Whither VDSL?

The UFB rollout is slated to take until the end of the
decade and arguments about whether that’s 2019 or 2020 aside, for most of us
it’ll be years before we see the fibre van roll up outside our homes.

For the foreseeable future, we’re locked in to a copper
world here in suburban New Zealand. While I fully support schools, hospitals
and businesses getting access to fibre as a priority (SME businesses stand to
gain the most from the UFB rollout and New Zealand will benefit from the
increased efficiencies that will bring) it does mean there’s a balancing act to
be maintained and unfortunately home users are on the wrong side of it.

But that’s OK because the advances in technology in the
copper world mean we should be able to see better services on our copper networks
in the meantime.

Over on Computerworld, a comment from Malcolm Dick (he of
CallPlus/Slingshot fame) caught my eye. Malcolm points to a recent announcement
regarding VDSL 2+ with vectoring:

“which gives download speeds of
100[Mbit/s] and upload speeds of 40[Mbit/s] on copper runs of 400metres long –
I would guess that covers around 800,000 households in New Zealand.”

Even standard VDSL as it exists today would be great – not
so much for the download speed but for the upload.

Currently, as you know, I’m running TUANZ from home – I have
a very good ADSL2+ connection and regularly get in excess of 15Mbit/s down.
This is fine for my uses for the most part, but the upload speed of at best
1Mbit/s is a killer. I’d be much better off with a 50Mbit/s down, 30Mbit/s up
speed which, given my location (less than 600m to the Mt Roskill exchange),
should be readily attainable.

Except there are very few VDSL sellers out there and worse,
the data caps are so incredibly low. It would cost hundreds of dollars a month more
to connect to a VDSL port, for no apparent reason.

Today, each VDSL port costs a premium of about $20 over and
above an ADSL port. Why? Because that’s the price the Commerce Commission has
set.  It’s a premium service, so it needs
a premium connection price, goes the theory.

Given the difference isn’t in the card in the slot but in
the backhaul and in the contention rates and so on , this is an artificial
price which keeps the retail price too high to be of interest to either
retailers or consumers.

Retail ISPs keen on selling VDSL will need to increase both
backhaul capacity and make sure the service delivers a higher level of quality
than ADSL2 does in order to attract customers. I get that, but an artificially
high price point that simply delivers extra cash to Chorus doesn’t really cut
it.

And then there’s the “copper versus fibre” model. The
argument goes like this – ISPs should not be wasting their time and money
investing in copper because fibre is coming and copper is a competitor. We
should artificially inflate prices on copper to ensure customers are
“encouraged” to take up fibre instead.

That’s all well and good if we all have access to fibre
(which we don’t) and if there is absolutely no other incentive in making the
leap to fibre (there will be plenty of incentives) but that’s not the case.

Instead I would suggest faster copper speeds serve as an
enticement to fibre – that a customer who has already moved up to 30Mbit/s is
more likely to want 50Mbit/s or even 100Mbit/s when that becomes available.
They’ll have discovered the apps they need to make such speeds worth their
while and their service providers will also have figured out which services
customers want. All of that is good for the fibre rollout because when it
finally arrives at my doorstep I’ll have an incentive to move – an incentive
other than “copper’s so expensive now I might as well”.

The telcos I’ve spoken to are all keen to rollout VDSL
services. They see the upside to it as they’ve seen the upside to unbundling
the copper lines today. They get increased margin, customers get better
service, they win more custom as word gets around and everyone’s happy. There’s
investment, there’s competition and there’s a dynamism in the fixed line market
that we simply wouldn’t have believed only three or four years ago. We were
late to unbundling, yet it’s still delivering results.

If we are to hike the price of copper lines to encourage
migration to fibre, we run the risk of snuffing out the nascent competitive
market in our fixed line world – that at a time when two of the three largest
players are about to join forces. That would be a tremendous leap backwards for
the industry and we, the customers who can’t get on to the UFB fibre, would pay
in terms of service and price.

Copper isn’t a competitor to fibre today. It might be once
the UFB is built but for the next seven years or more, it’s simply the only
choice we have for bulk broadband services. It’s important we get the regulated
price settings right.

2 replies
  1. john alicia keyes
    john alicia keyes says:

    actually I’m pretty sure the VDSL price is NOT regulated. i.e. Chorus can charge whatever they like. they just choose to charge a $20 premium for some reason. The unfrotunate result is that barely any ISPs are willing to buy it because, as you point out, if they want to get a higher margin then they need to charge enough to cover the $20 input premium, the extra backhaul and capacity, and the hefty install and modem fee (which would need to be free on a contract to get sufficient uptake). SO, at current input prices VDSL is likely remain at leats a $40-50 premium over equivalent ADSL plans, and thatis too much extra for the majority of people to pay.

    even if Chorus wiped out the premium totally, and charged the same as ADSL, there would still need to be a $10-20 premium to cover the other non-input costs, and even that is toomuch according to most research peices that suggest very few people are willing to pay even $10 more to get faster speeds when their ADSL is alreayd giving them pretty miuch anything they want.

    • Paul Brislen
      Paul Brislen says:

      Sorry, I haven’t made that terribly clear. VDSL itself isn’t regulated as a retail service but the wholesale inputs are. I don’t mind a premium but paying over the rate for a service that has little or no data limit is just not going to work.

      A $20 premium with higher data caps will encourage use of faster broadband and that’s something that will lead to greater uptake of UFB when that finally lands on our doorsteps.

      People will pay for a service if they see value in it. Currently VDSL plans provide speed but little else – this is why there’s no market for UFB at this stage (residential, I mean) and why that shouldn’t be taken as emblematic of the whole project.

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