Buck stops with Telecom over mobile network miseries

Paul Reynolds has wasted little time apologising and seeking to reassure the public with each new network glitch. Photo / Dean Purcell

"You have to ask: Do you guys really know what you are doing in mobile?," says telco analyst Paul Budde.

Sydney-based Budde, who has followed Telecom's progress for years, is scathing.

"The track record over the last 20 years indicates they haven't got a clue, in any case not on a strategic level."

With mounting financial pressure on Telecom, Budde believes there has been an underinvestment in the XT network build.

"It is very easy in a situation like that to then skimp a little bit. That would be fine if nothing happened but when something happens, the shit hits the fan, you then get these problems," he says.

Industry sources have told the Herald Telecom originally designed XT to have four radio network controllers (RNCs) before opting to launch with two - one in Auckland and Christchurch - with plans to add a further two next month.

Speaking at a media briefing on Tuesday, Telecom chief executive Paul Reynolds said two RNCs were adequate for the number of people connected to the network.

Telecom's network problems deepened on Thursday night when an outage at the company's Papatoetoe exchange disrupted 111 emergency calls in the Auckland region.

Reynolds declined to speak further.

Asked where the blame lies, Budde points the finger at Telecom.

"In the end it's Telecom because they build the network, they sign off, they put the money on the table. The buck stops with them. Fullstop."

After a flash marketing campaign and gala launch at the Auckland Town Hall last year, the extent of XT's meltdown could hardly be any worse. Even Telecom executives are understood to be back using old-school, non-XT phones as they try to deal with repeated failures of the company's new network in the southern half of New Zealand.

While the company has been on the PR offensive with apologies from Paul Reynolds featuring across the media, questions remain and rumours swirl about how our major telco could have gotten itself into such a pickle.

Another analyst, Ovum's Nathan Burley, says Telecom's mobile strategy has underperformed for more than five years, during which time Vodafone has become dominant in the New Zealand market.

Telecom has about a 40 per cent share of mobile spending compared with 70 per cent 10 years ago.

"Most incumbents globally have been able to maintain at least a leading market share in their local market. Telecom hasn't been able to do that," he says.

"Obviously competing against Vodafone is difficult, given their huge global scale and the expertise they have to leverage, but Telecom really should be in a better position in the market than they are."

Budde says if the XT network problems had been simple - hardware and software failures and human error have all been implicated - it would have been sorted a long time ago.

"If it's not simple, and they are using standard technology, then you have to look at deeper root causes."

Questions have been raised about whether Telecom's long time technology partner Alcatel-Lucent were up to the job. Burley says that people initially queried the wisdom of selecting Alcatel-Lucent, who were seen to be relatively inexperienced in deploying 3G technology, when Telecom announced plans for a new network mid-way through 2007.

"I think a lot of people said a wiser choice may have been to go with Ericsson," says Burley.

Ericsson successfully switched Telstra from CDMA network technology to a 3G network a year earlier, with the network up and running in a record 10 months.

Burley says that even though Alcatel-Lucent are not seen as a market leader - he ranks them fourth behind Ericsson, Huawei and Nokia-Siemens - the company has become more competitive over the past year or so.

"They aren't the leader but they obviously have some good solutions to offer."

IDC analyst Rosalie Nelson says Alcatel-Lucent's in-depth knowledge of Telecom's existing networks - the company manages the CDMA mobile network and fixed-line network - meant the company could guarantee it could integrate the new network with the existing billing systems and manage traffic between the fixed and CDMA mobile network.

"They really knew that inside and out and they were able to provide assurances around interoperability. Getting everything working was going to be difficult for another provider to do," says Nelson.

She disagrees with suggestions the network had been built on the cheap.

"The specifications of the network are very high. They've got fibre linking a lot of those cell sites in order to be able to carry significant amounts of mobile broadband.

"Clearly that means absolutely nothing to users if it's not reliable and robust," says Nelson.

Budde says the technology installed would have been standard with nothing unique to New Zealand.

"Mistakes can be made, but then it comes back to the design and it comes back to the original plan - all that stuff that goes before you start implementing the technology," says Budde.

Telecom set the budget and Alcatel-Lucent needed to work within the budgets, says Budde.

"If the budget is not enough then at a certain point you can say: 'Alcatel, you should have said no'."

Some pundits have queried whether Telecom would have been in such a mess with XT if it had an underlying 2G GSM network to fall back on.

Certainly the original plan announced back in 2007 was to run out a 2G network with a higher speed HSPA 3G network in the cities.

This was scrapped a year later and $33 million written off.

"I don't think anyone in the industry would have thought it was a good idea for them to deploy a GSM network," says Burley.

"They should have followed what Telstra did in Australia but it took them too long so not only did they waste a lot of money on GSM, in our view they were far too slow in moving to HSPA," he says.

Burley says XT was Telecom's chance to rectify past mistakes and attack the mobile market with a fresh approach.

Telecom would now find it difficult to charge any sort of premium for its XT services, says Burley, until it could convince consumers it was investing ahead of the curve on the network and delivering the best user experience in New Zealand.

Nelson says to expect more disruptive pricing for business customers.

Already chatter round the traps has both Vodafone and Gen-i offering huge discounts on calling and handsets to grab or retain customers.

UNANSWERED QUESTIONS

* Did Telecom skimp on the budget for XT?
* Was Alcatel-Lucent the right choice as vendor?
* Did Telecom act quickly enough when the issues first arose?