Fifth-generation mobile networks, which offer high speed data with very low latency, are seen as a key component of machine-to-machine connectivity, known as the 'Internet of Things' or IoT. That's where a device connects to another device devoid of human interaction, with autonomous vehicles or household appliances often cited as easily conceivable examples.
However, Vodafone's Stanners sees already IoT as a big opportunity for the country's second biggest broadband provider to generate revenue growth, as massive increases in data usage haven't yet converted into equivalent revenue gains.
Last month Vodafone said it plans to deploy a low-power wide area network for IoT applications, and Stanners said the company's 1.4 million connections was a "large growth area" on a network that brought together an array of devices, with services available in early 2018 after a test run with some commercial customers later this year. Spark is also keen on IoT and is working with State-owned Kordia to build a similar low-power wide area network which it has previously said it wanted up and running from June next year.
Still, building telecommunications networks is expensive. Between 2013 and 2016 Spark's capital spending on mobile networks totalled $383 million, which included some maintenance on the $574m third-generation XT network. The XT network's launch misfired in 2009 with a series of outages that led to architect Alcatel Lucent paying tens of millions of dollars in compensation to the Kiwi telco, and later missing out on the 4G contract to Huawei Technologies.
Last year Spark's Moutter warned telecommunications companies' margins were too skinny to justify $1.7 bilion of annual infrastructure spending, and First NZ Capital analyst Arie Dekker noted last month that the question marks hanging over 5G made it difficult to predict whether fixed wireless would become a viable substitute for fixed fibre line services.
Even so, 5G technology will need a commercial fibre product - direct fibre access service - to connect large commercial users to the network. In a Cabinet paper in June making final decisions on a review of telecommunications law, Communications Minister Simon Bridges noted demand for backhaul services - which opens access and allows interconnection with the fibre network - will probably rise with a growing appetite for 5G due to more densely deployed cell sites and deployment in cities expected between 2020 and 2025.
Bridges proposed the service's price be regulated from 2019, as it was also a key component for Spark's fixed wireless service which is a rival to Chorus's copper services.
In submissions on the review of the Telecommunications Act, Spark sought DFAS be designated one of the regulated anchor products under Chorus's net pricing regime.
"As we increasingly offer wireless broadband services over those mobile networks, this gives Chorus control over a key cost for its competitors, and strong incentives to raise the price of that service. As we introduce 5G, which will require much more cell sites, the importance of DFAS will increase," Spark said in its March submission.
"In terms of the economics of 5G networks, the more data demand there is the closer the cell site must be deployed to the end customers, and this means more cell sites, and therefore more cell site backhaul services, are required to link cell sites with the core network," Spark said. "We don't know how far operators will go in increasing the density of the network - this will be a function of demand and deployment costs - but conservative scenarios could see at least four times the number of cell sites we have today."
