Regulation is a fact of life

Things change, things stay the same. Russell Stanners began at Vodafone NZ in 2002 as the chief marketing officer; two years later he was appointed chief executive. In 2010 he holds both titles. The marketing responsibility is short-term until he finds a replacement for Mark Rushworth, who left abruptly in January* but it’s a role he’s clearly comfortable with. Ask him about mobile in business and his eyes light up, his smile broadens and he chats away; the research, the ideas, the applications roll off the tongue. Ask him about regulation and he shrugs and says "it’s just a fact of life".

Stanners is also the inaugural chair of the Telecommunications Industry Group, an alliance of eight telcos which includes Vodafone and Telecom, but excludes TelstraClear or 2degrees. It held its first event in March, called Planet 2010**. It flew Buzz Aldrin into town as the headlining act to draw the crowds. The strategy worked. On Friday businesses paid to hear Aldrin and a number of telcos speak. The following day the public flocked to hear the astronaut for free.

As you might expect Stanners was thrilled with the response to Planet 2010, citing it as an example of how telcos can work together. "It’s just been incredible the cooperation and support we’ve had from all the industry to put this together," he says.

But when asked what’s next for the TIG, Stanners was less forthcoming. The most pressing concern seemed to be the government’s Ultra Fast Broadband network, which Stanners’ calls "a big change and a big intervention".

"Who are the builders? The telco industry," he says. "So we’re spending a lot of time right now saying we have to get the standards (which enable interconnection between network builds) through and giving guidance and direction to the TCF, and say ‘come on, we have to get the standards by September. You can’t build the network without standards, how long will this take?’"

Not that Vodafone will be building a fibre network; it hasn’t put a bid in. But the company will be a major customer, just as it is on the Southern Cross Cable. So what did Stanners think of his erstwhile chief marketing officer hiving off to run Pacific Fibre, a start-up with the ambitious goal of building an international cable in direct competition with Southern Cross?

"I think it’s exciting for them. From our perspective anyone who invests in this industry to improve the infrastructure, it’s like a tick in the box – go for it, do it."

Does that mean Vodafone will become a core customer?

"Everyone likes us to be a core customer of what they’re doing; whether we become a core customer will depend on the proposal. We’re a very big customer of Southern Cross, they provide a great service at a great price and we’re happy at this point."

Vodafone is itself a fixed line player, having acquired ihug for $41 million in 2006. It made the New Zealand division something of a leader in Vodafone Group, and the company was at the forefront of investing in Local Loop Unbundling, partnering with Vector, putting equipment in Auckland exchanges and branding its wholesale service in typical bold Vodafone fashion as the Red Network. It undercut Telecom in Auckland, wholesaling to tier twos such as CallPlus. But progress appears to have slowed as the company isn’t rolling out to other cities, so what has Vodafone learned from the Red Network?

"That building infrastructure in fixed line is different to mobile; different skills, different capabilities, different process for customer service. We entered into it with a simple view of what we needed to do. Two years on we’re a lot wiser about what really has to happen, and I guess a lot more excited about how we can go forward," Stanners says.

The conversation turns to mobile. What about the competition from 2degrees and Telecom’s XT Network? How is Vodafone adapting to the new environment?

"It’s interesting; people say ‘how are you going to react to it?’. There’s only one choice: we have to compete. If you think about it, in a year you’ve had a new network from Telecom; a third network, CallPlus; Telstra coming back again; M2, Black and White, Compass. Here in New Zealand we have nine [providers] who can offer you a mobile service and three networks. In Australia there’s three networks and eight [providers] and there are 23 million people, and there are 4.5 million here... I’m pleased where we’re at, we’re competing very well. People forget that’s where Vodafone came from. It’s in the DNA."

I want to point out that seven of the nine providers are selling mobile services on Vodafone’s network, but it feels churlish to do so. Instead I ask about the impact of regulation – he must have been pleased with the Commerce Commission’s recommendation not to regulate Mobile Termination Rates. But Stanners says all the Commission did was accept the undertakings from Vodafone which it had asked for.

"People seem to be consumed about regulation this, regulation that to help an industry compete. When we entered this market place here we just had to compete, so now it’s like lots of competition we’ll just do what we know how to do, that’s why we’re aggressively out there now at the moment competing in the market place and driving things."

That would be the EXITadverts which promise to pay early termination charges for post-pay XT mobile customers switching to Vodafone, capitalising on Telecom’s mobile network outages – how does that square with the TIG’s goal of creating an industry that works together?

"Clearly consumers are very aware of networks now, and they’re not all the same and we’ve gone out there and we’re very aggressive in the market with offerings as you’d expect us to do. If the shoe was on the other foot Telecom would do exactly the same – it’s called competition."

It probably also helps that Vodafone has a few toys in the cupboard that no one else has – the iPhone being the shiniest. "Now and again along comes a piece of technology that changes the way consumers and businesses alike use services," Stanners says, when asked about the iPhone’s impact.

"When I joined Vodafone in 2002, I’d have this line I’d tell businesses. I’d say, ‘look the future’s mobile’; they’d say ‘no it’s not, look at this little screen, too small’. I go to every business now, every executive and say, look the future’s on this device and they say ‘you’re damn right.’"

Stanners says the three big things in mobile are the interface, data speeds and application stores. It’s here that Vodafone NZ can take advantage of being part of a massive global organisation, and offer devices and applications which New Zealand-based competitors will struggle to match.

The Apple iPhone deal is a conspicuous example – Telecom now has a decent BlackBerry device and is promising a Google device later in the year, but it has so far failed to secure the iPhone – something which financial analysts query Telecom CEO Paul Reynolds about at every quarterly briefing.

That’s because smartphones drive data usage and postpay accounts, which – as all good students of Telecommunications 101 know – is where the money lies. Demand for data will drive the need for faster speeds and greater mobile capacity, so what’s Vodafone’s technology roadmap?

It is currently trialling HSPA technology, which can offer theoretical speeds of 21Mbps, in central Auckland, but it’s not ready to go to market yet. The next major step change is 4G or Long Term Evolution (LTE).

"We won’t be doing LTE until 2013," says Stanners. "Two reasons: need spectrum, need money and we’ve got a network right now which we’ve just invested in called 3G. I’d like to get a return on that."