Paul Brislen: Telecom's 3G plans may be cleverer than critics think

COMMENT

Telecom's approach to its new third generation (3G) cellular network has been raising eyebrows.

The company's choice of technology, the prosaically named EV-DO, has been mocked locally and internationally for being untried and a stop-gap measure that won't last the distance. Furthermore, there are no handsets available, and you can't do video calling. Eventually, its critics say, Telecom will have to pay hundreds of millions of dollars to upgrade its network just like everyone else. All of which may be true but, in the grand tradition of techs everywhere, Telecom is adopting a policy of "smile, nod and do it anyway".

EV-DO, "evolution data only", is an extension to Telecom's existing 027 network, allowing it to provision new services in Auckland, Wellington, Christchurch and a handful of high-profile holiday destinations for a comparatively cheap $40 million. It should also be relatively quick to roll out, assuming all goes according to plan, so Telecom could be offering services by Christmas this year.

Vodafone, by way of contrast, is spending $400 million on its new 3G network and won't be offering a service over it until the middle of next year.

Yet Telecom is confident that EV-DO will deliver much greater speeds than Vodafone's proposed network, built on a similar standard called wideband CDMA (W-CDMA). While nothing's guaranteed in the cellular world, with connection speeds depending on factors like cell site size and proximity, and the number of users per site, Telecom is talking about peak network speeds of 2.4 Mbps, and an average 500 Kbps.

In cellular network terms, that's blisteringly fast.

Vodafone's W-CDMA promises a top speed of 384 Kbps with an average much lower than that.

Telecom's existing 027 network peaks at about 155 Kbps.

If EV-DO is as fast as Telecom suggests, customers will be able to connect their laptops to company networks and work remotely without the usual waiting times of cellular connections.

That's precisely what Telecom has in mind, and where its plans are at variance with other 3G network providers.

Most 3G networks have been pitched at the consumer market, with video phones and costly content.

To put it bluntly, that's not working terribly well. Customers typically aren't flocking to 3G networks to make video calls. If anything, they're flocking to 3G to make use of low-cost voice calls. They're not taking up the high-end services much at all.

They're also being dogged by technical problems - users of Australian 3G network "3", run by Hutchison, have been returning their handsets in droves complaining of poor coverage, awful voice quality and any number of other issues.

Teething problems like those make it hardly surprising that Telecom is planning to market T3G, as its new network will be called, to business customers. This makes sense for a number of reasons. Firstly, Telecom doesn't have access to voice handsets yet and isn't likely to before Christmas. EV-DO is a new standard that's yet to be rolled out in a big way. It does have some large supporters, however, including two of the big US cellphone companies, Verizon and Sprint.

If handsets for voice services are hard to get, cards that slot into laptops and handheld devices to provide data connections are available already, and Telecom will be pitching those to business customers as a data-only service. When handsets are plentiful - and a Telecom deal with Sprint means it will have phones as soon as they're available - Telecom will be able to offer voice services as well.

Business customers are attractive for another reason: they're traditionally big users of Telecom mobile services, make lots of calls, are hungry for mobile data solutions and generally pay their bills on time. In the battle of ARPU (average revenue per user), business customers beat residential hands down.

Interestingly, Telecom is also looking at the Wi-Fi market to bolster its mobile services . Wi-Fi is a short-range, high-speed service which is gaining toeholds in the Auckland and Wellington CBDs, and which Telecom could bundle with T3G. I can just see the ads now: buy a T3G connection and you'll get Wi-Fi hotspot access as well at a low, low price.

The beauty of all of this is that if - or rather, when - the EV-DO technology is surpassed, Telecom will have only spent a fraction of the full cost of a network build-out and will be handily positioned to build another, having established a healthy 3G market share.