fast, reliable, plentiful and competitively priced so we'll continue to provide a range of broadband options that suit different needs."
Rousselot never mentioned any mobile player or retailer by name, but did - perhaps pointedly - leave Spark out of a roll-call of praise for broadband innovation, where he variously name-checked Vodafone (for its SuperWifi initiative to address home wifi as the weak link in the fast internet chain), Vocus' brand Flip (for its $15/month plans and support for pending broadband provider Sky TV) and 2degrees for a plan aimed at small businesses getting back on their feet after the pandemic.
And the Chorus boss added, "Although the market is diversifying, there is still a high concentration of market power among the vertically-integrated retailers." That made education and incentive programmes all the more important, Rousselot said.
This afternoon, a Spark spokeswoman said, "We do not sell wireless broadband in the manner described by Chorus. Where we have a customer who is a good candidate for wireless broadband, for example they are on ADSL [copper], we will send them a letter offering a switch over to wireless.
"If they don't want to switch they can call us and opt-out, but if they are keen or we don't hear from them we will send them out a wireless modem.
"If they receive a modem and don't want to switch they don't have to do anything.
"They don't even have to return the modem if they don't want to.
"If they do want to switch then all they have to do is plug in the modem and we will take that as their decision to change and switch them over. We do not disconnect customers if they don't get in touch with us."
The Spark spokeswoman added, "There is room for both fibre and wireless broadband in the market – some of our customers want the fastest speeds possible, others who have more moderate data usage prefer the 'plug and play' simplicity of wireless broadband, where no installation is required."
She said Spark's wireless broadband push "Should not be confused with the shut-down of the Public-Switched Telephone Network [PSTN - including old copper lines], which is rolling out across Miramar and Devonport at the moment.
"Here we are migrating customers off an old technology, which is end-of-life. In this instance we make it very clear to these customers that they will have to choose between moving to fibre or wireless if they want to stay with Spark.
"Customers have different needs and we recommend the product and technology (fibre or wireless) that we think will best suit them based on their existing usage. The customer is then free to take our recommendation, or go with a different option, or they can simply disconnect their service, or go to another provider.
"To highlight our earlier point – in some instances customers who were recommended wireless have opted for fibre, and customers who were recommended fibre have opted for wireless. Customers have different needs and will choose the product that best suits them."
She confirmed the December 18, 2020 deadline for Devonport and Miramar had now been extended.
"Because it's a pilot project that will inform how we move customers off the PSTN country-wide, we always planned for the timeline to shift as we test and learn. We decided to delay over the holiday period and will communicate a new date to customers in the coming weeks," the Spark spokeswoman said.
2degrees declined the opportunity to comment bar a wry, "We'll sit this one out."
A no-surprises result
Outside of Rousselot renewing his red-meat attack on wireless broadband, Jarden head of research Ari Dekker called today's report, "A no-surprises result that was in line with expectations."
Rousselot had continued to push Chorus' line the Commerce Commission - which is still in the process of setting the rules for a new regulator regime - would not allow sufficient returns to reward investors for the risk they took in backing the UFB fibre rollout. He repeated that international investors would not return for another public-private project of equivalent scale - and today he raised the possibility that Chorus itself would not invest in any further UFB extention unless the ComCom changed its tune.
Dekker said that was moot. There was unlikely to be a UFB3: "The reality is that it's unlikely any further material expansion of that type of government-sponsored fibre investment beyond UFB1 and UFB2."