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!

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.

The need for speed 4(G, that is)

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For the past month I’ve been using Vodafone’s 4G network in
Auckland and recording speed tests around the city – 27 in total.

Partly I’ve been doing this for the greater good – it’s an
ongoing test of the service and the results might be of interest – but partly
I’ve also been doing it for the “ZOMG do you see how fast that goes?” fun of
it.

And it is fast. My best result was 88.69Mbit/s down and 47.22Mbit/s
up on April 4 outside SPQR on Ponsonby Road at midday.

That’s pretty outstanding (seeing the result made the Irish
waiter say something Gaelic) and I have to admit my eyes bugged out of my head.
Speeds like that have been the purview of point to point fibre until now –
having that speed available on a handset is just astonishing.

But that’s the peak – at its worst I hit 3.30/1.39 a few
days earlier, again in Ponsonby. Typically, though, I see something in the
20-25Mbit/s range, which is not half bad for real world use.

Two things have become apparent, however. Firstly, the
network footprint is still rather small – sitting at Depot on Federal Street
this morning (an area I’d assumed would be soaking in LTE) I got only 3G (not
even HSPA) which is quite a surprise.

Secondly, it’s foolishly easy to chew through your data.

I have a plan that gives me 500MB/month and because I whined
like a jet engine to the call centre I got an extra 1GB added on for free (no,
that makes no sense to me either). I’ve blown through that, and through the
500MB bump pack I bought and now, with four days left, I have no data. The call
centre again has come to my rescue (Vodafone’s iPhone app doesn’t let you buy
data directly – you have to go to the website which wouldn’t let me buy any
ring in, which worked a treat but seems so very 1973) and now that I’ve
conducted my 27 tests, I’ll resist the urge to try any more. I’ll stick to
email, calendar and Twitter from now on.

But if we’re to really embrace this whole mobile broadband
revolution – and the StatsNZ Household use of ICT survey suggests we really are
– we’re going to need more data. I’d start with 3GB and look for 5GB and 10GB
packs in a hurry.

Telecom is about to launch its own 4G service and 2Degrees
is testing its own capability in this area – with any luck competition will
kick in at that point and we’ll see what the service really can do.

The Household Use survey makes for very interesting reading.
We’re taking to online shopping like ducks to water (yet we’re also told
roughly 30% of New Zealand businesses don’t have a website) and if you’re
waiting for the smartphone revolution to arrive, you’ve already missed it.

Smartphone use is up 26% since the 2009 survey and ¼ of all
individuals have a smart mobile device. Mobile use has increased hugely – 55%
of recent internet users connected via a mobile device at a time when the use
of a desktop computer is in terminal decline.

There are still some hold outs who don’t have an internet connection
– but only one in five households. Rural has picked up hugely, but there are
still a (thankfully declining) minority who see no value in having an internet
connection. But while that group is declining, the “costs are too high” group
is increasing, something which suggests to me another case of the digital
divide and something that needs to be addressed.

WHERE TO FOR UNIVERSAL SERVICE – PART 2

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In Part 1 of this post (link) we look at the historical approach to universal service. Part 2 looks at the future: and in particular at rural broadband.

To its credit, the government has recognised that access to broadband in rural areas is a serious economic and social issue. The Rural Broadband Initiative (RBI) is the response: an industry-funded, government-led programme building faster broadband infrastructure in rural areas. When it is finished 86% of households outside the cities and most rural schools, health centres and public libraries will be able to access fast broadband, mostly within the next two years. Vodafone is building around 150 new sites and securing fibre to more of its towers, and Chorus is building 3,100 kms of new fibre.

The RBI was a big and welcome change in approach on how to to encourage telecommunications companies to provide services in hard to reach areas.

  • The TSO simply imposes the obligations on Telecom (and from 2001 to 2011 required other operators to pitch in to the costs). A similar model operates in Australia, where Telstra has the obligations and the other operators compensate it to the tune of around 50m each year (see the article on Universal Service Obligation here.
  • The RBI is a competitive subsidy model (the money actually comes from the industry itself through a levy), rewarding Chorus and Vodafone, who won the tender, for building networks and providing services in rural areas. The German government has done something similar, requiring bidders for new generation cellphone spectrum to commit to build their networks in rural areas before they are allowed to build them in urban areas (see that story here), implicitly accepting a lower sale price for the cellphone spectrum as the price of universal broadband coverage.

Not only is the RBI a better approach in terms of actually getting services rolled out in rural areas, but it sets a simple and clear standard for minimum broadband services which:

  •  will reach 86% of rural customers, over half of whom will have access to multiple competitors and a choice of technology (copper or wireless)
  • will deliver a peak speed of at least 5 Mbps over wireless (a bit quicker than average fixed broadband services today) and 20 Mbps for copper-based services
  • *will be priced so that services cost the same in both urban and rural areas. 

Four challenges for the review

First, there will be continued pressure from rural customers for better broadband services (see paras 164 to 167 of this Commerce Commission summary. 

This could take the form of a minimum guaranteed broadband service that must be available to all New Zealanders. There was much debate around the RBI as to whether 5 Mbps was fast enough for those customers relying on fixed wireless services (although of course it is a whole lot better than the no broadband at all that many ruralcustomers faced before the RBI came along). The UN has defined broadband as a basic human right, and Finland in 2010 made a rule that all telecommunications operators were required to offer broadband access of at least 1 Mbps.

Competition over the RBI-funded infrastructure should mean that customers willgradually get more bang for their buck – in urban areas competition has meant growing datacaps with broadly static prices. Wireless services have smaller data caps than copper-based services reflecting the higher costs of data on wireless technologies. But new mobile technologies should allow faster wireless data speeds and bigger data caps in due course.

Second, the government’s review will need to consider updating the TSO requirements for the internet age.

Certainly free local calling is heavily utilised – accounting for 29% of all voice minutes in 2011 (see page 11), but if the Commission is right it is holding back competition.

For the growing number of customers who use mostly or only their mobiles,”free” local calling is rather expensive. Other elderly TSO requirements – like not charging more in rural areas than in urban areas, and ensuring Chorus does not shrink its network seem superflous given the developments of recent years.

What to do with the ineffective price cap on basic voice services is trickier. It does not seem to serve customers very well, although clearly it is helpful for the industry to be able to put up prices every year. 

Third, the obligations could be extended beyond just Telecom. With Chorus, the network company, now split from Telecom, the retailer, it doesn’t obviously make sense that the TSO obligations should rest only on Telecom. If Telecom is required, say, to have a standard plan that offers free-local calling as an option, there is no obvious reason why this rule should not apply to other operators as well.

The fourth challenge is ensuring everyone can get decent broadband.

Even after the completion of phase 1 of the RBI there will be coverage and competition black spots. There is a phase 2 of the RBI ably explainedby the Commision in para 159 of this report to reach schools and other priority users that are not at present covered by the RBI or the government’s fibre network (the UFB).

Systematic, public, up-to-date data on remaining areas of trouble could also help – it seems like it would be an easy extension on the government’s broadband map to show people who do not have service at present. This would help operators to figure out the value of network extensions, sharing infrastructure where it makes sense in remote areas. Satellite solutions will work for many. Community self-build solutions like those from Wiz Wireless can also help in some parts of the country.

Over to you

So the ball lies fairly firmly in the government’s court. Its review is required to be completed by the end of 2013.

We wait to see the outcomes with interest. A bold answer would consign the outdated TSO requirements to the dustbin, and ensure a sensible alignment between the TSO and the RBI as we continue to work towards universal broadband.

Hayden Glass is a consultant specialising in telecommunications with the Sapere Research Group, one of Australasia’s largest expert services firms

Citizens and Video Watchers Arise!

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New Zealanders have long suffered due to a lack of legitimate online video options. Alert readers will recall that we have looked
at these issues in a blog post  The Ins and Outs of Online Video, and the next step is to get some better data on how our options compare with more fortunatate isles.

We want to do this by creating a list of legitimate online video options and their key characteristics. If you are a user of online video options willing to share your knowledge with the world, feel free to contribute what you know, or correct what is there in thisspreadsheet.

We also want to gather information on how New Zealand compares. So if you are using the US iTunes, Hulu, Netflix, Lovefilm or some other major online international video service, please fill in the sheet that explains how it stacks up. We promise not to tell anyone if you are breaching their terms and conditions.

With your contributions the idea is that this table can become a trusted source of information, and TUANZ and others can use it in their ongoing lobbying on these issues.

Guest blog – Where to for universal service

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Guest post from Hayden Glass from the Sapere Research Group.

And broadband for all

Now everyone has access to a telephone, the question is how to get everyone great broadband.

Next year, the government will review the rules about universal service, ie, the questions of what minimum level of telecommunications service should be guaranteed to everyone, and how best to make that happen.

The legislation requiring the review is quite specific about what to cover, including whether existing universal service rules are still needed, how they should be delivered on, and funding arrangements.

Successive governments have required Telecom to make basic voice services available to everyone. These historic requirements are now out of date, overtaken by competition and by technology (especially mobile). The real questions for the future are about broadband, as the government’s Rural Broadband Initiative (RBI) recognises.

Part 1 of this post looks at what the universal telecommunications services are, and how the requirements have fared over time.

Part 2 will consider the future, explain why the RBI is a big improvement, and looks at what remains to be done.

What is universal service

The universal service programme in New Zealand suffers under the moniker of the Telecommunications Service Obligation for Local Residential Telephone Service (TSO). Fundamentally its job was to ensure that everyone had access to a fixed-line telephone that they could afford. (There are also separate arrangements for a text relay service for the deaf, confusingly also called a TSO, that are not the subject of this post.)

The latest incarnation of the TSO is a deed (WARNING: PDF) agreed in December 2011 as part of the separation of Telecom and its network arm, Chorus. The TSO imposes four main requirements on Telecom.

* Never raise the price of basic fixed-line phone service for residential customers faster than the rate of inflation, unless Telecom can show its profitability is “unreasonably impaired”.
* Never charge more in rural areas than in urban areas for “basic residential service”, which in effect means Telecom’s standardHomeline service .
* Continue to offer fixed-line phone service to all customers who were connected in December 2001, and
* Provide free local calling as part of the basic phone service for residential customers. Via an exchange of letters with the government in 2000,  Telecom was also required to provide slow-speed dialup services to most customers.

Chorus, the network company, has obligations to maintain its fixed network coverage to ensure that Telecom can continue to meet its obligations.

These obligations have changed only slightly since they were put in place on Telecom’s privatisation in 1989 despite radical changes in the industry in the meantime. The slow-speed dial-up data requirements were put in place in 2001, when Telecom was given the ability to bill its competitors for some of the alleged negative profit impacts of having to meet these obligations. The Commerce Commission checks each year whether the obligations have been met .

The 2001 requirement for the industry to compensate Telecom was never going to be a popular policy in the industry. It led to a verylong-running legal dispute eventually won by Vodafone, although as between Telecom and Vodafone the case had already been settled before the last court decision came out. Vodafone was essentially arguing that the Commission had not followed the law properly and as a result had substantially overstated the cost of the TSO obligations for Telecom. Soon after, the government announced it would get rid of the contribution system, particularly in light of evidence cited by the government that Telecom had not spent the money it had been given by Vodafone and others on rural network infrastructure in any case.

Universal service anyway

The TSO obligations have worked so far as they went, ie, the fixed-line network is as no smaller than it was in 1989, the price of basic fixed-line phone has gone up at almost exactly the rate of inflation, and free local calling remains part of Telecom’s Homeline package (as seen in the Commerce Commission’s helpful report).

But thanks to competition and technological change, these obligations are now chronically out of date.

* Ensuring access to a fixed-line telephone is no longer the problem. Just about everyone has access to a fixed line and a mobile phone, coverage continues to expand through competition, philanthropy (Vodafone’s community tower build programme), and the RBI, and local calls are cheaper and cheaper on prepay mobile plans with no minimum spend.

* The price cap on residential phone service was insufficiently tough in the first place. The Commerce Commission thinks that free local calling has retarded competition, and that New Zealand has one of the highest prices for standard residential service in the OECD. The price of standard residential phone services has risen even while prices for other phone services have collapsed.  Local calling is only “free” for customers who pay the high monthly fee, which might be why the now-renamed Ministry of Economic Development calls it “charge-free local calling“.

In short, the existing TSO is a solution to a problem that no longer exists. The real issue now is broadband for everyone. As we shall see in Part 2.

Hayden Glass is a consultant specialising in telecommunications with the Sapere Research Group, one of Australasia’s largest expert services firms.