Opinion: Vodafone plus TelstraClear - good or bad for you?

InternetNZ CEO Vikram Kumar looks at the pros and cons of the TelstraClear sale from the user's perspective

It has been almost two weeks since Vodafone announced its intention to take over TelstraClear for $840 million. As number two in the market, the new Vodafone will have over a quarter of the fixed line internet market compared to Telecom’s half. What are customers and the broader industry going to get with the new Vodafone? What’s the impact of the number two and three players being combined?

Much of the reaction is ‘wait and see’ for the Commerce Commission’s decision on the competition impact. Impatient, I turned the dial on my crystal ball to ‘wildly speculative’ to create two extreme scenarios- Sunny Days and Rainy Days.


Sunny days: Copper reigns with prices for the average home internet connection down 20 percent. This comes about as Vodafone aggressively unbundles the local loop and sub-loop, using the extra margin to gain market share. At the same time, scale makes Vodafone a real competitor to Telecom at a national level. Small ISPs thrive and compete locally on the back of genuine price competition in national backhaul between Telecom, FX Networks and Vodafone. Finally, Vodafone uses its cable network to offer Ultra Fast Broadband at sub-UFB prices before fibre becomes available to these customers.

Rainy days: Prices for copper-based internet access rise gradually while Vodafone happily pockets the money from its extra margin. Vodafone kills off its cable network, forcing customers in Wellington and Christchurch off. It is a marginal player in the UFB world, Auckland-centric and concentrating on shoring up mobile data revenues by keeping mobile data prices relatively high. 2degrees struggles to transition to a 4G world.

Data caps

Sunny days: Competition in international bandwidth from the new cables (Pacific Fibre and Huawei Marine/Axin) plus its own national backhaul gives Vodafone the edge to move packets internationally and across the country. Data caps of 500 GB a month are the norm at home and no ISP even thinks of counting data uploads. If the deal somehow allows Vodafone to get Southern Cross Cable capacity at Telstra’s prices, data caps rise very quickly. Mobile data caps rise rapidly with fibre everywhere.

Rainy days: In an effort to keep the sticker price low, data caps are painfully low. The continued monopoly of the Southern Cross Cable and cosy arrangements in the national IP transit market leaves Kiwis envying the 1TB caps across the Tasman.

Content and services

Sunny days: Vodafone uses its newly acquired datacentres to offer massive, cheap local capacity. Enthused, the likes of Netflix and Amazon jump in. Local content gets a massive boost. Internet traffic flows far more smoothly within New Zealand as TelstraClear's customer silo disappears.

Rainy days: It’s all about Sky TV. Enough said.


Sunny days: Finally, there is true convergence across networks. The mobile phone is seamlessly our home phone, office phone, wallet, and TV controller. A phone anchored to a string of copper is a laughable, archaic concept. New services blossom. Long-suffering corporates get lower prices, a raft of local cloud-based services, and real choice for comprehensive services.

Rainy days: Innovation is defined as replacing the TelstraClear logo with Vodafone’s. Vodafone even struggles to give people and organisations a single bill. Corporate and retail markets remain silos and TelstraClear’s exit prompts risk-averse customers to shift to Telecom/Gen-i.

Customer Service

Sunny days: Vodafone treats customer service as a differentiator. Handling all calls locally keeps people happy.

Rainy days: Fragmented systems and understaffing makes Vodafone’s customer service as dismal as its data network in Wellington CBD is currently. People don’t care who answers the phone; they just want to get their issues sorted.

So, are we going to get Sunny days or Rainy days in a year’s time if the Commerce Commission gives the likely green light to the deal? In the Land of the Long White Cloud, it may well be a bit of both.

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Tags VodafoneinternetnzTelstraClearvikram kumar

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