VHA’s customer bleed has taken a sharp turn for the worse, with the firm losing 216,000 subscribers in the quarter ended 31 March. And Vodafone’s New Zealand operations are also shedding subs at an increasing rate, while revenues continue to decline in both countries.

However, they weren’t the only markets experiencing troubles in the Vodafone empire. The latest financial results from the Vodafone Group, for the full year ended 31 March, saw group revenue drop 4.2% to £44.4 billion and EBITDA down 8.3% to £13.28 billion.

The group posted an adjusted operating profit growth of 3.7% to £11.96 billion, though it attributed much of this to its share of profits in Verizon Wireless; after huge impairment losses, other incomes and expenses, net financing costs and income tax expenses, bottom-line profit crashed down 90% from £7 billion the previous year to £673 million in fiscal 2013.

The firm’s European operations, in particular in Spain and Italy, were also hit by declining revenues, with Italy down 12.8% and Spain down 11.5%. And in the last quarter, while the group reported a net addition of 893,000 new subscribers worldwide, Vodafone suffered massive losses in some individual countries that far eclipsed its ANZ falloff; the group recorded a loss of 323,000 subs in the UK, 1.48 million in Germany, and 1.93 million in Egypt.

While it didn’t break out individual country revenue, it stated that “Australia continued to experience steep revenue declines on the back of ongoing service perception issues.”

For the quarter from 1 Jan 2013 to March 31, Vodafone recorded a loss of 108,000 subscribers in Australia through its 50% stake in the VHA joint venture with Hutchinson; this translates to a 216,000 loss for VHA overall. The New Zealand operation also reported a loss of 7,000 subscribers.

In the previous quarter VHA had reported a loss of 128,000 customers while Vodafone New Zealand also lost ground, dropping 6,000 subs.

The AMAP region saw organic EBITDA rise 10.3%, however strong margin improvements in India and Vodacom offset the sharp decline in Australia. The results did note that there had been a strong focus on network improvement and arresting the weakness in brand perception.

Petroc Wilton and Geoff Long

Samsung’s revelation that it is developing 5G multi-gigabit wireless technology in the 28GHz band has thrown a bombshell into an already contentious debate over the future of the spectrum band in Australia—with the current holdings of AAPT and NBN Co scheduled to come up for renewal within months.

Satellite players are already coveting the band, and CommsDay can reveal that incumbent AAPT is planning metro fixed wireless coverage using the same frequency; the additional prospect of next-generation mobile services there can only pile on additional pressure.

As Samsung said in its statement, there have been some reservations around the use of millimetre-wave Ka bands such as 28GHz for cellular communications; their propagation characteristics were not thought suitable for transmitting data over long distances. Samsung, though, says it has deployed adaptive array transceiver technologies – using 64 antenna elements – to counter these drawbacks and access the potential of the bands to provide wider spectrum channels.

“Samsung plans to accelerate the research and development of 5G mobile communications technologies, including adaptive array transceiver at the millimetre-wave bands, to commercialize those technologies by 2020,’ said the firm. “Once commercialised, 5G mobile communications technology will be capable of ultra-high-speed data transmission up to several hundred times faster than even the 4G LTE-Advanced technology due for launch later this year.”

AUSTRALIAN SPECTRUM CLASH: There is already a debate escalating in Australia over 28GHz in the short to medium term – and Samsung’s news is only likely to add an extra dimension to that showdown. AAPT snapped up all spectrum in the band (defined in Australia as 27.5-28.35GHz), together with 300MHz in 31GHz, for A$66.2 million in a 1999 auction. That gave AAPT national coverage in both bands on a 15-year spectrum license basis; Telstra and Optus were both prohibited from acquiring any spectrum in either band. That spectrum was originally earmarked for the deployment of local multipoint distribution services.

But LMDS never saw the level of adoption that had been expected, and AAPT kept hold of all its winnings until early 2012, when it sold some of its 28GHz holdings to NBN Co for the latter’s satellite services at an undisclosed price – primarily (and logically) in rural and regional areas. AAPT retained all of its 31GHz spectrum.

Both sets of licenses are due to expire in January next year, and the Australian Communications and Media Authority is currently in the middle of a review of the two bands. Coming from the start point that both are currently under-utilised, the ACMA’s preliminary view is that a reversion to 5-year apparatus licensing for both bands – albeit with an emphasis on continuity of service for current spectrum licensees – will “best accommodate the range of technologies that are likely to be high-value of uses of the 28GHz band… [and] may better allow for the introduction of technologies in the 31GHz band as and when demand for those technologies  emerges.”

AAPT VS SATELLITE PLAYERS: AAPT, though, has argued for a hybrid approach: it is happy to see 31GHz licenses and some 28GHz licenses revert to apparatus licensing, but wants to retain three contiguous bands of 112MHz each within 28GHz under a spectrum licensing regime, in metro areas only.  To date, the firm has remained tight-lipped about its plans for those 112MHz bands – but CEO David Yuile filled CommsDay in on the detail.

“We saw a resurgence of interest [in 28GHz] about 2-3 years ago, initially around using it for backhaul for mobile networks,” he said. “We saw a lot of technology development around meshing and point-to-multipoint; and we started to get excited, because we saw that you could potentially get 500Mbps to 1Gbps over these multi-point links… we saw enough evidence that we decided to actually resubmit; to renew the spectrum with a view that there’s significant potential in it.”

“We never saw it as a mobile network… we saw it as a fixed wireless service… to provide fixed wireless backhaul [or other network elements] with huge capacity,” added Yuile. One of the key advantages, he said, would be that the point-to-point technology could obviate the cost-prohibitive planning overheads required for individual links. “We saw the potential for non-planned networks; you put up a canopy from a central point, and you can have lots of points join it from anywhere within that canopy…. it’d almost self-heal, and self-[configure].”

But that would require the contiguous blocks of spectrum that AAPT wants to retain – and, said Yuile, a move from spectrum licenses to fixed point-to-point apparatus licenses would doom the project. “When you’re talking high volume, high density areas, the cost of that planning is horrible… for every link you wanted to run to somebody’s house or business, you’d have to go to the ACMA and submit for an apparatus license… after making sure that nobody else was using it,” he said. “There’s enough room in the 28GHz band in Australia to have apparatus, and a clear band for this [as well].”

Yuile says that Samsung’s announcement won’t change his intention to hand over the rest of AAPT’s metro spectrum for apparatus licensing. “Because of the timing around the spectrum, we saw the technology coming, but we didn’t know from whom or where!” he said. But he does face stiff opposition from satellite operators including NewSat, Inmarsat and SES.

All of them have argued that the current spectrum licensing of 28 and 31GHz has the effect of segmenting the internationally allocated Ka band, making it difficult to find contiguous bandwidth there – problematic in context of a sharp increase in the number of Ka-band satellites planned and deployed worldwide, as satellite operators seek to increase bandwidth. Each has called for the 28GHz band, in particular, to be shifted to an apparatus licensing regime across all Australia – without geographic exceptions.

“This would allow the band to be used by earth stations and fixed systems on a first come-first served basis, meeting the immediate needs of Inmarsat and offering maximum flexibility to all terrestrial and satellite applications to make use of this bandwidth,” said Inmarsat in a recent submission. Even Telstra has chimed in to support an Australia-wide shift to apparatus licensing.

What remains to be seen is how the prospect of 28GHz 5G plays into the clash in the wake of Samsung’s announcement. That will partly depend on exactly how Samsung defines the 28GHz band it used in trials; the band is defined differently by the ACMA in Australia than by Europe and the ITU, for example. It will also depend on whether mobile players like Optus and Telstra are allowed to acquire any spectrum in the band next time around – which could create more tension with satellite players.

Still, next-generation mobile broadband in the band is already on the regulator’s radar. “Higher radiofrequency ranges are being looked at and considered by the international radiocommunications community for use by mobile broadband applications. Australia is involved in this process through the ITU-Radiocommunication Sector work,” an ACMA spokesman told CommsDay. “These considerations are for long term planning arrangements – to which we note that the Samsung technology may be commercialised around the year 2020 so also a long term consideration.”

Petroc Wilton

Optus Business has restructured for a renewed attack on the government and business market, integrating telecoms, ICT and applications expertise into a single organisation that will draw on SingTel Group Enterprise for regional strength.

And the division is also expanding is range of targets, revising its go-to-market model to better address the medium-sized business segment – which it sees as one of the fastest growing in Australia.

The realignment follows on from a process first kicked off a year ago, when the SingTel group as a whole restructured to help leverage its global scale and drive growth. Announced at the Optus Vision 2013 event by business MD John Paitaridis, the latest move will see Optus’ IT services arm Alphawest integrated into the Business division, and also align it with the Australian arm of NCS, a SingTel element specialising in applications.

“This business structure will have networking, managed services, mobility applications and cloud all under one roof: a truly integrated, end-to-end proposition, domestic and regional, with customer centricity at the heart of our strategy,” said Paitaridis. “Customers, in this converged world, don’t just talk to me about a network, or a mobile broadband plan, or a bit of bandwidth. Increasingly, they want our organisation to talk to them about how we solve business problems; how do you win by devices, by applications, by software, how do you wrap it up in a service.”

As part of the shakeup, Optus has also announced a ‘Centres of Excellence’ program which will focus the merged capabilities of Optus, Alphawest and ACS on six areas: business applications services, cloud and data centres, collaboration, contact centres, bring-your-own-device and machine-to-machine communications. “[These are] bets that we’re placing, where we’re investing… in terms of resource and in some cases capital,” said Paitaridis.

And, as SingTel Group Enterprise CEO Bill Chang explained, the transformation will also connect Optus Business fully with Group Enterprise’ formidable regional and global resources across fixed, mobile, cloud and applications. “The transformation that [Paitaridis] has done in Australia is a very important  final move to integrate fully into Group Enterprise; to allow us to provide seamless capabilities right through the customer base in APAC,” he said. “We are deeply committed to this market in Australia… it’s a strategic market. We are reinforcing through [Paitaridis’] transformation of Optus Business, and we’re going to press it.”

“What we will do is ensure that Optus business is the true alternative, bringing choice to customers, putting that in the centre of whatever we do… as a group, to help drive innovation at business and industry level; and to bring our scale and cost competitiveness to enable the transformation, and do more for our customers here.”

Paitaridis noted that regional capability was increasingly emerging as a key point of differentiation.

“Increasingly, customers are saying ‘we don’t just want you to do it domestically, we want you to do it regionally’,” he said. “And… we can provide that same service and that same experience in Singapore, or across the APAC region, where we have footprint and presence. Indeed, we also have some capability for expansion into Europe and the US.”

MID-MARKET EXPANSION: Meanwhile, Optus Business will push harder into the mid-market. “There’s enormous potential in this mid-market segment, defined as anything up to 500 seats,” Paitaridis told CommsDay. “For us, it’s about fine-tuning our go-to-market model.”

“I think we were a bit one-dimensional; we had a direct sales force trying to serve that customer base. Over the last six to nine months, I’ve introduced a channel partner model to serve that customer base; I’ve also upped the ante on telephone account management as well, so we’ve got this multi-dimensional approach of direct selling, we’ve got our partners with us and selling into that space. We’ve always done that in the bottom end of the SME, but we’ve really brought that up now into the mid-market channel.”

“We’re also going deeper around capability; we’re introducing new services… midmarket partners are primarily domestic businesses with a high focus on mobility and ICT, selling Optus services and bundling with their own capability.”

Petroc Wilton

Popular legend has it that Stephen Conroy’s NBN policy was forged on the back of a beermat. This, of course, is an embellishment given that as early as March 11, 2008— more than a year before—Conroy had explicitly asked his new Expert Panel to consider both FTTH and FTTN in their assessment of proposals from industry for a national 12Mbps broadband network. What is true is that the final policy announcement, unusually, was effectively workshopped and finalised in an airborne conversation between Conroy and then PM Kevin Rudd.

Likewise, it could be said that Malcolm Turnbull’s policy—now a mere 8 days old—was forged on the back of a commercial airline napkin, albeit quite a few of them, and his ubiquitous iPad. There is no doubt that Turnbull’s policy is primarily influenced by the personal testimony of many FTTN and FTTH operators he has spoken to over the past two years in his travels across Asia, Europe and elsewhere.

Indeed, Malcolm Turnbull, with his extensive experience of both the media boardroom and the Cabinet room, can represent this policy as his own work. But Paul Fletcher, the Liberal MP with an extensive background as head of public affairs at Optus and adviser to former Liberal communications minister Richard Alston, also apparently played a major role in the policy’s development, particularly in its analysis and consideration of the finer points of the competition regime.

Oppositions notoriously lack the resources of governments. Just as Stephen Conroy’s 2007 FTTN policy owned much to a then 25 year old graduate student called Tim Watts (later to find great success as a Telstra regulatory executive and now an ALP candidate for a safe seat at the next federal election), Malcolm Turnbull’s policy adviser Stephen Ellis played a similar role in helping knock into shape the new Coalition broadband tract.

ROUNDED ADVICE: Ellis has an interesting background: an ANU economics graduate (like Conroy) who became a Fairfax political and business writer, then went to the US to study a masters degree at the Massachusetts Institute of Technology, ended up at McKinsey’s and then founded a Cambridge, Massachusetts data storage start-up, Permabit, which he exited in 2006. Returning to Australia he found himself working for Turnbull as Opposition leader, and now shadow comms minister.

Indeed, like Turnbull, Ellis has an unusual blend of technology, economics and business knowledge that is notably absent in many of the protagonists in the NBN debate.

With the policy finalised, Turnbull then convened his own informal variation of an expert panel: about a dozen or so people with telecom backgrounds across various disciplines such as financial analysis, economics and industry advocacy, seeking their opinions, which I understand were valuable mostly in refining the messaging of the policy.

Incredibly, not one of them gave into the temptation to hit the forward button on their emails and the policy remained under wraps until it was previewed to newspapers last Monday night.

Eight days on, how has the policy faired? A Fairfax poll rates it at 40% odd public support next to 60% for the existing NBN plan. This could probably be rated an interim win for Turnbull given four years and tens of millions of dollars of relentless television advertising and general advocacy for all things FTTH. If the recent flow of bad news regarding NBN delays and cost blowouts continues, Turnbull could probably expect to add a few percentage points to that polling over coming months.

Of course some sections of the technology media have attempted to blow holes in the Coalition policy. One persuasive criticism is that the policy does not count the future cost of annual copper maintenance.

OPEX, MAINTENANCE COSTS CONFLATED: One correspondent points to an alleged cost of $2 billion for this but appears to be incorporating all of Telstra’s retail customer acquisition and service costs, advertising, branding, switching, transmission and even office pot plant rentals as a “copper maintenance cost”. This is obviously ridiculous, the real cost is much less and in the zone of hundreds of millions, not billions.  Nevertheless, the most expensive part of the copper network per capita is the section serving the last 7% of the population—it costs a few hundred million dollars a year to run. Under the existing NBN plan it is retained and funded separately through the TUSMA-led universal service arrangements. It’s running costs cannot be considered as a direct opex cost attributable to Turnbull’s NBN.

Ditto, the Turnbull NBN provides for FTTH for about a quarter of the remaining 93% footprint and replacement of copper with fibre for much of the loop length of the other 75%. It is highly fallacious to suggest that all this new fibre will do nought to reduce the extent of any faults and costs endemic to copper as a specific medium.

Where the Coalition made a mistake was not to talk more about upload speeds in its policy. Given that NBN advocates prefer to concentrate on the utterly asymmetrical 4K Ultra HDTV business case for FTTH these days (given many of their claims for e-health, video conferencing and so on have been torn apart), maybe this wasn’t so bad an omission. But it could be considered a mistake from the point of view that there is a reasonably good story for vectored DSL on this front.

VDSL specialist Assia tells me that vectored DSL upload speeds are rated at about 40% of the download speeds: so a minimum 25Mbps download speed, would be accompanied by a 10Mbps upload speed. Double that for 50Mbps which seems to be the average peak download speed Turnbull’s policy aims for.

This genuinely allows for and enables all those “social good” externalities involving NBN interactive video usages which we are told are so essential for the future.

There’s still much to be detail yet to come for the Coalition’s NBN policy before telcos can proceed to plan with some certainty. What will be done with the NBN’s current speed tier and connectivity virtual circuit pricing which disincents users from using the capacity the network is designed for?

What reasonable visibility can we have on a future NBN-Coalition government deal that cannot even be discussed before September? How will a Coalition government recast the structural issues in contracting and skills shortages which are afflicting the current rollout? Could they contract the FTTN and FTTH deployment job back to the most obviously suitable candidate—Telstra– despite the structural separation import of the overall policy?

One certainty is that the policy will evolve and change, a given since it will be subject to no less than three separate reviews post-election which could see it look more like or less like the current NBN depending on how the wind blows.

After all, just six years ago, Stephen Conroy went to an election promising a $4.7 billion contribution to a national FTTN network.

Two years later he promised up to $43 billion for a near-national FTTH network with significant private investment and to be completed in 8 years—or by 2017.

Four years later—halfway through this promised period—less than 2% of the network has been built, it has less than 15,000 customers connected and the government has now assumed 100% funding responsibility without any apparent spending cap. This simply isn’t sustainable.

The moral to this story is that change is the only constant, delay is the norm and almost all the arguments between the two competing NBNs over the next 150 days will be in vain because both of them will inevitably change post-election.

Grahame Lynch

CommsDay can reveal that NBN Co is well advanced in negotiations to secure the necessary orbital slots needed for its satellite broadband service. The firm has concluded successful coordination with the main domestic satellite operator Optus, and is also working through similar co-ordination efforts with both local and international operators.

And in a rare conversation with the media, KaComm Communications chairman and co-founder Dr Gregory Clark has told CommsDay that the company’s plans are being reassessed after being overtaken by NBN Co’s satellite launch. However, he dismissed reports that the company was hoping to sell its four orbital slots to NBN Co or could somehow slow down NBN Co’s attempts to coordinate its own slots.

KaComm had been the subject of media speculation which has suggested its orbital slots could impact on NBN Co’s plans. However, a spokesperson for NBN Co said the company was not concerned with KaComm’s plans and that its co-ordination efforts – including with KaComm –  for its own slots were well advanced.

“We considered and dismissed the potential to use the KaComm slots very early in our planning because we would still need to go through much of the coordination process we are now undertaking. A deal with them didn’t represent taxpayer value,” an NBN Co spokesperson told CommsDay.

Under the ITU’s procedures for obtaining an orbital slot, potential satellite operators have to go through a formal co-ordination process with any company that has previously filed for slots – whether they’re in use or not.

According to one consultant with knowledge of the process, KaComm’s orbital slots were never a threat to NBN Co’s plans. The consultant, who wished to remain anonymous, suggested that media reports on a potential sale of KaComm’s slots to Indonesia impacting on NBN Co was also not based on fact. He said that NBN Co had to co-ordinate with a number of foreign companies, which was potentially more time-consuming. However, the process is likely to be successful.

NBN Co has confirmed to CommsDay that it is coordinating with a number of other international operators. It also noted that it has already concluded successful coordination with Optus and has also had talks with KaComm.

KACOMM SPEAKS OUT: KaComm was set up in 2006 with the goal of providing Ka-band broadband satellite services to remote and regional Australia. In 2009 the company gained financial backing from satellite manufacturer Loral, however shortly after its plans were left stranded when NBN Co decided to launch its own Ka-band satellites as part of the national broadband network.

Clark also dismissed the News Ltd reports that suggested the four slots would be sold to Indonesia and that a deal could somehow hamper NBN Co. However, he didn’t rule out that KaComm’s plans could be revived outside of Australia.

Clark said there had been an offer made to NBN Co when it was first planning its satellite network back in 2009 – which has been confirmed by NBN Co – but he said no further offers had since been discussed.

One thing that Clark was confident of, however, was KaComm’s original business model. He said that ACMA had originally requested a study on satellite broadband, while its plans had also later been formulated in conjunction with a number of independent consultants.

“What amazed me at the time is what a viable business satellite broadband was. We were well on our way with the project, with backing from Loral, when NBN Co came along. They hired two of our top people and implemented our business plan, so of course we haven’t proceeded,” Clark told CommsDay.

Clark and KaComm co-founder Keith Goetsch both have a long history in the space industry. Clark was previously both president and COO of Loral Space and Communications in the US and has also been chairman of satellite companies GlobalStar and SatMex. He worked with a group of entrepreneurs to develop Wildblue, another significant broadband satellite system that uses Ka-band for rural services in the US.

Co-founder Goetsch, who initiated and lead the company’s satellite orbital slot filings, has been involved in numerous Australian satellite projects. In 2008 he was awarded the National Space Society of Australia’s Australian Space Pioneer Award in recognition of his leadership in the initiation of Australian space activities.

While Clark would not be drawn on what the company’s next moves are, it is believed that the company is looking to projects off-shore. The company’s original plan was for broadband predominantly in Australia, but it had also looked at the possibility of offering services in neighbouring countries. Its orbital slot filings are subject to ITU “bringing into use” time limits, which will come into effect in late 2015.

Geoff Long