Red Alert

Broadband too important to muck around with

Posted by on August 3rd, 2010

Let’s see how much of this you agree with this.

New Zealand needs high quality ultrafast broadband. In principle, the goal of delivering this to New Zealand businesses, schools, hospitals and homes is the right goal.

Delivering high quality UFB is a core infrastructure priority for governments throughout the world and is in line with the US, Australia, Europe and many Asian countries. New Zealand is not leading, we are following many other countries in delievring on this goal.  It is likely to take (at least) 5-10 years to deliver.

Delivering high quality UFB is a complex undertaking to get good outcomes for our country. It requires transition for existing players. Including Telecom. But transition is about the whole industry not just Telecom and it’s a great pity that what happens with the UFB project and how it will be delivered, seems to be all about Telecom.

There is a view that Telecom is currently the most vulnerable telco in the world. I’m not sure about that, but it is important that Telecom can survive the next 3-5 years and make the transition. But it shouldn’t be able to demand the terms.

The next ten years are unknown territory for telecommunciations in New Zealand. The industry is poised to change forever and to become about fibre rather than copper.

Transition will likely require some changes to existing legislation, in particular the Telecommunications Act 2006.

Crown Fibre Holdings, the body charged with making a decision on the UFB contract, is an infrastructure company. It has no ability to determine a vision, no policies and no strategic element.

Telecom’s statement yesterday wanting to ‘integrate the UFB (overseen by CFH and a ‘co-investment’) with the Rural Broadband Initiative (a grant scheme being driven by the MED) and funded by the new look Telecommunications Service Obligations (overseen by the Commerce Commission) shows what a confusing regulatory alphabet soup the Government’s cornerstone broadband policy is becoming.

We need clear orchestration of all the elements in this process. It’s complex and it needs flexibility and transparency. It’s taxpayer’s money. That’s why it’s time to change the governance process.

And that’s why today I called for Telecommunications Commissioner Ross Patterson to be given an independent oversight role in the government’s ultrafast broadband (UFB) scheme.

Communications Minister Steven Joyce should now consider changing the governance process for the UFB decision and to involve the independent Commerce Commission ensure public confidence in the process. At the very least Steven Joyce should remove himself from decisions about Telecom’s requests for variations to its operational separation agreement with the government.

Dr Patterson has sufficient credibility and experience within the industry to bring independent oversight and objectivity into the process and to be mindful of New Zealand’s long term interests in developing our future in broadband.

Otherwise there is likely to be a cloud over the broadband decision. Whatever the outcome, how can the public have confidence that Telecom is not somehow holding our country to ransom with its bid to secure as much value for its shareholders as possible in securing the broadband contract?

“New Zealand’s interests are paramount, not the Telecom shareholders and the government should recognise this.


20 Responses to “Broadband too important to muck around with”

  1. “Whatever the outcome, how can the public have confidence that Telecom is not somehow holding our country to ransom with its bid to secure as much value for its shareholders as possible in securing the broadband contract?”

    Because it’s a open tendering process… I’d be dissapointed if Telecom wasn’t trying secure as much value as possible for it’s shareholders, just as I’d be dissapointed if Vector wasn’t or Crown Fibre Holdings…

    Telecom has announced it will structurally seperate…

  2. insider says:

    broadband is just another pork barrel and I suspect Clare you are interested as much because you’d really like the power of doling out cash and favours rather than this actually being

    a) a priority for taxpayer spending
    b) a well thought out policy with a clear business case

    You say yourself it is a complex process. That says to me it’s risky and perhaps not such obvious benefits as the promoters who have their hands out would have us believe.

    I believe there were a couple of reports in the paper this week that strongly questioned the benefit of UFB for all as being of marginal incremental value over current broadband.

    The reality is most of us work in offices/shops and are never going to want to commercially transfer multi gig/tb files from home that UFB would enable. Get the commercial areas wired up first, and that can be supported by user pays not subsidies. residential access will follow, if it is really needed.

  3. Loota says:

    insidr said

    broadband is just another pork barrel and I suspect Clare you are interested as much because you’d really like the power of doling out cash and favours rather than this actually being

    Go back to your 56K modem mate. The rest of us would like to enter the modern world and join our friends and family overseas from our homes in NZ with seamless full HD teleconferencing and true to life surround sound.

    Would be great to sit down here at home in NZ and over a high speed fibre link and have a beer in real time with your brother working in Ireland or share a cuppa with your daughter and her new grand daughter while they reside at their freshly built home in Perth, eh?

    Try and think a little ahead further ahead than your nose for our sakes yeah?

  4. Tim Tian says:

    Look at the current New Zealand boardband price for hoursehold usage cross the market, you would not be happy with any of the suppliers. They just charge us too much with low speed and limited data allowance. Telecom’s current 40GB pro plan will cost $79.95 and $2/1GB for extra usage. And this the lowest price in new zealand for 40GB data allowance. With the UFB, the max speed can reach upto 5MB/second, which means if with the maximun speed your $79.95 pro plan will last 8000 seconds/133.3 mins/2.2 hours. After that, you will be charged 1 cent per second, 60 cents per minute and $36 per hour. If I am the user of UFB with the pro plan, I will not care about how fast is the speed but the xtra cost after that 40GB which may cost me years to pay it back. This is an extreme case but may happen to someone in somehow. If the company such as Telecom get the contract of UFB but can not provide cheaper boardband services, the end user of it can not get benefit from this project. Then this project will fail. I am a taxpayer, I am not happy with someone to use taxpayer’s money to pay Telecom for example to charge me more and if the project fail, then the money from taxpayer has already in someone’s pocket.

  5. I think there is some credence to the stance that UFB is a solution looking for a problem but as time progresses we’ll need Telcoms more and more and sure as eggs the next Bill Gates will figure out how to utilise the full bandwidth of UFB…

    I personally would be happy to pay the cost of the fibre installation from the kerb to the home and higher monthly fees for almost instaneous page loads and no cap services…

  6. Currently the broadband data caps mean that you can’t make use of the speeds currently available. Meanwhile connection speeds during peak times are slowing down dramatically. Current connection speeds are more than good enough for high quality streaming media. The only real limit is backhaul – ie how much you can send out. This is the real limit, and could be addressed with symmetric DSL.

    Also the data caps mean that you can’t actually use the connection to anything like it’s actual capacity. Until the caps rise far enough that you can reasonably use the additional bandwidth there is little point in rolling out faster connections.

    Also, will faster connections cost more? Do we really need 100Mb connections to our homes? There are issues facing the country such as transportation and oil dependency which, in my humble opinion, are far more urgent.

  7. Loota says:

    Well if we could start with ensuring a consistent 10-15Mb/s to each home 24/7 that would be something.

    P.H. yes there are other urgent matters to get on to as well.

  8. Spud says:

    Down with data caps! :evil: !

  9. Any form of broadband would be welcomed in parts of the unwanted Auckland Super City but telecom are unwilling to deliver this basic requirement to these areas. If they are unable to deliver basic broadband connections to the biggest city in New Zealand how are the rest of the country going to fare?

  10. Nevyn says:

    When we first got “broadband”, we had plans at 256k speeds. These were uncapped (in fact, I’ve still got this plan because of this reason). If I have to move though, I can’t get the same plan. I have to put up with ISP’s spouting on about what I really want when all I really want to do is be able to download at a constant rate (not throttled) and at a constant price (none of this pay / GB business).

    So as things have moved on, looking at plans, I actually get less value for more money. For my $50 / month at the moment, I get 256k download rates with no data cap – this equates to around 30GB. For $50 / month now, on Xtra, assuming that I don’t have my home calling with Telecom, I can get 10GB. If I do have my home calling with Telecom, I get it for $40.

    So every plan seems to be tethered with a home calling plan. The consequences of going over your data cap is a slow down in speed to dial up speed (damn that’s archaic) or having to pay anywhere between $1-$2 for additional data.

    When I first came across datacaps, I had just used around 15GB in about 2 weeks and then it got throttled down. I quickly canceled the plan – what was the advantage to dial up speed if I was going to speed 2 weeks out of every month being hamstrung?

    Much as I’d like to get enthusiastic about fibre, it’s just another diversion tactic from real issues. People, if you’re using excuses like “But we’re too small a country” or “we’re too far away”, you’ve been hit by the “I’m happy being, and willing to justify being a cash cow” club.

  11. @Maggie, Chorus is rolling out fibre to the box throughout Auckland and I think that is scheduled to be completed late next year, they have rolling out to some 3,600 odd boxes around NZ and Vector has 1000 odd kms of fibre in Auckland already, but it is a chicken and egg situation with the legacy copper networks from the box to the home and lack of return on investment applications for fibre at the moment…

    Are there no reasonably priced plans with unlimited data caps at the moment..? Is this because all the ISP’s are purchasing from Telecom Wholesale..?

  12. LabRat says:

    This is crazy, government should not be financing this infrastructure. Business will do it off their own back because they stand to profit from it. The market will set the price, and there’s no reason to think government paying for the infrastructure will result in a better price for the consumer.

    Just as a recap, in 1996 for businesses it cost $1.60/MB ($1638/GB) incoming international traffic, and you’d pay $620/month for a 64k leased line. Home users had dial-up plans usually costing close to $1/minute once you’d used up whatever plan minutes you had, and this was before the unlimited plans (which suffered from huge over-subscription).
    Today your home ADSL2+ is easily capable of 10mbps (up to 22 if you’re lucky – I get 17) and international traffic can be less than $1.60/GB (= 1/1024 x $1.60/MB)

    Already look at how this UFB deal has Telecom manoeuvring to get in on the action. Chucking public money into the mix screws the market. Foreign owned telco executives are already calculating their bonuses (funded by us)

  13. Dylan says:

    @Labrat to my understanding other countries have had this quality of broadband for years so if our private sector was willing and capable to provide this broadband for us they would have done it already.

    Consider the costs of a project like this and then the low returns on it because of our low population/consumers – then you will see why we are only just coming out with 4 mobile phone providers (one of them an SOE, one foreign owned, and one originally built by the state) when Britain for example has like 20+ from what I hear. Things like internet/phonelines are expensive to set up and we don’t have alot of consumers to give back enough returns/profit.

    The reason why it’s taken us this long to get this broadband is because it’s taken the govt. this long on the initiative. I just wish they did it earlier and would supply us the internet themselves instead of needlessly selling it to us through privateers. If the Govt. has fully produced it then the Govt. should get full returns, and investments paid by the tax payers dollar’s returns should go back to the good of the tax payer.

  14. Draco T Bastard says:

    Why are we even thinking of giving taxpayer money to private corporations for necessary infrastructure? It results in massive loss and cost over runs as the tenders are cut to the bone to get the job and then more has to be added to get the infrastructure working.

    Far simpler and far cheaper just to have an SOE putting it in place. Of course, we had that until the 4th Labour government sold it and now we’re paying the cost in higher prices and less service.

  15. LabRat says:

    Dylan, the reason we are where we are with our telecommunications is because of the size of our market: “we are only just coming out with 4 mobile phone providers…when Britain for example has like 20+”.
    Britain has 15x our population.

    Also, ADSL is still the predominant home connection method in Britain, with ADSL2+ being capable of delivering up to 24Mbps downstream and 2.5Mbps upstream. They are more likely to get closer to the full 24Mbps when they’re a short distance from the exchange, and I’d bet rural users get much less. This closely matches what we have here, and they pay roughly 40 quid per month ($NZ86.90 at today’s exchange rate) for unlimited usage. In NZ we are less likely to get the full 24Mbps again due to lower population density meaning it is hasn’t been commercially viable to install more exchanges – so most of us don’t live close enough to an exchange to get that speed.

    Primarily the difference in NZ is the cost of international bandwidth. This is an area where I think there is some validity for the government to take a stake since surety of international connectivity is critical to NZ. But basically the cost of international bandwidth is what is driving the cost of internet connectivity.

  16. Loota says:

    I wonder, if the cost of international bandwidth is driving the cost of internet connectivity, how is it that Australia can offer much more data on their broadband plans for less money than NZ providers?

  17. LabRat says:

    Just for argument’s sake, how much do we think people will pay for 100Mbps to the home? $50? $100?
    Let’s say 100,000 people take it up, we’re subsidising them at $15,000 per punter.

    Bearing in mind this is just the line rental, like a telephone, and international traffic will still cost extra, just like toll calls still cost you outside your toll-free area. FYI an ISP pays approx $300/month per 1Mbps dedicated international bandwidth.

  18. The new south sea cable Morgan and Co are planning will hopefully create some competetion in the international market and Kordia are looking a piggy backing that to Australia… Things are developing on all telco fronts…