Vodafone's view of the future

By RICHARD BRADDELL utilities writer

Without fail, every quarter Vodafone and Telecom deliver statistics showing spiralling growth in mobile subscriber numbers.

But Vodafone managing director Grahame Maher takes little comfort in the rapid increase.

"The big drive in the past has been growth, growth, growth and more and more customer numbers. The big challenge going forward is how you provide the customers you have with new services and applications," he said.

Perhaps he has a measure of self-interest. Telecom claims it is again outselling Vodafone after its rival scooped the line honours for several quarters. But after 10 years of selling handsets, Vodafone now wants to sell devices that communicate in diverse ways, Mr Maher says.

Its prospective customers may want services delivered to their televisions, laptop computers or to and from a remote vending Machine.

Vodafone is agnostic about the end device, but it does want to provide the higher value services, many of which have yet to be conceived, in a seamless way.

Much of the development work is already going on in New Zealand, and Mr Maher says that Vodafone New Zealand is not just the traditional test bed for the latest in technology, it is developing its own solutions for export to other operators in Vodafone's 173 million-customer global network.

Already, it has a head start on other Vodafone operators, having last year commissioned the first GPRS packet switched network in the group and one of the first in the world.

Known as 2.5G (generation) for its intermediate positioning between networks such as Vodafone's existing GSM digital network and third-generation services, GPRS is ideal for commercial applications such as remote monitoring - drinks vending machines, for instance - because packet switched connections are always on, and don't require dialling in before data can be transferred.

And while data speeds on packet switched networks will be much lower than the exaggerated claims, speed is not the crucial issue for many commercial applications.

Mr Maher says being first in the Vodafone world with GPRS has put New Zealand in a great position for application development.

But the traditional telco model of doing all the work in-house is also breaking down. The partnership to develop mobile internet forged last year between Swedish equipment vendor Ericsson and Wellington software developer Synergy will benefit Vodafone, as will efforts by Unisys and more than 50 other independent software developers.

Mr Maher says the model of independent developments being brought in-house has been amply demonstrated by the hugely successful i-mode messaging system used by Japan's NTT DoCoMo.

I-mode was created by independent developers and there was no reason the same approach would not work here, he says.

But he sees introduction of an i-mode-style product here as unlikely because its icon-based messaging system has specific appeal to the Japanese culture.

He believes open mobile internet systems such as WAP (wireless application protocol), which have had a lacklustre reception so far, will overtake proprietory standards such as i-mode.

Customer numbers are important, but not at any cost, and Mr Maher concedes that he cannot compete with Telecom at the bottom end of the prepaid market, where it has been making gains with low-cost handsets and free airtime.

Although he claims no knowledge of Telecom's cost structures, he believes the lower pricing it offers for its prepaids is probably justified.

Notwithstanding, Vodafone is happy to exploit what he refers to as "quite large" technology gaps.

But although it has had a clear lead in the text messaging market, which has proved particularly attractive to young subscribers, Mr Maher says Vodafone wants a text messaging interconnection agreement with Telecom.

Telecom, which has only just begun offering text messaging on its digital phones, is getting round the lack of an interconnection agreement to get text messages from its subscribers to Vodafone's by sending them via Australia.

The text messaging interconnection issue is part of broader interconnection negotiations taking place between the two companies.

The result will probably update an interconnection agreement that has become somewhat old-fashioned in the light of deals cut by TelstraSaturn and Clear with Telecom, in which interconnection costs are mostly met in the network where they arise.

Before that, Vodafone had expressed satisfaction with the deal it had with Telecom and, indeed, with the regulatory environment which it argued strenuously to maintain during last year's telecommunications inquiry.

While Government policy released before Christmas is instituting significant changes, Vodafone is still claiming satisfaction, although its disappointment with the Government's decision that other telcos foot a proportional share of Telecom's Kiwi share losses is a badly kept secret.

The losses, which Telecom puts at around $160 million, result from serving remote areas. But Mr Maher takes issue with a fundamental point of the Kiwi share, that of maintaining free local calling, because he says many low use customers are in fact paying dearly for local calls through their monthly line rental.

But Mr Maher does not see wireless as a replacement to a fixed wire network in rural areas - at present.

"As we develop solutions such as GPRS, it might be more cost effective," he said, adding that a combination of broadband cable and cellular might provide the ultimate solution to rural needs.