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Thank you Labour

Posted by Darien Fenton on September 24th, 2010

IMG00232-20100924-1129

The $36 million transport interchange at New Lynn was officially opened today.

Cudos to Waitakere Mayor Bob Harvey and his Councillors, along with ARTA and Mike Lee from the ARC who all worked hard to achieve what Bob describes it as the new heart and soul of New Lynn.

The joint Waitakere City Council, Auckland Regional Transport Authority Council and Central government development has been more than five years in the making and includes an underground train station and a revamped bus interchange.  New Lynn looks like a town that’s going places with the redevelopment of the town centre to follow.

New Lynn Labour MP David Cunliffe was instrumental in convincing the then finance minister Michael Cullen and Prime Minister Helen Clark to back the council’s plans. Dr Cullen signed off $140m for the project despite objections from Treasury.

While the Governor General and Transport Minister Joyce did the official business today, I thought it was great that the locals recognised the Labour government’s contribution and particularly that of Michael Cullen, with this banner.

Thank you Labour.

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Filed under: Labour Party, Rail, Waitakere, infrastructure, transport
31 Comments

Just what deals are being done to build trains for Auckland?

Posted by Clare Curran on September 13th, 2010

Just over a week ago Kiwirail made a quiet announcement. Without any fanfare it had surprisingly extended the number of bidders from 4 to 10  for the $500m of Govt money to build trains for Auckland’s electrified system.

Now that might not have caught attention, except that an independent  group of people led by an Aucklander Danise McEvoy had several months before been charged with deciding on who the short-listed bidders would be based on a rigorous process. They had announced a group of four in July.

Yet inexplicably on 3 September, Kiwirail changed the goalposts and when the RFP was announced six more companies were included (several of which I understand had been excluded first time round). The big question is why? And who will gain? I suspect the original four won’t.

In his media release Kiwirail CEO Jim Quinn said the number had been increased because:

“in extending the number to receive the documentation from an initial shortlist of four,  we have reflected on the critical importance of securing the best possible whole of life outcome taking account of quality and cost.”

Whatever that means! Despite him claiming otherwise, it’s my understanding that the six new companies did not meet KiwiRail’s original qualifying criteria.

I also understand that at least once of the four companies on the original short list are considering their options given the change in the bidding process. (Update: that view has since been reinforced strongly)

And you’ve got to admit it looks pretty damn odd. Even dodgy. And just who decided to include the six new bidders?

They are:

  • CSR Zhuzhou Electric Locomotive Co Ltd The Chinese company was founded in 1936. In 1958, ZELC successfully developed and manufactured the first main line electric locomotive in China. In 1978, it switched to electric locomotives. It calls itself the main development and manufacturing base of electric locomotives in China.
  • CSR Nanjing Puzhen Ltd. It build this high  speed train in time for China’s Olympics.
  • UGL Rail Services Limited – the largest end-to-end rail technology solutions provider/integrator in the Asia Pacific region, and Australia’s largest supplier of outsourced asset management and lifecycle engineering services. Its clients include RailCorp in New South Wales, Yarra Trams in Victoria, MTR Corporation in Hong Kong, Queensland Rail (QR) and Pacific National (PN).
  • a consortium of  Japan’s Sumitomo Corporation and Nippon Sharyo Ltd,
  • China’s LORIC Import & Export Corporation Limited and
  • Downer EDI Rail Pty Ltd (which has been producing passenger vehicles for use throughout Australia since the mid-1800s).

Thankfully there’s a blogger in Auckland called Jon C who writes a blog called Aucklandtrains and pays pretty close attention to this stuff. He points to increasing speculation about China chasing infrastructure work in New Zealand, especially after transport minister Steven Joyce and prime minister John Key both visited China recently. The NZ Herald has written about this. So has the ODT. You’d think it would be a bigger story. Not sure why the media haven’t hopped into it more.

Last Thursday, my colleague Darren Hughes asked why:

“At the eleventh hour, KiwiRail decided to increase the short-list of prospective tenderers for a $500 million contract to build Auckland’s electric trains doubling the number of interested parties and lessening the chances of a successful Kiwi bid.

“Steven Joyce’s latest move as Transport Minister has been described by the industry as ‘mind boggling’ especially when figures released today show manufacturing is at a 10 year low.*

“This bizarre move raises questions about the integrity of the tender process, the priorities of this government and the transparent nature of the Minister’s dealings.

You’ve got to ask yourself why the govt (and I bet it wasn’t just Kiwirail) made the decision to include four more players in the Auckland train bid. Isn’t that intereferring in a tender process?

Given this development, just what chance does a substantial NZ build have? Is there a preferred bidder? Is it going to be a largely overseas build? What about Kiwi jobs?

I reckon the government needs to be pretty careful here. The media may not be watching closely (yet) but there’s a bunch of Labour MPs, industry reps and Chambers of Commerce who are, who care about Kiwi jobs and the sustainability of Kiwirail’s mechanical division and our rail engineering capability in this country. Because it’s not just Kiwirail jobs at stake. There’s a wider engineering industry. They’re Kiwi jobs.

And it’s NZ’s reputation in being able to run a credible tender process.

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Filed under: #OpenLabourNZ, Rail, economy, infrastructure, jobs
18 Comments

Broadband too important to muck around with

Posted by Clare Curran 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.

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Filed under: #OpenLabourNZ, broadband, economy, infrastructure
20 Comments

The Nat Love Affair with Helicopters

Posted by Sue Moroney on July 27th, 2010

What is it about National’s Tertiary Education Ministers and Helicopters?

First off, we had Anne Tolley taking the tertiary sector literally when they suggested she should take a “helicopter view” of the sector -she had them stump up for a costly ride in a chopper over Auckland.

Now, we have Steven Joyce telling the country that he would prefer fund helicopter trips for commuters between Hamilton and Auckland than to subsidise a passenger train service between the two cities.

He seemed to have borrowed Simon Power’s strategy of heavily inflating the cost to the taxpayer, so he could justify his idealogical postition against trains and for more and more roads. Joyce claimed the  train would cost $15-16,000 per trip which is complete rubbish.

Power used this tactic to try to justify the closing down of Hamilton’s successful trial youth justice facility, Te Hurihanga.

Maybe they just think people can’t do maths in Hamilton. Sonething of a miscalculation, if you excuse the pun.

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Filed under: Hamilton, Rail, Uncategorized, education, infrastructure, transport, waikato
15 Comments

Gee the Aussies actually think ICT issues matter

Posted by Clare Curran on July 26th, 2010

The key ICT political figures in the Federal Election are expected to go head to head in a debate at the National Press Club on 10 August.

The Australian Computer Society (ACS) has extended invitations to communications minister, Stephen Conroy, the Opposition shadow communications minister, Tony Smith, and Greens ICT spokesperson, Scott Ludlam to take part in the event.

Computerworld Australia will seek to clarify each party’s policy commitments on the following ICT-related issues in the lead up to the vote:

  • The National Broadband Network (NBN);
  • e-Health
  • Digital education (computers in schools)
  • Gershon Review changes
  • Government 2.0
  • Security and cyber crime
  • The Internet filter
  • Defence cyber capabilities and oversight
  • ICT skills development
  • ICT innovation
  • Privacy Act changes
  • Sustainable ICT
  • Smart grids, transport and environment systems
  • Online piracy and copyright protection
  • ICT advocacy
  • Online services
  • Departmental IT transformation program

I wonder whether Steven Joyce (the Minister of Communications and many other things)  could have a debate with me on any of these issues (other than broadband).

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Filed under: broadband, censorship, comms & IT, digital, infrastructure, internet
9 Comments

Let us get clear policy on school PPPs

Posted by Trevor Mallard on July 23rd, 2010

A reminder of a previous post on school  PPPs :-

But lets make it clear. Labour will develop a clear policy position on this. It will involve unwinding the contracts – using legislation if necessary. As with ACC in the past and if there is another privatisation.

And my view is that policy will involve compensation for the value of the bricks and mortar but not for the overheads and tender costs.

So be warned – don’t spend up on getting these deals together.

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Filed under: #OpenLabourNZ, Loan Sharks, business, economy, education, finance, infrastructure, outsourcing, policy, privatisation
50 Comments

Are the wheels falling off the broadband plan?

Posted by Clare Curran on July 12th, 2010

Now that John Key has started talking about the Chinese bidding for the $1.5 billion ultrafast broadband plan it really seems that things may be coming unstuck. Or at the least confused.

And yesterday’s Sunday Star Times reports Steven Joyce’s acknowledgement that the government may have to dip into money set aside to build its $1.5 billion ultra-fast broadband (UFB) network to pay for further policy advice on the project. Policy advice on what?

Written questions from parliament’s Commerce Select Committee (which I sit on) to Communications Minister Steven Joyce have revealed that the appropriation for policy advice in his portfolio is under “extreme pressure”, and a transfer of up to $2 million more than the $3.7m already budgeted may be needed early in the current financial year. That $2m would come from capital set aside to pay for fibre.

In other words, the funding set aside for policy advice on the broadband initiative is not enough. Why is that? It certainly has become a lot more complicated than anticipated. Which Joyce needs to own up to now.

I”m submitting a bunch more written questions on this. But it does seem that Steven Joyce may have bitten off more than he can chew.

The SST story and previous posts by me have strongly suggested that $1.5billion isn’t going to deliver what the government has promised. Vodafone head Russell Stanners has now said publicly several times that he doubts the $1.5b set aside for the project will be enough.

The country must get broadband rolled out. Soon. And we must do it right. But what the hell is going on? And what will be the cost? And are we going to be faced with a foreign bid that undercuts other local bids, particularly on labour costs?

Steven Joyce continues to remain silent on these issues. It’s time for him, or perhaps now Key to start talking to the nation about just what the problems are and what’s being done about it.

Remember this was the government’s biggest election pledge. There’s a lot riding on it, for them and the nation.

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Filed under: broadband, comms & IT, economy, infrastructure
18 Comments

New Zealand, not vested interests paramount on broadband

Posted by Clare Curran on July 5th, 2010

We don’t appear to be getting much closer to a workable solution on how to roll out ultrafast broadband to the nation.

Every person I speak to, every event I go to, is consumed with doubts, questions and concerns.

The biggest issue is what role Telecom, or a split of part of Telecom, will play in the rollout.

Because there’s a closed tender process underway there is no ability for a public discussion led by our government to be had on this issue.

Telecom is trying to work out how to structurally separate and qualify to get a large piece of the action on the UFB rollout. They don’t want to go down this track without some certainty as to how it will radically change the company.

The government wont give them certainty because there is a tender process underway.

The conundrum, as was pointed out succinctly last week on an InternetNZ blog post is this:

…there is a chicken-and-egg problem on the separation front. Telecom as a vertically integrated firm can’t participate directly in the UFB. But Telecom probably can’t make the economics of separation work unless it has some kind of assurance that its separated network business will be a lead player in the UFB.

Here’s some other views being put out there:

New Zealand needs fibre and we need it soon. We cannot wait much longer to have a comprehensive plan. It’s been almost two years and the government is in a quandary.

That’s not good for NZ, nor for the industry.

It’s not in New Zealand’s interests for Telecom to be run into the ground and excluded from the biggest network build for the next generation (or more).

But it’s not in NZ’s interests for Telecom to be in a position to bully the government or the country into it participating in a way that’s about its own vested interests. New Zealand’s interests are paramount.

There’s all kinds of speculation about what discussions have been occurring with Telecom over the last 19 months.

Tom Puller-Strecker in today’s DomPost is attempting to get to the bottom of this. As usual Joyce is keeping all his cards close to his chest. Does he have something to hide?

There are concerns that the level of private investment available for UFB is not enough to make it work. The government has shifted the goalposts on its tender to allow local fibre companies to provide Layer 2 services as well as Layer 1 on the fibre network.

Layer 1 is the fibre cable in the ground or strung over poles, while Layer 2 lets the supplier add the electronics at both ends of the fibre and means retail providers can use it immediately and supply products to end users.

Essentially this is changing the terms of the tender. The industry seems to welcome it as a sensible move. But there’s a number of issues that lie behind the recasting of the tender which raise more questions.

The small amount of public discussion that is occurring indicates that the debate is shifting to a question of whether $1.5 billion is going to be enough to deliver on the government’s objectives (taking into account the 1:1 private investment). How will reshaping the tender affect this? It doesn’t appear clear to the bidders.

Questions about the role of the Commerce Commission and their ability or otherwise to regulate these networks in the public interest.

And if, as Joyce has said, the government hasn’t ruled out taking an equity stake in Chorus, what would that company look like? And could we end up with an unregulated monopoly that is largely privately owned? Who’s interests will that serve?

Internet NZ’s two concerns are very valid.

They warn against:

  • making policy deals or regulatory deals behind closed doors
  • changes to the current tender process that undermine the efforts people have gone to in making bids

What’s in the way is the closed tender process and the inability for frank public discussion to occur. What does the government think? What does Steven Joyce want?

Whatever happens, we must make this about New Zealand’s interests. And we must make sure that there is an open access network and that real competition can occur.

Telecom needs to state its intentions to the nation. But the government needs to be more upfront. This is public money. And it’s the nation’s network.

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Filed under: broadband, comms & IT, economy, infrastructure
9 Comments

Poll result

Posted by Clare Curran on June 18th, 2010

Last week Red Alert published its first poll.

The question was:  Should Auckland’s new trains be built in NZ?

The results were:

  • Yes (75%, 534 Votes)
  • No (25%, 176 Votes)
    Total Voters: 710

A fairly resounding result and a high response rate we think.

There were 53 comments and a very thoughful discussion about the issues around kiwi content in large government contracts and the capacity of NZ to build carriages and engines.
As you’ll see below we have another poll running and plan to run them three times a week on Mondays, Wednesday and Fridays.
We welcome your suggestions for polls.
Clare

Filed under: #OpenLabourNZ, Manufacturing, Rail, Red Alert, blogs, comms & IT, infrastructure, jobs, polling
22 Comments

A bit of a stretch

Posted by Chris Hipkins on June 17th, 2010

I sat through all of the hearings on Gerry Brownlee’s Electricity Industry Bill. A lot of submitters questioned his plan to take Tekapo A and B power stations off Meridian Energy and give them to Genesis Energy (both state-owned SOEs). The Institute of Professional Engineers argued that it could lead to less efficient use of water as competing generators tried to maximise their competitive positions against each other. The Treasury argued in a written submission to the Minister that there wasn’t a robust business case / analysis. Unfortunately the National MPs chose to block Treasury from appearing before the Select Committee to explain their concerns.

This morning Gerry Brownlee appeared before the Commerce Select Committee to discuss the estimates for Vote Energy. I took the opportunity to ask him what his basis was for concluding that the asset swap was a good idea. He claimed that because there had been several dry years in the past decade there was evidence that Meridian hadn’t been managing the Waitaki water catchment efficiently. Basically he tried to blame the lack of rain in the South Island on Meridian. I know they are the biggest generator, but I don’t think their market power extends to controlling the weather.

State Owned Enterprises aren’t toys. They’re multi-million dollar enterprises. Any changes the government makes need to be based on robust business cases and rigorous analysis. Gerry Brownlee hasn’t done that. Former National Party Minister Max Bradford made a real hash of his power sector reforms of the 1990s – which led to huge increases in prices. Sadly for price-wary Kiwis, Gerry Brownlee and National appear to have learned nothing from their past mistakes.

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Filed under: Energy, infrastructure, legislation, privatisation, water
20 Comments

Something new on Red Alert

Posted by Clare Curran on June 9th, 2010

We have just added a poll function. The first one is below. You have a week to respond. I hope you will.

You can send us suggestions for future polls. You know the rules.

Should Auckland's new trains be built in NZ?

  • Yes (75%, 537 Votes)
  • No (25%, 177 Votes)

Total Voters: 714

Loading ... Loading ...
Filed under: Manufacturing, Rail, economy, infrastructure, jobs, polling
55 Comments

Is this an important issue or what?

Posted by Clare Curran on June 8th, 2010

Hillside March 001

Today nearly two hundred plucky workers from Hillside Engineering in Dunedin joined by dozens of cold, wet but staunch fellow Dunedin-ites stood in the Octagon in a freezing southerly to tell the National Government that we need a strong rail industry.

Kiwi jobs for kiwi workers was the message, along with Can we build trains in Dunedin? Yes we can is the answer. At a competitive price. And in NZ Inc’s interests.

The case has been made. We have the skills and the capability. If we can’t compete on labour costs with the likes of China, we certainly can on quality and whole of life costs. And ability to deliver on time. The case for kiwi content stacks up.

Across New Zealand, people think it’s important that we build here, rather than go overseas. It’s a no brainer. Especially right now. We need to build confidence in our homegrown industry. We need to retain a manufacturing base. It’s at the heart of Dunedin’s economy, let alone important for the rest of NZ.

Why should the profit go elsewhere? At the very least, the bulk of the actual work should be done here even if we don’t hold the contract.

The EOI contains a limp clause about NZ content. It’s not good enough. There are two particular people standing in the way of NZ’s rail engineering industry having a future. Transport Minister Steven Joyce and Kiwirail CEO Jim Quinn. Neither of them believe in rail’s future. Both are trying to talk it down and to cast those who do support it as emotional rail enthusiasts.

Interesting, given the huge resurgence that rail is having elsewhere in the world.  Quinn has a job to do. Joyce has a political imperative. The thing about Joyce is that he’s too cold, too clinical and economic rationalists don’t always resonate.

And he’s made a mistake. He slagged off at Kiwi skills. And he hasn’t even bothered to come and have a look at Hillside.

Leaving aside jokes about animal behaviour, if Steven Joyce can’t make it to Dunedin to have a look at Hillside’s ability to manufacture trains, then he’s chicken. It’s obviously not a priority.

Today Labour had five MPs at the rally. Myself, Pete Hodgson and David Parker from Dunedin. Trevor Mallard from Hutt South (where Kiwirail has its Woburn workshops) and Darren Hughes, Labour’s Transport spokesperson. Phil Goff sent his apologies and his support along with a bunch of other Labour MPs.

Labour thinks that Kiwi content should have preference in the tender for the carriages and engines for Auckland’s rail system.

What does the Government think? Is this important or isn’t it?

So Steven, come to Dunedin. Are you chicken or what?

Watch this clip from Local Channel 9 to see footage  from today’s rally

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Filed under: Manufacturing, Rail, economy, infrastructure, jobs, transport
110 Comments

The energy efficiency challenge

Posted by Chris Hipkins on June 8th, 2010

Do you really pay that much attention to how much electricity you are using at any point in time? I suspect most Kiwis think about their electricity use once a month – when the bill arrives! These days our electricity meters are tucked away discretely somewhere outside our homes. We don’t pay all that much attention to how much electricity we’re using, or when we are using it.

In the next few years technology is likely to change all of that. Smart meters and web-based technology is likely to give us much greater information, and through it much greater control, over our electricity use. We’ll be able to monitor the impact each additional appliance has on our power bill. We’ll also be able to spread our electricity demand, allowing us to save money by using cheaper electricity in times of lower demand. The retail pricing model will have to change for this to happen because at the moment we’re charged the same unit price for our electricity regardless of when we use it. That may be simple, but it doesn’t incentivise more even usage throughout the day.

Smart meters and smart appliances will also allow us to use less or cheaper electricity without even having to think about it. Our hot water cylinder and our deep freeze will be able to switch themselves on and off depending on other demands within the household and external factors such as price. I particularly liked the Parliamentary Commissioner for the Environment Jan Wright’s recent comment that we’ll soon be able to drive our electric cars home, plug them in, drain the remaining electricity they have in order to cook our dinner and heat our homes during ‘peak’ times, and then charge them up again off-peak when power could be cheaper.

Maximising the use of this kind of technology is going to require industry standards for two-way communication between consumers and the big power companies, something the current government are reluctant to impose. They argue it’s too early to regulate because we don’t know what the dominant technology will be. On the other hand, it’s a bit of a chicken and egg situation; appliance manufacturers won’t produce smart appliances until they know what the smart grid is going to look like.

To be fair to the government, they aren’t doing nothing to promote more efficient electricity use. While I have some concerns about the way it has been rushed, I do give the current government credit for the huge increase in the number of homes that are being properly insulated. Warmer, drier homes are more able to minimise unnecessary electricity use. Similarly, if they’re used effectively on timers, heat pumps can also lower power bills, so the government subsidies in this area are also welcome.

We need to change our mindset from thinking about how we can build more power stations to thinking about how we can use our existing electricity supply more efficiently and how we can encourage more localised electricity production. More on the latter shortly…

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Filed under: Cost of Living, Energy, climate change, environment, infrastructure
20 Comments

Are you a nimby, a yimfy or a banana?

Posted by Chris Hipkins on June 7th, 2010

The latest Listener has a timely article about electricity generation. In it they quote Massey’s Ralph Sims who argues there are three types of response to the electricity generation challenge, the nimbys (not in my backyard), the yimfys (yes in my front yard) and the bananas (build absolutely nothing anywhere near anyone). Which are you?

Over the next few weeks the electricity generation challenge is going to get quite a bit of air time in Parliament. Next Wednesday my private members’ bill will be read for a first time. It would prevent electricity generators building new generation plants that use non-renewable energy sources like gas and coal, unless they were essential for security of supply. And soon Gerry Brownlee’s Electricity Industry Bill will be reported back from select committee.

There is no doubt working out how to deliver enough electricity to meet future demand is a major challenge. The Listener quotes Institute of Professional Engineers projections that show our electricity demand will grow from 42,000 GWh in 2009 (itself a 7% growth on 2002 figures) to 55,000 GWh in 2025. That’s a lot of new power plants. Or is it?

Over the next few days I’m going to do a series of posts canvassing alternatives to building a bunch of extra gas-fired power plants. First, we can do a lot more to increase energy efficiency, including a heap of stuff that will give consumers more control over how much power they produce. Second, we can spread new generation more evenly through a lot more localised production. Third, we can promote renewable generation much more than we have in recent decades.

I firmly believe New Zealand can be a world leader in this area. We used to produce a much greater proportion of our electricity from renewable sources. In the last 25 years or so we’ve allowed the non-renewables sector to absorb most of the growth. That has to change. We can show the world what a truly sustainable approach to electricity generation (and consumption) can look like.

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Filed under: Energy, climate change, environment, infrastructure
44 Comments

The public interest #2 Will the market deliver it?

Posted by Clare Curran on May 31st, 2010

According to Tom Pullar-Strecker in today’s DomPost there is still a strong possibility of the government taking a stake in Telecom’s network arm Chorus.

This is despite Communications Minister Steven Joyce ruling it out last week in the House when he was asked:

Clare Curran: Will he guarantee that the funds the Government has set aside for investing in new fibre infrastructure will remain dedicated to the roll-out of new fibre infrastructure?

Hon STEVEN JOYCE: Yes.

Clare Curran: Does he agree that there is no public benefit in diverting funds into a purchase of Telecom’s old copper network?

Hon STEVEN JOYCE: The Government has been clear all the way along that it does not intend to spend money purchasing existing infrastructure from any existing bidder.

The Government hasn’t really been that clear about anything. There is a veil of secrecy around its process to choose a vehicle to roll out ultrafast broadband to the country. The industry is very confused. And increasingly unhappy with what appears to be the big problem: What to do about Telecom?

Telecom is struggling to work out what to do. It has now proposed structurally separating though how it plans to do that is very unclear. It has talked about a de-merger, which is curious because in order to de-merge (like for instance AOL-Time Warner), you have to have first merged. Telecom and Chorus are not a merged company. Are Telecom and Paul Reynolds making it up as they go along?

Did Telecom think that they would have to be part of the fibre roll-out and that the government would have to pick them? How have we ended up in a situation where a few weeks out from a deadline for preferred tenderers to be announced, Telecom have suddenly gone into a tail spin about structural separation. Or has there been a parallel process going on behind the scenes all along between the Govt and Telecom?

I’ve recently made several points about this:

This is NZ taxpayers money, it’s an investment in our future. We must not sink public money into a project that could ultimately about delivering profit to shareholders. Especially if those shareholders aren’t NZ-based.

Fibre is the future, copper is the past. Telecom are fixated on their copper network and don’t believe that the country should migrate to fibre straight away. Should they lead a fibre company wont that mean ongoing delays to rolling out fibre? We must not be making a decision that takes us backwards and is ultimately about buying into the past.

Investment in fibre will allow a new generation of providers to develop. We must allow that to happen.

And just as has been the case with mobile termination rates, market behaviour, posturing and stand offs should not influence the ultimate decision. A deal that requires the Crown Fibre Holdings Company to effectively buy out or invest in Chorus is questionable. No matter how such a deal is dressed up.

Should a company that has demonstrated its failure to properly design and build a 3G network be handed more than a $1b of taxpayer money? Telecom must not be propped up to save its bacon. It must be a decision based purely on merit and what’s best for NZ.

What is Telecom’s future? And what does the government really want? I think they are trusting the market to deliver the outcome. And I’m not sure that’s going to work. It certainly doesn’t appear to be working for Telecom. But more importantly it doesn’t appear to be working in the public interest.

Given that they wont have a conversation with the industry or the public about the best way to spend public money on ultrafast broadband, here’s what I think.

That the roll-out of fibre infrastructure needs to be via a regulated monopoly. Perhaps all the parties could agree to work together to achieve this. The Regional Fibre Group, led by Vector, Chorus and Vodafone/Axia. A collaborative solution. To do this requires a circuit breaker. And of course the public need to assured that the Commerce Act wasn’t being breached through collusion. But NZ’s interests are not being served by the current situation. And Steven Joyce must reassure the public that a parallel process behind the scenes with Telecom is not occurring.

Problem is, Telecom still seems to think they can manipulate government. Old habits. And it still seems to be down to who will blink first. Doesn’t seem to me to be in the public interest.

Filed under: broadband, comms & IT, economy, infrastructure
15 Comments

Advertised vs actual broadband speed: there is a difference!

Posted by Clare Curran on May 28th, 2010

Slide1

Slide2

A wee bit hard to read but kind of speaks for itself. Refer to previous post for context. Glad we are having this debate. What should be done?

Filed under: broadband, comms & IT, digital, economy, infrastructure, internet
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What is Steven Joyce doing?

Posted by Clare Curran on May 27th, 2010

For months now I’ve had a steady stream of industry stakeholders in and out of my office talking about broadband. Voicing concerns about the government process to roll it out, the time it’s taking, the uncertainties around the tender process. And most of all, about the policy itself.

Yesterday, finally, someone said quite clearly to me that the industry took a decision early last year to NOT criticise the government’s $1.5 billion ultrafast broadband policy in public. Even though many, if not most, thought it was ill-conceived. The phrase Steven Joyce is “delivering an election campaign slogan” has been used so many times.

There’s no question that we need ultrafast broadband. And we need it sooner rather than later. But we need a policy that will work.  And for months and months there’s been a big question mark about what role Telecom could or should have in this.

I wrote my first post on this in September last year. And identified Telecom’s dilemma. And until this week, Telecom somehow seems to have thought that if it just stood its ground then it would get to deliver the fibre. And now we’re seeing the consequences.

We are just over a month away from a deadline to complete commercial agreements with successful partners to roll out broadband. But the decision appears more and more difficult.

And the worst thing, as people keep telling me, is that there’s no ability to have public discussion about it. About the issues involved. A couple of weeks ago, InternetNZ hosted a public forum to get parties in the room to discuss the issues. Telecom was a no show.

The government has made no attempt to run forums. Why isn’t Steven Joyce initiating a debate on this? I understand Treasury has concerns. Is there intellectual rigour around the issues? Is there an economic analaysis? What role is MED playing?

I understand Crown Fibre Holdings, the Crown entity established to manage the roll out is now getting its feet under the table, and has considerable talent. But are they being asked to deliver on a flawed policy?

Remember Steven, it’s the public’s money you’re spending. They have a right to know what the thinking, the discussion and the issues are that lie behind the decisions made. And they need to know that the outcome is in the public interest.

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Filed under: broadband, comms & IT, economy, infrastructure
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Let’s all admit it. Our internet speeds are rubbish

Posted by Clare Curran on May 27th, 2010

I have to confess that when I received some info today yesterday confirming that NZ’s actual internet speeds (compared with what you’re offered) are pretty much rubbish I felt a bit vindicated. I don’t know about you but I feel constantly frustrated with my computer. Not blaming an inanimate object, but it just doesn’t always do the business.

Despite the advertised internet speeds offered by ISPs (your internet service providers) it’s usually pretty slow. And I use four different computers in different locations (including a laptop).

So when speedtest.net (via http://www.netindex.com/) popped into my inbox this afternoon I was curious and intrigued to read that just published figures for global broadband statistics show that New Zealand download speeds rate just ahead of Ghana. Go on have a look.

I’ve heard various explanations for this, namely that it’s due to Telstra and Telecom refusing to peer nicely. In 2004 they both de-peered from the two main exchanges (APE and WIX). This complicated the way ISPs were able to get content from one network to consumers on another ISP’s network.

We rate at number 43 out of 153, which doesn’t sound so bad. But we’re behind Mongolia, Georgia, Slovenia, Slovakia, the Ukraine, Estonia, Iceland, Andorra, Latvia, Romania, and Moldova . In terms of quality, we’re between Albania and Serbia.

So while advertised speeds are pretty good the effective speed is rubbish. In fact I undertand much of Kiwi based traffic is routed via California in order to get to Kiwi consumers. And Radio NZ has servers overseas to get content to NZers .

This is crazy. Basically a market failure. Not sure what this government is doing about it. I know the previous Labour government knew about it and was pressuring Telecom.

Two things. We need broadband. Soon. And there’s an issue with our international interconnectivity. Do we need another cable connecting us to the rest of the world?

There’s a case being made for this.  Next generation devices, like Netbooks and the iPad, consume significantly more bandwidth data.

Unless we address the international bandwidth issue, New Zealanders will not get affordable access to services and devices increasingly common in the rest of the world.

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Filed under: broadband, comms & IT, economy, infrastructure, international, internet
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Important and puzzling questions on broadband

Posted by Clare Curran on May 24th, 2010

The Budget didn’t appear to have any surprises in it around broadband, which was one of the National Govt’s big election promises to deliver a new network, core infrastructure to NZ.  A further $248 million announced as part of the pre-election commitment to spend $1.5 billion to deliver ultrafast broadband to 75% of NZ homes largely within six to 10 years. Adding to last year’s $240+ million, of which not much has been spent. So that’s close to $500m in the bank.

We all know broadband wont actually get delivered to homes. Only to the street. Would take  a much bigger investment to take it to the home. So there will be costs to the consumer to do that. It’s now been 18 months and there’s no fibre laid. So they’re behind schedule.

And no decision yet on who will get to lay out the fibre. There’s a big decision ahead for Crown Fibre Holdings (CFH), the Govt entity charged with making the decision. They’re under considerable pressure and ostensibly there’s a three horse race for the $1.5 b.

So…. interesting to read the weekend “exclusive” by Tom Pullar-Strecker in the DomPost, that a majority stake in Chorus, Telecom’s physical network, will “apparently” be sold to the Government and other investors. Currently valued at $1.35 billion, according to Pullar-Strecker, Chorus will form the core infrastruture deliverer of broadband to the nation.

Now excuse me for scratching my head, but I don’t see the Govt writing a cheque for $700 million+ anytime soon to underwrite the purchase of Chorus to bail out Telecom, which is looking a bit fragile right now.

And even if the Govt was to do that, how would it stand up to public scrutiny? Given the XT debacle, the fact that Telecom has a copper network that they remain committed to and have publicly said they think the $1.5b investment in fibre is misjudged.

Is there, as Pullar-Strecker alludes to, some sort of secret negotiation going on with Telecom involving Treasury which undermines the whole tendering process being conducted by Crown Fibre Holdings?

Is it a done deal that Chorus will get a major stake and that NZers will fork out for it?

If so, what does this mean to the other bidders in the process? Particularly the Regional Fibre Group of electricity lines companies led by Vector, which must have spent mega dollars developing its bid?

I have heard that one of the key regional bidders has spent $600,000 developing its bid for its share of the broadband pie. Surely the Govt wouldn’t be conducting a secret process behind closed doors to deliver a fait accompli. Would it?

And what does this mean for the $248 million allocated in the Budget? And the unspent money sitting in the bank? Are NZ taxpayer dollars being dealt with transparently?

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Filed under: broadband, comms & IT, economy, infrastructure
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The logic of losing KiwiRail in the north

Posted by David Shearer on May 19th, 2010

Despite the $750 million announcement for KiwiRail, the Auckland-Northland rail link appears to be under threat. I can’t understand the logic.

Steven Joyce is intent on building the ‘Holiday Highway’ from Puhoi to Wellsford – a road with a negative cost-benefit ratio – at a cost of up to $2.1 billion as part of his Roads of National (Party) Significance. That’s three times the amount he is spending on the KiwiRail nationally.

Here’s the incomprehensible part –
- the reason for the Holiday Highway is to optimise movement and freight to the north. Cutting the rail link simply shifts freight on to our roads. (It occurs to me that maybe that’s part of the Joyce masterplan to lift the Holiday Highway’s negative BCR.)

- increasing heavy trucks on these roads and congesting it further for other motorists raises safety issues, another reason he has cited for the Holiday Highway. Obviously much of that pressure could be relieved with more freight going by rail.

- our deepest – and alternative main port – is at Marsden Point. The rail link there is strategically very important.

Yes the rail line needs some long overdue upgrades, but the potential is enormous.

Btw, what KiwiRail appears to be doing is making small, non-headline grabbing improvements to rail that should greatly lift its efficiency. That same strategy for SH1 in the north would result in much more cost-effective improvements: a diversion around Warkworth for example, or straightening and widening other parts of SH1 would remove the need for a brand new motorway and at a fraction of the cost.

Non-headline grabbing I said. I guess that’s not so attractive National’s new Mr Think-Big.

Filed under: Rail, Uncategorized, infrastructure, transport
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