The high cost of rural broadband

Watching the Australian NBN project implode in a shower of nonsensical, politically-motivated decisions (and indeed non-decisions) has been breath-taking in both its cost and its impact.

Instead of a fibre to the home project, the NBN will now be a mix of fibre to the home for very few, fibre to the node (aka the cabinetisation programme Telecom New Zealand ran in the early 2000s) and fixed wireless services for rural Australia.

If it sounds familiar it’s because in many regards it now mirrors the New Zealand UFB and RBI projects. Over here we have a fibre to the home project for 75% of the population and a blended fibre, copper, fixed wireless model for most of the rest. Those in hard-to-reach places will still have to put up with a satellite service, as indeed will their Aussie counterparts.

Australia’s communications minister, Malcolm Turnbull, says one of the biggest problems in rural Australia has been the overwhelming demand for broadband.

Speaking at the Comms Day  summit in Sydney yesterday, Turnbull says there was a “material underestimation of likely demand” in the fixed wireless areas.

“So instead of an assumed takeup rate of 22-25%, the work done so far by the strategic review team has modelled demand in the satellite footprint to be between 50-63%, and 38-51% in the fixed wireless footprint,” says Turnbull. But even those figures turned out to be low.

“Taken together, the company’s modelling shows that demand in the non-fixed-line footprint was underestimated by two to three times – instead of the forecast 230,000 connections, actual take-up would result in 440,00 to 620,000 connections.”

That’s a remarkable under-estimation of demand. Speaking to rural customers and would-be users (those that can’t get anything at all worth speaking of), I’d say the same level of demand exists in rural New Zealand.

Forget 5% average uptake as we have in UFB areas, rural New Zealand is clamouring for a decent service.

So how do our figures for take-up compare?

Sadly, we don’t have any. The minister of communications releases detail around how many kilometres of fibre have been laid and how many cellphone towers constructed, but not a word is said about usage.

I’ve not found any customers who are using the service, so I can’t tell you even anecdotally about uptake rates.

However, yesterday I was on a Google Hangout chat with John Butt from TrueNet, the company that measures broadband performance around the country.

John tells me he has 400 probes in action at any one time, measuring usage from all sectors of the industry. In total he has around 1200 testers willing to take part, which gives a good spread across providers and technologies. He has DSL probes with customers of most ISPs, UFB probes, cable probes and while most are in urban areas, he has some in rural New Zealand.

He has only two testers using the fixed-wireless RBI service and one of those is moving to DSL.

Given the extraordinary level of demand from rural customers and the ever-increasing availability of RBI service, why are there so few?

The answer may well lie in the price. Vodafone promised it would offer pricing that was comparable with urban prices and one way it has – the price itself. I can get a plan from Vodafone for either fixed or fixed wireless service for about $95 a month.

On the urban service, customers get voice, ADSL2+ broadband, a free MySky box and free calling to five New Zealand phone numbers.

On the rural service, you’d get voice, fixed wireless broadband and free national calling (a nice touch since local calling in rural New Zealand is quite limited). You’ll also have to pay an installation fee as a truck-roll is required – either $99 or $199 depending on your situation, but for that you’ll also have to sign a two-year contract. If you want it without a two-year contract, it’s $699 or $849.

Broadly speaking they’re not too far part. You can get a discount off each if you have your mobile with Vodafone but generally speaking, they’re comparable.

Except for the data. The urban service includes 150GB of data while the rural service has only one tenth of that – 15GB.

There are other plans, but they follow the same pattern. On DSL you get up to half a terabyte of data, on fixed-wireless you can have up to 30GB of data before the over-bundle charges kick in.

Try running your rural business on that, let alone running your household as well.

We need to not only provide the infrastructure, we need to provide a decent service, or face having a rural New Zealand that is left behind, much like Australia will be.

Of course there are other providers, not just Vodafone, but as the lead retail provider on the RBI it's to Vodafone most RBI customers will turn.