Adam Gifford speculates on what NZ's third network will have to offer
Mike Reynolds likes to play poker, and holds his cards close to his chest.
Frustrated reporters and analysts assembled this week for the soft launch of the country's third mobile telephone network.
They wanted to know pricing, whether this would be a low-cost competitor to Vodafone and Telecom. And if
it wasn't launching a price war, what was it competing on?
Chief executive Reynolds wasn't blinking. Pricing and bundling offers will be announced closer to the August start date. For now, what's on the table is the name.
The mouthful that was New Zealand Communications is gone. The company and brand are now Two Degrees (or rather, 2°, if you can work out to hit option-shift-8 on your keyboard).
It refers to Hungarian author Frigyes Karinthy's notion of everyone in the world being within six degrees of separation.
AUT Professor Rob Allen has argued that New Zealanders have only two degrees of separation, one of the shortest social distances of any country.
It's also two degrees of separation from Econet, the Zimbabwe-based mobile operator which teamed up with Te Huarahi Tika Trust in 2000 to commercially exploit frequencies made available to Maori under a treaty settlement.
There followed several frustrating, credibility-sapping years before the regulatory environment thawed enough to offer a prospect of fair competition.
The amendment of the Communications Act in 2006 and the glimmer of stronger regulation encouraged other experienced international operators to relieve Econet of its shareholding.
They have since committed $250 million to building a network, with more than 300 sites now completed around Auckland, Wellington and Christchurch.
Outside of that, users will roam on the Vodafone network.
Subscribers can sign on and start making calls in August. They can transfer their existing 021 and 027 numbers or get numbers in the 022 range. If they are on 021, they can use existing handsets.
While Reynolds wouldn't spell out specific bundles, there are enough clues that 2° doesn't intend to follow the game plan established by the incumbents - contract lock-ins, technology lock-ins, loss-leading on text while maintaining artificially high voice charges, crippling data charges and predatory on-net pricing.
It's this last aspect of the New Zealand market that 2° shows the most concern about.
It indicates its business plan is viable at current termination rates, and considers the Commerce Commission's review of the cost network operators charge each other for access can only improve matters. "They can hardly make it worse than it is now," says Reynolds.
But on-net pricing, where mobile phone operators offer cheaper rates for calls on the same network - think BestMate or My Favourites - is so effective an anti-competition strategy, it is banned in many countries.
At a telecommunications conference in Wellington yesterday, Reynolds released the results of a Phoenix Research study of phone use patterns among students in Auckland and Dunedin.
It found 97 per cent of Auckland students were Vodafone customers, almost all on pre-pay, and 93 per cent of their calls and 96 per cent of their texts were sent to other phones on the Vodafone network.
The situation was reversed in the south. In Dunedin, 85 per cent of students were on Telecom, and 81 per cent of their voice calls and 90 per cent of texts were to Telecom phones.
Just to emphasise the importance of the on-net effect, the majority of the Telecom minority in Auckland and Vodafoners in Dunedin also had a second handset connected to the rival network.
The data confirms what seems implicit from pricing behaviour - that up to now New Zealand had not had competition in the mobile phone market but regional monopolies.
The launch of Telecom's XT network this month means by the end of the year there will be three companies competing on the same modern 3G technology platform.
Vodafone is offering what it calls its "best-ever plans" including free handsets and three month's free access charges for a two-year contract which includes a high degree of on-net pricing. Expect Telecom head Paul Reynolds to announce similar inducements at tonight's XT launch.
The other Reynolds, the poker player from 2°, says people should avoid locking themselves in.
"I think people should hold their cards and wait and see how this plays out," he says.
adamgifford5@gmail.com
