Here’s to you FX Networks…

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I’ve got mixed emotions about the news that FX have done a deal with Vocus, I’ll miss FX they’ve made a huge contribution to the NZ telco scene and they’ve achieved more in a short period of time than virtually any other player I can think of.

FX is proof that dreams can come true, I remember Roger de Salis sitting at a desk in CityLink in 2002 formulating this crazy idea that he could build a network based on the railways fibre.

Roger then quite literally talked and pitched his way into being a player, with serious backing from Colin Hill he set about turning his dream into reality, he attracted  talent, clients and capital and built an awesome business.

I have so many fond memories of going to ‘Thursday Night Curry’ in Manners Mall and getting caught up in the energy of so many of our brightest and proudest geeks, people like Jonny Martin, Jamie Baddeley and Neil Fenemor.

They set out to build a proper network and they succeeded, FX reaches nearly every City in NZ and now runs at a blistering 100gb/s, they provide the physical network for KAREN, the backbone for one.govt and are trusted by many major organisations like the NZ Police & Transpower to provide their national communications backbone.

FX has also supported many of our innovative ISP’s and have even been used to show how we really can have ‘fibre to the farm’. People like James Watts at inspire.net in Palmerston North and Chris Roberts at Amuri Net in Culverden (in North Canterbury) spring to mind.

People like Murray Jurgeleit and Dave Heald have taken FX to the position it is in today.

Vocus actually feel like they are the right kind of buyer and I’m really hoping they focus on delivering the services that will make the UFB come alive.

FX I’ll miss you but Vocus – the future is yours

Confessions of a Tee-shirt evangelist

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Since its a friday I thought I’d go off on a slightly different tangent, the recent moves in our extremely nascent, emerging residential Gigabit market got me thinking about the power of evangelism (in the marketing rather than the spiritual sense) as a marketing tool.

If you’ve ever found yourself up against rivals or competitors who can outspend you 1000:1 or even 1,000,000:1 you need to find ways to punch far above you weight (a bit like TUANZ does) and one of the best ways of doing this is to turn your customers and supporters into real life walking evangelists.

And one of the best things to give your evangelists is a tee-shirt with a snappy slogan on it.

I learnt about this technique from Guy Kawasaki who was Apple’s chief evangelist, who wrote the original Macintosh marketing plan. Guy realised that his launch budget was less than IBM’s annual styro foam coffee cup budget so they got creative.

The original TV commercial is widely regarded as the best TVC of all time, even though it was designed to only play once (during the 1984 Superbowl) and a lot of effort when into cool tee shirts for developers.

Fast forward to the early 2000’s and it was great pleasure to be working with the team at CityLink, we launched CafeNET (early public WiFi) in 2002 with street theatre in Civic Square (plus David Isenberg) and a bright yellow tee shirt saying ‘love is in the air’.

In 2004 CityLink couldn’t afford to mount a stand at the 2nd National TUANZ Broadband Conference in Hastings but we wanted to make a point about getting ‘real’ broadband not just the rationed version that Telecom were promoting.

So we got a Tee Shirt printed that said “You need at least 10mb/s to be broadminded” on the front and “CityLink – we’re broadminded” on the back. I hitched a ride to Hastings and took 3 cartons of tee shirts (I kept 3 for myself), with about 5 confederates we started circulating in our cool tee shirts and we got our first requests.

We then started our guerrilla phase and gave anybody that made a statement we liked a tee shirt, often by yelling “that deserves a tee shirt” this went on all day.

Breakfast the second day saw about 100 tee shirts in the room with more people trying to get them. I knew we’d won when on the last day, the keynote speaker from Ericsson in Sweden took the stage in one of our shirts and started by saying ‘the guys in the tee shirts are right!”

The tee shirt got a gigabit upgrade when it was taken to NZNOG (the NZ Network Operators Group) where it became a collectors item.

I then went to the TUANZ Digital Summit in 2006 (I think?) with some tee shirts that said “I want FTMH NOW!” on the front and on the back it said “Fibre To My House” It worked pretty well as well, we got the then Minister David Cunliffe into one.

So I think it worked because here I am a decade later eagerly awaiting gigabit fibre at my house.

Next week I’ll tell you what I plan on doing with it.

Here’s how TUANZ makes a difference

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I’m meeting with quite a few people at the moment and the topic of TUANZ’s raison’d’etre often comes up. There is a view that we’ve fought the fights that needed to be fought, but now the market will take care of things and we should just retire gracefully basking in the glow of a job well done.

The thing is that our voice is needed now more than ever, and our user perspective is very different from the carrier view or that of the officials and regulators. Our strength comes from our voice being listened to.

So I’m pretty pleased to learn from NBR (sadly behind the paywall) that my late night musings on things gigabit has helped to produce a result:

Chorus: gigabit soon across our entire network
NBR put the Dunedin South MP’s criticism to Chorus.

Spokesman Ian Bonnar replied,  “We already offer Gigabit business products, and we have long had residential Gigabit services on our product roadmap.

“Since last year we have been working with our retail service provider (RSP) customers to understand how and when we can best launch residential Gigabit products and we expect to do so soon, across our entire fibre network.”

Hmn.

So if gigabit fibre is coming to all Chorus’ UFB areas (essentially, the whole country besides UFF’s eight towns, and Whangarei and Christchurch), and its own fibre elsewhere, why should we care who wins Gigatown?

Thats awesome, I’m glad that gigabit is on the Chorus roadmap and its safe to assume market pressures will keep the wholesale pricing sharp.

The challenge now is to the RSP’s, we need you guys to figure out how to create gigabit services (I’ve been talking to some folk with a few ideas in this space). We’re not expecting to buy gigabit products in July but now we can put them on our roadmaps.

Next week I’ll be looking at ‘the state of the stack’ and what we can expect from UFB products, if you read the comments in the NBR article you’ll also see several commenters who are stuck in the blind spot between the UFB and the RBI (the 3 speed internet we were concerned about as the UFB was being negotiated).

Its hard to put an immediate value on our advocacy but if you are a member thank you your continuing support lets us function, if your not a member but think this is a useful role the membership details are on this site.

Time for Giga thinking

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Today’s ‘Giganet’ announcement by UFF promises to revolutionize the entire UFB program for some really exciting reasons:

 

1.   It gives the RSP’s a reason to get serious about creating compelling gigabit products

2.  It brings gigabit to a powerhouse of the NZ economy

3.  It clearly separates UFB from legacy copper based broadband 

and it deserves a marketing award as a cheeky and brilliant use of a competitors marketing program and promotional budget.

All we need now are the clever uses, I can think of a few…

 

Good times!

And the winning Giga Towns are…Hamilton, Tauranga, Te Awamutu, Cambridge, Tokoroa, New Plymouth, Wanganui and Hawera.

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No I’m not talking about Chorus’s ongoing #gigatown competition, I’m referring to all the towns in the central north island that are lucky enough to have Ultra Fast Fibre as their LFC.

Because they will all have access to residential gigabit UFB services from July this year, these services will be available to RSP’s for $65 per month until 2020!

UFF have decided to rename their region the ‘Giganet!’

So it’s now over to the RSP’s, TUANZ congratulates UFF and will update this story tomorrow .

More to follow,,,,

 

Whats next in “Fibre-Rei”?

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Last Wednesday night, Graham and Darren from Northpower shared the Northpower Fibre story at a TUANZ After 5 in Auckland.

It was a great night and I’m trying to convince them to come and share the story in Wellington soon (keep an eye on the after 5’s section of our website).

I’ve been following Northpower with interest for a number of years and it was great to see them pass such a major milestone – just in case you missed it 

Northpower have completed their UFB build!!!

Thats right, ahead of schedule and apparently under budget!!

Compared with what we usually hear about the UFB as a troubled project, this is quite simply amazing news and a fascinating story.

Personally I’m not surprised because Northpower is pretty special, not just because in many ways they are still a pretty traditional, community-owned electricity lines company but also because they have one of the most cohesive corporate cultures I have ever encountered.

When I first visited them with Ernie Newman 5 or 6 years ago, I was struck by how it didn’t matter whether you were talking to the Chairman of the board or one of their linesman you heard a completely consistent view of why they were building a local fibre network and who they were doing it for – the people of Whangarei in particular and the well being of Northland in general.

This attitude has already attracted investment and focus to Northland (examples being the early partnership with TelstrClear  and the extension of competitive fibre backhaul via FX Networks and the Tai Tokerau Network) and which may be strengthened soon by a Northland based landing for a competitive international fibre with the proposed Hawaiiki trans-pacific cable (watch that space for pending developments).

What they’ve achieved is remarkable on many fronts, when fibre became a political issue in the 2008 election, I don’t think too many of us would’ve picked the ‘Rei’ as NZ’s first fibre city! But when you hear Graham tell the story its easy to understand how they got there.

It was a ‘communications project’ planned by ‘power engineers’ using ‘IT project management tools!’ and a never say die attitude.

They had a genuine process of plan, build, refine, learn and modify, they developed unique hardware for their overhead build and even stuck the fibre jointers up the poles in cherry picker buckets all to speed up the deployment time and lower the cost per premises passed.

And they refined this process at least 4 or 5 times, I think their tight structure and locally focussed team were also huge assets in their success to date.

They’ve done a remarkably good job of taking key stakeholders and the community with them, from working with the council on consenting, developing and supporting local IT companies as retail partners and working with local businesses, schools and communities to ensure that Whangarei was truly fibre ready.

The proof is in the pudding so what are the results?, well they’re pretty impressive too, they currently have the highest UFB uptake rate of any LFC, approaching 70% in the earliest streets they connected, but the figure that blew me away was that since announcing the completion of the build and its subsequent publicity – the enquiry rate has increased by 400% !!!

Rohan McMahon from CFH summed this up by saying “you’ve turned the waiters into wanters!” and in the process I think they’ve shown the way forward for the UFB overall, people will watch the build with interest but it is only when they can assume UFB is available that they’ll seriously consider making a commitment.

But it gets even better, Northpower aren’t resting on their laurels just yet! ultimately they’d like to be able to offer fibre to all their electricity subscribers! (including Rural dwellers!) there’s a few wee challenges but if anyone is up for it – its these guys.

So if you want an awesome lifestyle plus NZ’s best broadband Whangarei is the place to be!

More, Better, Faster but at what cost?

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Chorus is to launch discussions with interested parties
regarding re-working the UFB fibre plans and prices.

The entry level 30Mbit/s down, 10Mbit/s up plan costs $37.50
per line per month (increasing to $42.50 by 2019) at a wholesale level.

That doesn’t include national backhaul, international
backhaul or any of the other stuff – it’s just the Chorus bit, so don’t expect
to pay $50/month for fibre services any time soon.

What’s interesting is the range of new products – from a
50/20 plan through to 200/200.

Most of the current plans have a committed information rate
(CIR) of 2.5Mbit/s – that is, if your line is utterly saturated with use, that’s
the minimum you’ll get.

That sounds awful, until you consider the CIR on copper
wholesale, which at the basic level gives you 45kbit/s, which is dial-up speed.

See the full line-up of prices and speeds here.


 

You’ll see the biggest mover is in the business space with a
doubling of the high-end plan’s speed from 100/100 for $175 to 200/200. Now
that’s a plan to get excited about.

But what will the costs be like for the retail service
providers? Don’t forget, if you as a customer want to see these speeds
throughout your entire network, your ISP is going to have to buy a lot more
backhaul.

An anonymous ISP source has done some numbers for TUANZ on
the Gigatown promotion that Chorus is running. Gigatown, you’ll remember, is
the plan to offer 1000Mbit/s service for the 30/10 price. However, Chorus is
unable to sell directly to users, so it has to bring in a retail ISP to do that
side of things.

Let’s assume a town of 40,000 people is chosen for Gigatown.
Chorus will provide the ports at entry-level price, so 40,000 customers x
$37.50 = $1.5M/month

Upfront costs are not cheap:

First you’ll need equipment at the exchange to handle
the traffic.  A fully-loaded chassis will
handle around  7,000 ports, so that’s six
chassis and 100x10Gbit/s backhaul.  Roughly a $6 million cost for exchange
equipment.

The absolute minimum price for a box that can handle a
10Gbit/s backhaul is $1200 for a Mikrotik CCR, so the RSP has at least $120,000
capex spend to get in the game.

Then there are the recurring monthly charges:

Either co-locate the equipment at the exchange or get
100x10Gbps backhaul to premises, either way it’s roughly $30,000 per month.

The RSP needs to provision bandwidth for the
customer.  Let’s assume a generous $1/Mbit/s
for national, provision – 100Gbit/s will cost $100,000 each month.

Then there’s international capacity at $17/Mbit/s
equivalent (ISPs don’t buy international bandwidth in these terms so this is a
bit of a translation), so to provision 20Gbit/s assume a cost of $340,000 a
month.

“With no other costs, the RSP would be at $2M/month,
with over $1.5M of that going to Chorus, assuming 100% penetration.”

At today’s rate of about 5% penetration (current UFB
stats), your costs would come down but so too would your earning potential.

Five percent uptake means 2,000 households, so only
one chassis is needed, 14x 10Gbit/s backhaul and an upfront cost of only $1
million capex at the exchange, and $20K capex for the RSP.

Backhaul or colocation costs would come in at $10,000
a month,  national backhaul would be
another $20,000/month and then your international would add another
$100,000/month.

Those 2,000 customers would earn $75,000 a month
(assuming no calls to the call centre etc)  but the costs per month would be around
$205,000, so you’d have to bill customers around $102.50 a month to break even –
no profit for you.

I’d pay $102.50 a month for gigabit speeds without a
second thought, but would you get 100% uptake at that price? I don’t know.

What does all this mean? If the sums are right (and do
let me know if you think they don’t stack up and we can discuss tweaking the
model) then selling UFB is going to be a big chore for RSPs. They’re going to
need faster speeds (but that comes at a cost) and will need to give customers a
reason to move (content, for example, which also isn’t cheap) and they’re going
to need help with the marketing to get the general population excited about it.

These really are interesting times.

 

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Why don’t you still have a black and white TV?

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In the UK there are still 13,000 homes with black and white TV sets even after the digital switch over. You can still buy them and they’re ludicrously cheap – only $10 on eBay, plus shipping.

So why don’t you own one?

Because the experience with a colour TV is so much better. You can do more, you can see more, the TV sets are now the kind of science fiction experience we used to talk about in hushed tones. Flat TVs that look like windows rather than boxes, that could double for pieces of art in some cases (looking at you, Samsung, with that gorgeous $55,000 4k screen). Coupled with thousands of channels, access to Netflix and Hulu, connectivity with your mobile phone or tablet and suddenly the
TV is so much more.

The fact that you can buy a black and white TV and get perfectly good reception and perfectly good television on it at a crazy low price doesn’t stop you going out and buying the more expensive product because the more expensive product provides a better experience.

You can see where I’m going with this, I’m sure.

But what if that new flat panel LCD screen only showed the same three channels as the black and white TV and only showed them in black and white as well. Would you then spend your money on the newer set or stick with the old?
Then you’d probably have to stop and think about it. Is having a shiny new flat panel telly really that important? The difference is minimal and sure, there are some whizzy bits with it (it uses less power, it’s cooler to look at) but overall the experience is about the same.

At that point I’d probably see the wife acceptance factor kick in and find myself wilting in the face of children’s orthondonture, vet fees and a new kitchen.

We face exactly this dilemma with the move from copper to fibre.

Fibre’s entry level price is being touted as about the same as copper, but the speed is only as good as you get from VDSL2 and nowhere near as good as you get from LTE, neither of which require anyone to come to my house and drill holes in the living room wall.

Sure, it’s fibre, and there are plenty of advantages to making the leap, but you have to put up with your drive way being dug up and your garden being trampled (Enable’s before and after shots say they’ll do a good job and from what I’ve seen they do, but still…) and even then it may not work well I’ve seen failure rates of 80% reported, and frankly, I can do without having to explain to the family why we have no phone or internet for a third day running.

The selling point of fibre is that you can do more with it, so why are we throttling it back to 30Mbit/s down and 10Mbit/s up? There’s really no reason from a technical point of view. Fibre is fibre and can scream along at far more than that. Yes, this will be a contended network and yes, telcos like to differentiate so they can upsell, but when the difference between one service and the other is so close and yet the ‘cost’ of implementation is so high, you can understand why customers aren’t beating down the doors of their fibre companies demanding to be connected immediately.

Keeping the cost of copper artificially high will do nothing to push customers towards fibre. The cost of copper simply isn’t the driver toward fibre that the government thinks it is. People will move to fibre when you give them a reason to and without any promotional work, without readily available content, without a speed bump that makes people sit up and take notice, why on earth would anyone sign up?

Uptake rates are woefully low. Costs are woefully high for Chorus (we haven’t seen the costs per connection for the local fibre companies), install times are long and wait times are growing. Customers in rented property can’t get Chorus to install, customers in multi-dwelling units or down right of ways are in the too hard basket.

The problem isn’t the cost of copper. The problem is the lousy selling job we’re doing on fibre. Fix that and then we can talk about whether copper prices should go up.

 

It’s the connection, stupid

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Currently I’m sitting in a conference room in Hawaii waiting for the start of the APECTEL roundtable on cyber-security.

I’m here representing INTUG (the International Telecommunications User Group) of which TUANZ is a part (and in case Mr Oil is reading, they paid for the trip) and hopefully will learn something useful about both telco regulation and issues throughout our region.

Telecommunications will play a huge role in the development of countries throughout the region as we jostle to take up space in the digital economy – but in some countries the role is a lot more basic. Simple infrastructure is what’s needed – they just don’t have the pipes (physical or wireless) to connect the population either to each other or to the rest of the world.

Which brings me to the topic of the UFB. By now you’ll have seen the campaign we’re running to get the government to rethink its $600m tax on copper connections.

It’s important to me that we build the UFB but that we build it the right way. Setting it up as a cash cow for Chorus is not going to be in the best interests of competition or users in the foreseeable future and such backroom deals should have no place in the shiny new fibre world we’re building.

That’s not to say I think the UFB is a white elephant or is failing to deliver on its promise. Far from it – we’re very early in the project and deployment rates are on track or slightly ahead in most areas. Sure, uptake is still woeful but there’s a practical reason for that – most households won’t be connected until after 2016 so the ones who are able to connect today are at the leading edge of the adoption curve.

Picture the bell curve. We are still very much at the leading edge of that curve. Uptake rates in single figures aren’t at all surprising because the deployment is still in its infancy and the number of users who are willing to subject themselves to the torturous installation process are few and far between.

But in a year or so we’ll start to see that process get better as installers learn their trade (I can feel a column about training coming on as well) and as more customers find more things to do online with ultra fast broadband.

But two things have to happen to get to that point. Firstly, we need to actually have ultra fast broadband, not this piddling “it’s a bit quicker than copper” we have on offer today. Secondly, we need to have more content legally available online in order to satisfy customer needs.

Having a UFB that is capable of 1Gbit/s is tremendous. Cutting the entry level speed down to 30/10Mbit/s is quite woeful.

TUANZ backs Vodafone’s suggestion of increasing that base speed to 100/50 or more for the same price in order to really give users the speed bump that will jumpstart uptake. It gets users over the line far more pointedly than a 30/10 proposition does.

Content is another area entirely and that’s something we’d like to see government get involved in. Rights issues cloud the waters and nobody is really sure where the problem lies. It’s high time we sorted that out and got to the bottom of where the bottleneck is, what’s stopping uptake and what would help get a Netflix, Hulu or similar up and running in New Zealand.

Sure, we’re a small island nation at the bottom of the world but frankly if we let that stop us we’d be in big trouble. High time we start talking to content providers and see what could be done to bump us up the waiting list.

When colour TV arrived the selling point wasn’t that it’s the same price as a black and white TV but rather that the customer experience was better. Nothing’s changed – UFB’s selling point is that it’s better than copper, not that it’s priced at the same rate.

Axe the tax

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A coalition of Kiwi companies, industry associations and consumer advocate groups has today said no to government proposals to introduce what economists Covec say is a new tax of at least $600 million on Kiwi broadband customers.

In a discussion document issued last month, Communications & IT Minister Amy Adams proposed transferring decisions for the price of existing internet connections from the independent Commerce Commission to politicians in the Cabinet – and to charge users of the existing copper technology the same as those with access to the faster fibre technology.

According to a conservative analysis by Covec, the effect of the policy would be to transfer around $600 million from firms and households to one company, Chorus, which reported an after-tax profit of $171 million last year and increased the dividends paid to its shareholders.

The company’s share-price rose immediately after Ms Adams issued her discussion document on 7 August.

Firms and households would pay $600 million more than recommended by the Commerce Commission for existing internet services, even though more than 70% of households will not be using the new fibre network in 2020 – and 25% of households will never have access to it.

The Coalition for Fair Internet Pricing was founded by Consumer NZ, InternetNZ, and the Telecommunication Users Association of New Zealand (TUANZ) and is supported by CallPlus and Slingshot, the Federation of Maori Authorities, Greypower, Hautaki Trust, KiwiBlog, KLR Holdings, National Urban Maori Authorities, New Zealand Union of Students’ Associations, Orcon, Rural Women, Te Huarahi Tika Trust and the Unite Union.

A number of other organisations are strongly supportive of the coalition’s aims, including leading telecommunications companies and business groups, but have come under political pressure in recent days not to be part of today’s campaign launch.

The spokeswoman, Sue Chetwin, the Chief Executive of Consumer NZ, said the coalition was making two simple points:

“First, it is wrong for consumers to be forced to pay the same amount for older technology as for new technology. It’s like the Government saying people should pay the same for dial-up as for broadband, when broadband isn’t even available to them.

“Second, it is wrong for politicians around a Cabinet table to set prices for monopoly services rather than an independent body like the Commerce Commission. We haven’t seen that sort of thing since the 1970s and we are worried that is an attempt to tax consumers to subsidise Chorus.

“We call upon Ms Adams to indicate that she plans to reconsider her proposal.”

Ms Chetwin made clear that all members of the coalition support Ultra-Fast Broadbrand.

“However, under this funding proposal, there would be only one winner: shareholders of an already profitable monopoly. The losers would be every household, every small business, every big business, every farmer, every school and every student with broadband.”

Ms Chetwin said the new coalition would focus this week on completing submissions to Ms Adams’ consultation process and then running a comprehensive public campaign against the proposals.