Telecom mobile history and Rod Deane's failing memory

By Steve Biddle, in , posted: 2-Mar-2010 14:04

In The Herald on Sunday last weekend journalist Matt Nippert wrote an article entited "Can Telecom survive" which gave a background into Telecom's mobile history and included comments from former Chief Executives Theresa Gattung and Rod Deane. Deane also also served as the board chairman of Telecom until 2006. Both have made very little comment about Telecom in recent years so it was certainly a coup to get comments from both of them. While reading this article I was interested in a comment from Deane over Telecom's choice of mobile technology:

 

Telecom also persisted with an older, CDMA technology for its mobile phone network and only recently upgraded to the newer industry-standard with XT.

Deane says that this, again, was the fault of Government. "We bought the GSM spectrum in an auction, and the Commerce Commission forced us to sell that back to Vodafone and Bell South. I still remember pleading with the Government that we should have that technology, but officials - in their infinite wisdom - decided against it."

Nonetheless, Deane concedes that history proved CDMA wasn't the technology of choice. "It was a bit like VHS versus Beta," he says. "And Telecom has effectively moved to VHS with XT."

 

These comments are completely and utterly wrong. Matt Nippert has either misquoted Deane, or Deane has a failing memory and should have probably checked his facts first before giving an interview.

Many people wonder why Telecom chose the CDMA path and didn't deploy GSM in the 1990's - the answer is quite simply that they did not own any spectrum that enabled them to deploy a GSM network.

In 1987 Telecom launched New Zealand's first mobile network using the AMPS (Advanced Mobile Phone System) technology. The AMPS standard used spectrum in the 800MHz band and consisted of two blocks of radio spectrum known as the AMPS A and AMPS B bands. These blocks consisted of an equal number of channels and were created so two networks could happily co-exist side by side. Telecom was granted usage right for the AMPS B band to deploy their network and over the next few years successfully rolled out a nationwide analogue mobile phone network. At this stage ownership of the AMPS A band was still retained by the Crown.

By 1990 network growth meant they required additional spectrum to expand their network, Telecom were already using some AMPS A frequencies under agreement with the Crown and were excited at the potential of upgrading the network to the DAMPS (Digital AMPS) standard that was ratified in March 1990. It was clear to analogue network operators already that the limited number of frequencies available would seriously hamper the grown of analogue networks and that a move to digital was essential. At this time the GSM standard was also being finalised but had still not been publically demonstrated.

In May 1990 the NZ Government announced that it was calling for public tenders for usage rights to the AMPS A band, and also the TACS A and TACS B bands. The TACS bands were European frequency blocks in the 900MHz band that were used for deployment of analogue TACS (Total Access Communication System) mobile networks in Europe, however they were now expected to be used for the GSM standard that were expected to launch in Europe in 1991. A 3rd block of TACS spectrum known as TACS C was not sold off as it was still currently in use by existing licence holders for non mobile services.

The New Zealand Government auctioned off these blocks of spectrum using the Vickrey auction process where the price paid by the successful bidder was that of the 2nd place bidder. At this auction Telecom New Zealand bid $101,200,000 for the AMPS A band but had a pay price of $11,500,000 which was the price bid by the 2nd place getter, First City (a Canadian investment bank). BellSouth won the usage rights to the TACS A network bidding $85,522,101 with a pay price of $25,200,000 that was bid by Telecom. Telecom Mobile Radio Ltd were the successful bidder for the TACS B spectrum bidding $7,000,000 but with a pay price of a mere $5000 from the 2nd place bidder, Broadcast Communications Ltd. Telecom bid for this TACS B spectrum through a subsidiary known as Telecom Mobile Radio Ltd who were at the time primarily providing land mobile radio services. They claimed this spectrum would be used for  "expanding demand for land mobile services, future mobile data services, and point to point linking services", however it was finally acknowledged that this spectrum was being acquired for future mobile services.

A condition of the auction was that any spectrum purchases by Telecom New Zealand had to be cleared by the Commerce Commission before the acquisition was finalised and submissions to the Commerce Commission were made on the 29th May 1990 seeking approval for the AMPS A and TACS B bands.

Immediately after this auction issues were raised over the fairness of Telecom New Zealand owning two new blocks of spectrum and appeals were lodged by several unsuccessful bidders. The Commerce Commission also began reviewing the case to test whether Telecom's purchase would be preventing competition in the mobile market. The Commerce Commission issued a draft determination on the 24th August 1990 saying that it believed Telecom's purchase of the AMPS A band was anti competitive and would result in it having a dominant position in the market as it would control 3 out of 4 available spectrum blocks for mobile services, as well as full control over the existing PSTN and interconnection with the PSTN. On the 17th October 1990 the Commerce Commission issued a final decision blocking Telecom from acquiring the management rights to the AMPS A band.

On the 31st October 1990 Telecom lodged an appeal against this ruling. Telecom had made it plainly clear that it's submissions that it's preference was for the AMPS A band over TACS B and that in it's view BellSouth would be competitive in the marketplace which placed even greater pressures on Telecom to acquire AMPS A. Telecom argued acquiring AMPS A "as the essential means by which it could at least achieve, first, greater efficiencies with its existing network notwithstanding its basic inferiority compared with digital technology and, secondly, the ultimate capacity to upgrade to digital technology without incurring inordinate expense and disruption of its existing analogue subscribers".

On November 30th 1990 the Commerce Commission cleared Telecom to acquire the management rights to the TACS B band, however Telecom were still so keen to acquire the AMPS A band that they reached a deal with the Commerce Commission and pledged to give up their rights to the TACS B band if they were successful on appeal for the AMPS A band, hoping that this compromise would avoid any competition issues.

Telecom's appeal was heard during a 12 day case before the Administrative Division in June and July 1991, and in December 1991 the High Court delivered a judgement dismissing the appeal. Leave was granted to appeal to the Court of Appeal which was Telecom's next step. It's also worth noting that Broadcast Communications had also filed legal action against the Commerce Commission which is part of the reason both cases took so long. In June 1992 the Court of Appeal ruled that subsequent to Section 97 of the Commerce Act 1986 Telecom should be allowed to purchase management rights for the AMPS A band. The court noted " it was not demonstrated that the grant of the AMPS-A frequency to Telecom would, or would be likely to, result in it acquiring or strengthening a dominant position in the cellular telephone market such that Telecom was entitled to clearance under s 66(7) Commerce Act 1986".

Telecom now had access to both AMPS A and AMPS B bands and BellSouth had access to TACS A. The TACS B band was subsequently sold to Telecom Australia (who later became Telstra) and remained unused. Throughout the 1990's Telecom proceeded to upgrade their mobile network to the DAMPS standard and ran their digital and analogue networks side by side.

What had become very clear to Telecom by the late 90's was the fact that GSM was vastly superior in many aspects to the DAMPS standard and had grown to become the defacto standard for mobile networks around the world. With the purchase of BellSouth by Vodafone Group and aggressive marketing that resulted, Telecom gradually began to lose market share and was faced with a network that was simply unable to offer the same capabilities as it's competitor.

Around 1999 it because clear to Telecom that they were going to need to look at options for replacing their AMPS/DAMPS network. At this stage Telecom still didn't own any 900MHz spectrum that enable it to deploy a GSM network, however 1800MHz spectrum was available that would enable Telecom to build an entirely new nationwide GSM network. The downside of the 1800MHz frequency was that it required significantly more cellsites to create a nationwide network than the lower 800MHz and 900MHz frequencies, and would also mean building a brand new network from scratch. Also being considered was the CDMA (Code Division Multiple Access) standard which was being sold as a solution for existing AMPS/DAMPS networks allowing a much simpler upgrade to something bigger and better. The base of installed AMPS and DAMPS networks in the USA was huge and this technology allowed an upgrade without having to entirely rebuild the network which would have been required with a 1800Mhz GSM network.

Telecom proceed with the CDMA network upgrade, rumours have it in part because of the much cheaper price, but also because of the influence put on the company by part owner Verizon who had already upgraded their AMPS/DAMPS network in the USA to CDMA. In 2001 Telecom launched it's CDMA network to much fanfare and the rest of the story is now well known. CDMA while technically superior to GSM in many aspects, suffered badly in the marketplace. GSM had become the dominant global cellular standard, and handset selection began to suffer as large players such as Nokia and Ericsson pulled the plug on CDMA handsets. Despite hurting Vodafone, Telecom never managed to reverse the rot that had already set it, and it became clear by around 2005 that Telecom seriously had to look at options to replace CDMA as their share of the mobile market was in decline.

Telecom's options right now were fairly straight forward, the GSM 850MHz standard had been around since 2002 and finally Telecom owned spectrum that allowed them to deploy a GSM network. Telecom also won a 3G 2100MHz licence at auction and would make use of it to build a dual mode GSM/WCDMA network that would be identical to that of Vodafone with 2100MHz 3G services in the cities and major towns and GSM coverage across the remainder of the country. The stage was set, but unfortunately things didn't run to plan.  Delays then occurred in the planning, delays which turned out to be a blessing in disguise for Telecom - the 850MHz 3G WCMDA standard had matured and Ericsson had deployed a huge 850MHz WCDMA network in Australia for Telstra. Ericsson now wanted to do the same thing for Telecom, and the decision was made to dump the GSM component and go with a nationwide 850MHz WCDMA network that would ultimately be built by Alcatel Lucent. XT was born.

What is clear is that at no time did the Government force Telecom to sell spectrum suitable for a GSM network to BellSouth/Vodafone as Deane claims. BellSouth had won management rights to the TACS A band. Telecom had won management rights to the TACS B band. Telecom simply picked the wrong horse, opting for the AMPS A band rather than the TACS B band when it was given a choice by the Government. Nobody knew at the time GSM would turn into a global standard and dominate over DAMPS - there wasn't even a single GSM network in the world in 1990 when the decision was made (the first GSM network was launched in Finland in 1991). Allowing Telecom to own 75% of the available mobile spectrum was frowned upon by the Commerce Commission in 1990 and it was a decision that was would certainly not be any different today.

So in a nutshell that's the history of Telecom mobile. A history that is unknown to many people, including the former Chief Executive and Chairman of the company!


Other related posts:
Spark Paging network shutdown – the event nobody cares about? Not quite.
UFB voice, power cuts, copper invincibility and mainstream media FUD.
New Zealand’s growing BUBA problem (AKA I feel sorry for you if you’re on a Conklin)






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Steve Biddle
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New Zealand


I'm an engineer who loves building solutions to solve problems.


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