Telcos to enter a brave new world

Paul Brislen says the onus will be on Telecom to ensure access to the fibre network, technology which Eric Hertz says will revolutionise the mobile market. Photo / Greg Bowker

Caught up in the hyper-speed of the 21st century, it is hard to picture life in a decade's time.

Since 2000 the internet, and its ability to spread information, has transformed the way we communicate and the type of information we share.

Technology's impact on everyday life is immeasurable - those who did not even own a mobile phone 10 years ago today cannot imagine leaving home without one.

Ten years from now, the Government is expected to have completed a plan that it hopes will again change the face of telecommunications in this country - the ultra-fast broadband scheme.

Central to this plan is Telecom, which is set to undergo its biggest shake-up this year so it can be a part of the Government's vision.

The telco is now in priority negotiations with the Government to build a high-speed internet network in 25 regions around the country.

The billion-dollar scheme will offer speeds of 100 megabits per second to 75 per cent of New Zealand within the next 10 years. To put this in perspective, average browsing speeds in 2010 were between 2 and 5 megabits per second.

If Telecom wins the Government's tender, it will partner up with the state-owned Crown Fibre Holdings to lay fibre throughout New Zealand.

Telecom is also tipped to build the Government's rural broadband network, rolling out fibre in areas where the ultra-fast network won't reach. The rural network will improve speeds, but offer nowhere near the same rates as its urban counterpart.

As part of Telecom's bid to build the ultra-fast network, it proposed to split its lines company, Chorus, from its retail arm which sells phone, internet and mobile services.

If Telecom wins the Government contract, Chorus will become a separate listed company.

The split will be no easy task, especially given that Telecom now relies on its network to generate a good deal of its revenue.

However, the change is not only a concern for Telecom; the implications for the whole sector are vast. In a report on the proposed separation, the Ministry of Economic Development said the division of Telecom and Chorus would result in "a significant change to the structure of the New Zealand telecommunications industry".

So what will Telecom and the telecommunications landscape look like in 2021?

Telecom was unwilling to comment on how it would look and operate once it had split with Chorus and finished the mammoth task of laying fibre throughout the country.

Telecom chief executive Paul Reynolds merely said that the separation would be a "significant and complex piece of work".

While the company's lips are firmly sealed, others in the sector happily stared into the crystal ball, sharing their vision on where Telecom could be in a decade.

IDC analyst Rosalie Nelson predicted that in 10 years Telecom, as we know it, will not exist.

"It [won't be] the Telecom of the past. A lot of concerns and fears around re-monopolisation ignore the fact that telcos are going to be increasingly marginalised with the way in which the services market is moving. It's not just about adapting, Telecom almost needs totally new DNA to make that transition."

Chief executive of the Telecommunications Users Association (TUANZ) Paul Brislen acknowledged the difficulties in structural separation but said 10 years after a split, Telecom would have more direction and purpose.

"It will be very good for Telecom to be split. The retail arm has different goals, priorities and needs than the network arm," Brislen said.

Brislen believed it would also help Telecom's share price.

"The share price will come up from where it is because [investors] will have clarity of purpose and different investors will put their money in different places. High-risk, high-return folk will invest in the retail business and the pension funds will invest in the network. That will help both companies," he said.

2degrees chief executive Eric Hertz also saw the split as beneficial, as Telecom will become more "nimble" and able to make timely decisions more rapidly.

Although Telecom would have a near monopoly on the rollout of fibre, Brislen believed competition could still thrive if new providers were given room to innovate.

"It's quite different from when Telecom was first privatised all those years ago. But it's very important that Telecom becomes a network provider for all rather than saying 'you can have any colour as long as it's black'. It's all down to open access," Brislen said.

Hertz was adamant the mobile market would be competitive over the next 10 years.

Given the gains made by 2degrees, Telecom would have to keep offering new services and deals if it wanted to maintain market viability, he said.

For Hertz, technology would change the landscape of the mobile market and the future would look remarkably different.

Instead of having one or two mobile devices, in a decade New Zealanders would have five or six, he said.

This would change the way we performed everyday tasks - rather than using a credit card or a chequebook to make a purchase, your phone would instantly be able to pay for items, Hertz said.

As well as the technology, Brett O'Riley from NZICT believed the industry operating environment would be unrecognisable in 2021.

"I think in 10 years' time telecommunications won't exist, the nomenclature will disappear. [telcos] will be providers of bundles of applications, delivering voice, video and social media [products]," O'Riley said.

This service sector would supersede the traditional role of telcos, who now only provide internet access and email.

"Voice won't be a priority," Nelson said. "It will be embedded into video content or into instant messaging, not even email will be a critical part of it, so the very core planks of what makes telecommunications relevant today to the end user will be marginalised," Nelson said.

She said it would be interesting to see whether Telecom and others supported service companies like IBM, Google or Facebook by providing network access or whether these companies bought wholesale bandwidth themselves.

For O'Riley, content will be the key for telcos in 2021.

Sky Television and other content providers were the "elephant in the room" of the ultra-fast broadband project, he said.

He predicted they could have a big stake in Telecom in 10 years' time.

"Might we see Sky and Telecom being the same company? Or Google and Vodafone being the same company?" He believed international internet brands like Google and Facebook could dominate their local partners.

"You could find that your service provider is the descendent of [what we now know as] Telecom retail, but would use the Google brand or the Facebook brand because its become a globally ubiquitous," he said.

Whatever happens, Nelson stressed that change is coming.

"We need to recognise that the Telecom as we've known it in the past, and even today, will not exist."