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Tough Calls Ahead On 5G Mobile Roll-Out

A boat race, Chinese espionage fears, and a Māori spectrum claim may all play a part in deciding how long New Zealanders have to wait to experience the next generation of mobile technology.

5G promises faster mobile broadband and bigger data caps, and its lower lag means it could even help pave the way for more responsive self-driving cars that are less likely to crash.

2degrees spokesman Mat Bolland says there is still plenty more that can be done with 4G technology and it believes 2023 would be early enough for the country to adopt 5G.

NZ could be left in Australia’s wake launching the next generation of mobile technology, Spark managing director Simon Moutter (second from right) has warned.

Spark managing director Simon Moutter, on the other hand, has wasted no opportunity to stress it is keen to have a commercial 5G network in time for the America’s Cup competition in July 2020.

For one thing, Spark has promised to deliver 5G wizardry to Team New Zealand to give its boat a competitive edge.

In November, Moutter warned that New Zealand “could be left behind in the race to 5G” by Australia if the Government didn’t make decisions soon on how radio spectrum for 5G would be allocated to telcos.

When Communications Minister Kris Faafoi attended a Chorus’ function a fortnight later, the first thing he did was scan the crowd and joke about whether he was going to be buttonholed by Spark on the topic.

But Spark’s hopes of getting a commercial 5G network up and running by the middle of 2020 may have been dealt a blow by the knock-on consequences of the local and global controversy engulfing Chinese network equipment company Huawei.

WHO WANTS WHAT

As always in the telco industry, self-interest looms large.

Vodafone’s focus is currently on getting its books into as good a shape as possible ahead of its proposed IPO (initial public offering) on the NZX in 2020.

It will be Vodafone’s second attempt to float on the exchange and it needs to persuade institutional investors who baulked at its asking price the first time around last year that it really can offer a tempting stream of strong profits and dividends.

To that end, Vodafone NZ is consulting staff on a major restructure that could see significant job losses, but any savings would be offset by rising capital expenditure if it was forced into an early splurge on 5G.

Chief executive Jason Paris said in November that if 5G was available tomorrow he didn’t think customers would pay more for it “because it is too early for us to demonstrate what 5G will mean and why you should pay a premium”.

Huawei’s possible exclusion from selling and installing 5G gear would hit 2degrees the hardest.
2degrees appears even less keen on an early start to the 5G race.

2degrees has shallower pockets than its rivals and the share price of its majority owner, Trilogy International Partners, has been hammered this year in part because of the market challenges faced by its sister company Viva in Bolivia.

Yet it could face significantly higher costs upgrading to 5G than Vodafone or Spark, if it is not allowed to use equipment from its existing technology partner Huawei.

The Government Communications Security Bureau has blocked a proposal that would have seen Spark use Huawei equipment for a 5G upgrade.

2degrees’ chief technology officer Mike Davies has acknowledged that 2degrees might need to either replace or duplicate much of its existing access network, along with parts of its core network, in the move to 5G, if a broader “ban” on Huawei was confirmed by spy agencies and the Government.

The cost could be significant, he has warned, saying changes in the RAN “is really where your big numbers start to play out”.

2degrees isn’t shying away from the need to invest in 5G eventually. Bolland says it is committed to 5G. But right now is it looking like “the later, the better” for the third network operator.

Spark would like to invest in 5G sooner – not just because that would give it an edge over its rivals – but also because it has been heavily pushing wireless broadband as an alternative to copper and fibre fixed-line broadband for its customers.

The company may be approaching network capacity constraints in some parts of the country. That means it will either have to upgrade to 5G or (less appealingly) outlay more capital on its 4G network if it is to avoid the risk of wireless broadband uptake degrading the performance experienced by its regular mobile customers.

For Spark at least, the immediate benefits of 5G appear to come down to cost and efficiency – which should translate into better value for money for its customers.

But Spark is likely to need help from the Government to launch 5G early.

 SPECTRUM OF OPTIONS

Smartphone makers and other device manufacturers are likely to first sell 5G devices that utilise the 3.5GHz spectrum band.

The Ministry of Business, Innovation and Employment (MBIE) said in March that indications to date were that the 3.5GHz band would be the “priority internationally for early deployment of 5G networks”, with the first commercial networks likely in 2019 and 2020.

But that spectrum band is partially occupied and is not due to be repackaged and made available for new users until October 2022, making a 5G launch in that band difficult before 2023 at the earliest.

Faafoi could assist Spark by accelerating the repackaging of 3.5GHz spectrum for 5G, for example by buying back at least some of the licenses from the small number of businesses currently utilising the spectrum band.

These include some wireless broadband providers and satellite communications firm Inmarsat which uses part of the upper portion of the spectrum band for a ground station in Albany.

But there is no sign so far that Faafoi is considering that sort of intervention.

Faafoi says new rights for most of the 3.5GHz band “cannot begin until the existing rights in the band expire in October 2022”.

“If 5G network operators want access prior to expiry of existing rights, this can be achieved with the agreement of existing users,” he notes.

“5G network operators could enter commercial agreements with existing users to gain access to spectrum without any government involvement.”

While that is true in theory, it may not be practical for Spark to negotiate with existing rights holders to commercially take over their spectrum rights for a 5G network when it might lose those particular rights a couple of years later when the spectrum band is re-auctioned by MBIE.

​MĀORI CLAIM IN PLAY

Complicating matters further, there is an existing Waitangi Tribunal ruling – ignored or danced around by previous governments – upholding a Māori claim to radio spectrum when new property rights are created.

Antony Royal, who has been a key figure in Māori spectrum discussions in the past, says there is no need for Māori to make a separate or fresh claim for 5G spectrum.

But iwi have raised the issue of 5G in discussions with the Government and had received “an indication that the Crown is considering Māori interests”, he says.

“There is an expectation there will be a conversation with Māori prior to any auction of rights.”

These haven’t tended to be quick conversations in the past and it may be relevant that Māori have previously aligned their interests with 2degrees, which is in no hurry for a 5G auction.

The former government did not recognise the Waitangi Tribunal ruling when it auctioned 4G spectrum in 2013, but did set aside $30 million for a Māori ICT Development Fund.

A “5G top-up” for the fund appears an option. Royal said iwi were open to discussion and didn’t want to pre-judge what the outcome might be.

“I would not want the impeding America’s Cup to be driving our discussion about rights over spectrum”, he added.

Faafoi says the Government is “committed to improving the Māori-Crown relationship” and he is working with other ministers to determine how it approaches the spectrum treaty claim.

“I won’t be making any direct comment on these issues until my discussions with other ministers and treaty partners are complete.”

NO NEED TO CHANGE TACK?

Spark’s America’s Cup card may be a weak one in any case.

Faafoi says MBIE has issued three test licences for 5G equipment and services with the proviso that the spectrum can only be used for non-commercial “proof of concept” trials.

But he says MBIE is also working with America’s Cup organizers “to ensure their spectrum requirements are identified and addressed”, saying he recognizes the event “provides an opportunity to showcase new technology”.

Critics of Spark’s 5G push suggest it could fulfil any obligations to Team New Zealand and the America’s Cup using just a few cellsites overlooking the Hauraki Gulf and a short-term spectrum licence.

While that might not be Spark’s preferred outcome it could make do, they suggest.

The bigger picture may be that the industry is entering a dangerous time for mobile competition, and Spark will be aware that it needs to tread some careful lines if any broad block on Huawei doing business in New Zealand is confirmed.

Spark has thrived during the status quo of three-way network competition with Vodafone and 2degrees.

But the Commerce Commission is currently reviewing mobile market regulation.

The watchdog agreed to the review in 2017 in the wake of former communications minister Simon Bridges expressing what were arguably minor concerns about a lack of mobile service retailers in a letter to Telecommunications Commissioner Stephen Gale.

But if there was a genuine worry that mobile competition could be badly dented in the switch to 5G, then sources suggest that review could become the vehicle for some form of mobile network “unbundling”, or there might even be renewed calls for a single shared national 5G network.

The argument against a shared 5G network? As one industry insider put it: “Who would then have the incentive to launch 6G?” – Stuff

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