NZ lacks speed for new phase in phones

New Zealand and Australia are lagging behind in the drive to merge home phones and mobiles because of slow broadband speeds and low uptake, a technology industry analyst says.

"The sort of convergence strategies that people are moving towards, particularly in Europe ... really do rely on significantly higher [speeds]" than are offered here, said David Kennedy, senior telecommunications analyst of the Asia Pacific region for Ovum.

Telephone companies around the world, including Telecom, are moving to merge home phones and mobiles into one device in an effort to stop declining traditional calling revenue.

The goal is to offer customers bundled packages of the two services, and ultimately a single dual-mode handset that functions like a fixed line at home and as a mobile outside.

British Telecom introduced a dual-mode handset - called Fusion - last year, while Telecom last week announced a business restructure designed to work toward such convergence.

Telecom has said it doesn't plan to introduce dual-mode handsets this year, and Kennedy doesn't see a mass-market rollout happening until well into 2007. Other countries in the Asia Pacific region, such as Singapore and Korea, will get there sooner.

"By global standards, what we in Australia and New Zealand call broadband isn't that fast. That issue has to be addressed if we're going to keep up with other countries" in rolling out converged phones.

Uptake is also a problem - New Zealand only has about eight broadband subscribers per 100 people, while Australia has nearly 14, ranking the countries 22nd and 17th respectively among the Organisation for Economic Co-operation and Development's 30 member countries.

Dual-mode handsets are dependent on a fast broadband connection because they use voice over internet protocol (VoIP). In Australia, average download speeds are 512 kilobits per second, while about 60 per cent of Telecom's broadband connections were at 256 kilobits as of December.

Kennedy said a good VoIP connection needed at least 144 kilobits, which would use up most of that speed.

"If you've got one person on the phone already and somebody else in another room picks up their phone and starts talking over the same service, then there really isn't going to be a lot left for anything else at that point."

Telstra in Australia and Telecom have acknowledged this problem and it's why both are looking into upgrading their networks through investment in faster ADSL2+ technology, he said.

"That opens up all the possibilities of all sorts of convergent offerings, not just fixed-mobile convergence but things like triple-play [television] strategies."

Chris Loh, telecommunications analyst for IDC, said the building blocks for fixed-mobile convergence were rapidly falling into place. Telecom's ADSL2+ plans and looming Government regulation, which is expected to open up broadband competition, were likely to improve the speed and uptake issues.

"Certainly that's going to build on our already ramping penetration. It's only ever going to get better."

Loh said the fixed-mobile convergence strategy was also "compelling" for Telecom if it was to head off a counter "fixed-mobile substitution" strategy from rival Vodafone.

The company plans to introduce similar dual-mode phones that operate independent of Telecom's network by the end of the year.

Convergence

* Telephone companies are moving toward fixed-mobile convergence, or the merging of home and mobile phones into one device.

* The dual-mode handset will connect at home through a broadband connection, then switch into a proper mobile when outside.

* Such phones will require faster broadband speeds than those most New Zealanders are currently using, an analyst says.