Sense and sensibility

Tony Poulos

Sense and sensibility

November 18, 2010

Whether a sign that our industry is reaching some level of maturity or simply due to economic necessity, two fierce competitors last week joined forces to fend off potential competition. Telecom New Zealand (TNZ) and Vodafone New Zealand last week announced a surprise joint bid to provide broadband services to rural areas of New Zealand.

The government is making NZ$300 million ($230m) available to the successful party to roll out broadband services to 93% of rural schools and a minimum 5Mbps broadband service to 80% of rural households over the next six years. The project has attracted four other bidders including New Zealand Regional Fibre Group, a consortium made up mainly of network operators including Vector Ltd., New Zealand's largest multi-utility infrastructure company, and a second group, which includes state-owned Kordia, internet provider Woosh and network owner FX Network.

In what can only be deemed a major understatement, Vodafone Chief Executive Russell Stanners told a press conference that the two companies working together “was not a sight you saw very often.” No kidding! These two have been at war, no less, since wireless spectrum was first released in New Zealand, TNZ having opted for CDMA and Vodafone for GSM.

The joint bid by the two largest fixed and mobile telco providers was a surprise but company executives said it made sense. If their proposal is accepted, Telecom and Vodafone plan to combine their resources to build a new, open-access network infrastructure using a range of technologies. TNZ will be responsible for building the fiber network linking schools and hospitals, cell sites and rural exchanges and cabinets, while Vodafone will be responsible for the design and building of open-access tower infrastructure. The new towers are expected to improve mobile phone coverage in rural areas.

It would make further sense for both parties to utilize existing infrastructure as well. Each party will also benefit from the enhanced network rollout to areas not considered economically viable previously. This follows a developing trend in Europe for competitors to share assets rather than replicate them, sometimes four of five times over.

Also news of seven of Italy's largest operators having signed a memorandum of understanding to create a new company that will build the country's broadband infrastructure. The new company will be financed by both private and public funds and be under an executive committee chaired by the government's Industry Ministry.

The consortium includes Telecom Italia, Fastweb, Wind, Tiscali, and the Italian operations of Vodafone, BT and 3, according to a Dow Jones report. Italy's state-controlled fund, Cassa Depositi e Prestiti will help fund the project. A representative from each of the operators will also serve on the executive committee.

Cooperation combined with an element of pride-swallowing will have to become the norm if operators hope to continuously reduce costs and improve profitability. That makes perfect sense, doesn't it?

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