Yesterday, it was widely reported that 2degrees had acquired internet service provider Snap for an amount speculated to be between $26 million and $30 million, making it possible for the telco to offer a service that had long been absent from its offering.
And while this shortcoming hasn’t stood in the way of 2degrees attracting over a million subscribers since its launch in 2009, broadband is becoming increasingly important at a time when Kiwis demand video content.
Malcolm Phillipps, the chief marketing officer at 2degrees, sees this as part of the continued progression of the telco.
“We’ve moved step by step,” he says. “First we started with pre-pay, then consumer paid monthly [contracts], then we moved into the business and corporates markets. This is really the natural evolution for us to move into the fixed broadband space.”
He does however add this this move will not change the core identity of 2degrees.
“From a branding perspective, we made some changes to our brand recently to move it forward. Some people have called it growing up, but we still want to retain a challenger perspective and be seen as the challenger in the market. And even as we add a new product, we will still remain a challenger at the heart of the brand.”
While there are clear parallels between this and Vodafone’s acquisition of TelstraClear in 2012, Phillipps says that the circumstances surrounding the respective purchases are quite different.
“The big difference is that Vodafone already was a fixed broadband player when it bought Telstra Clear, but we have never sold fixed broadband, so it’s actually unique from that perspective. It’s actually more akin to Vodafone when it first purchased iHug [in 2006].”
When Vodafone purchased iHug, it rebranded itself as a “complete communications service provider” and later started offering bundled packages, which included both broadband and mobile elements, to subscribers. This is something that Spark has also being doing for quite some time, and it has given both telcos a major advantage over 2degrees in attracting higher value customers.
Phillipps says that the acquisition of Snap now puts 2degrees in a position whereby it can also look into offering bundled packages.
“This something we’ll work on in the next few months, but, absolutely, we will have bundled offers available in the market sometime in the future,” he says.
Vodafone and Spark’s broadband offerings have also led to the pair establishing partnerships with various content providers. Vodafone has recently signed a deal with Neon in an effort to coax consumers to upgrade their broadband plans to get access to the service, while Spark has an ongoing partnership with Spotify (Spark also has Lightbox, which gives it extra bargainging power).
“We’ve seen what Spark have done and we’ve seen what Vodafone has been doing with Sky and Netflix,” says Phillipps. “So now that we are moving into the broadband space, we’ll definitely be looking into those partners as well and what we can do in that space.”
It is however questionable whether it’s worthwhile investing in broadband so late in the game, especially given that mobile technology is advancing so quickly. And as this technology continues to evolve, it wouldn’t be far-fetched to imagine broadband becoming obsolete sometime in the future.
Phillipps concedes that the technology is advancing quickly, but he believes that broadband still has an important role to play in the Kiwi market.
“It’s an interesting perspective, but if you look at the trends in the market [where]we’ve just had the launch of a significant content player into this market—which already has Lightbox and Neon—[then it’s clear that]all those things require significant amounts of data and bandwidth … If you just use your broadband for email and light web browsing, you should throw away your broadband today and just use one of our mobile plans.”
Phillipps says that high-definition video consumption will only increase over the next few years, and that mobile data will not be able to meet this demand.
“If you try to deliver all of that over mobile spectrum, you would run out. There will always be a place for fixed line broadband, and that’s why New Zealand is building an ultra-fast broadband network across the entire country …. Many familes need to have rich content delivered over a fast fibre pipe, and this where the opportunity awaits for us on the broadband side of things. It’s about taking advantage of the UFB rollout.”