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.

Lost Opportunities and hypotheticals

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In 2002 TelstraClear approached the Auckland City
Council with a view to rolling out its cable TV network in Auckland. A FUD
campaign by the New Zealand Herald put an end to that (read the intro to
Bernard Orsman’s piece) and Auckland missed out on the opportunity to
have the Holy Grail of telco deployment – network competition.

Imagine the scenario if TelstraClear had been given
the go-ahead. Auckland would have provided a customer base of well over a
million potential customers, giving TelstraClear the ability to scale its
services up far more than it could with just parts of Wellington and
Christchurch. It would have become a power house in the home broadband market
at a time when regulation was “light handed” to put it mildly. This
was before unbundling, don’t forget, when you could have any broadband you
liked so long as it came from Telecom.

A resurgent TelstraClear would also have given Sky TV
a run for its money in the content world. Less than a year earlier,
TelstraSaturn (as it was then) and TVNZ had signed a joint venture to provide
set-top boxes throughout the market to offer a new wave of TV services. The
content market would not be quite so one-sided and we’d have at better range of
choice in the  market, even without regulatory intervention.

Unbundling may or may not have happened. I’d like to
think Telecom would have gone out of its way to win other retail partners to
its network, competing on price and service, instead of “walking backwards
slowly” fending off regulatory and competitive pressures. If TelstraClear
had opened its cable network to the wholesale market we would have two
well-placed providers offering network competition at both domestic and
national level. I would expect that within the decade both would be fighting to
deploy their own fibre upgrades to these networks and by now we’d be well on
the way to a fibre to the home service. Competition in the pay TV space would
have been far more dynamic and we’d have multiple operators offering
differentiated service.

Instead, TelstraClear was knocked back and couldn’t
compete in Auckland. The Commerce Commission decision not to allow unbundling
put the company back even further and eventually, as we know, the whole thing
was sold to Vodafone and Telstra exited the market, turning its attention to
Asia instead. Sky TV is the only pay TV operator in the market and Telecom was
forced by the government to split into two businesses. We’re now on to our
third Telecommunications Act in a decade and a significant competitive
opportunity was lost.

—

Mobile network operator 2Degrees has made a huge
impression on the mobile network, offering products and services the other
mobile operators seemed reluctant to consider. Shared data, rollover minutes,
simple pricing tariffs.

But 2Degrees is a mobile-only operator, which means
the big guys still hold sway in the all-important “one throat to
choke” market segment. Plenty of customers, business and residential, want
to deal with one provider and if 2Degrees is mobile only, that limits its
appeal to the truly cost conscious.

What if 2Degrees had bought Orcon? The combination of
fixed-line capability, including unbundled exchanges and cabinets, plus a
mobile network would open doors that previously hadn’t existed for 2Degrees.
Not only would the customer base be able to opt out entirely from the big two,
but 2Degrees would in turn be large enough (and diverse enough) to offer
wholesale services to smaller ISPs.

In the fixed line market there isn’t much margin, to
put it mildly, but in mobile 2Degrees would be able to undercut Vodafone and
Telecom in terms of MVNO offerings, and essentially use that as leverage to
shake up the entire telco market.

Years ago I read a paper about the psychology of the
Apollo space missions (back when the human race cared about such things) and why
having three astronauts was important. You never end up with a split decision –
each decision is either overwhelmingly for or against – it’s always two to one.
That gave the mission a kind of stability that was vital when you’re millions
of miles from any kind of command or support structure.

Markets operate in much the same way. With two players
the opportunity to “take a breather” and to “sit back for a bit
and recoup on our investment” becomes an option. We see the “cosy
duopoly” form and any dynamism is muted.

With three players (or more – I’m happy if we have
more so long as it’s sustainable) that situation never arises. You can’t rest
on your laurels and eyeball the other guy across the divide because that
whipper snapper will jump up and bite you on the leg. And if you and the new
guy reach some kind of stalemate you can be the other big guy will have some
offering that you have to respond to.

Having 2Degrees in the total telco market would, I
hope, do something along those lines. It would keep the other players honest
and would potentially mean we see more differentiation right across the board.

It’s an expensive business though, being a fixed-line
ISP, and with narrow margins and an impending 700MHz spectrum auction, I can
well understand 2Degrees’ decision to stay out of the bidding for Orcon.

—

Vodafone has yet to announce its plans for UFB retail,
but it has announced a trial of LTE in rural areas.

I’ve been using Vodafone’s LTE for a couple of weeks
now and while the speed is quite variable (ranging from download scores of
3Mbit/s up to 80Mbit/s) it clearly provides a competitor to a fibre network I
won’t see for at least another four years.

So imagine if Vodafone decides not to bother with UFB.
Imagine if, instead of deploying its marketing might on fibre, it pushes big
into 4G throughout the country.

Vodafone could quite easily deploy LTE capability
around New Zealand prior to UFB arriving in town. It could bite the bullet and
introduce far greater data caps (50GB, 100GB) on its LTE network and take the
hit in the short term for long term market share gain.

(By quite easily I mean “if money were no
object” naturally. This is a hypothetical).

After all, given the choice between 50Mbit/s download
speed today, but with a smaller data cap, and 30Mbit/s download in four or five
years’ time, I know which I’d opt for, especially if Vodafone did away with
capped plans and let me use data and pay for it as I go as I do with
electricity or voice calling at home.

Vodafone would gain market share, but more importantly
the customers would be on its own network, free from regulation and from
government intervention. No need to worry about the price of copper or the cost
of the fibre deployment artificially hiking it up – just put all the customers
on your own networks (unbundled, cable and 4G) and move on while the rest of
the market gets bogged down in regulatory reviews, UBA pricing determinations
and all the rest of the distractions that come with the current market.

Telecom would dominate the UFB market, Chorus would
still have to offer fibre backhaul from the RBI towers at a regulated rate,
Vodafone would eventually move all of its traffic over to its own fibre
backhaul (thanks TelstraClear) and would use cable and LTE for the last mile
service to customers. Eventually you could even see Vodafone deploying its own
last mile fibre connection, if it really wanted to, using open access ducts.

But without Vodafone’s support in the UFB market,
uptake rates would be a lot lower and potentially Chorus would miss its
targets. The other LFCs would, presumably, still make theirs but for large
swathes of the population, UFB deployment would cease as the money-go-round
stopped. Either the government would have to rethink its level of investment or
do something else equally as radical.

The upside to it all is that you’d have infrastructure
competition, albeit in the bizarro world of fibre versus LTE, and that I for
one would get better speeds sooner, which is clearly a win for me, but the
downside is the possible failure of the UFB and that’s not something I’d like
to see.

Interception

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The government is going to update the Telecommunications Interception Act which came into effect in 2004.

Nearly a decade on it’s a good idea to review these things and to make sure we have a process that works, that the need is still the same, that the players involved are still doing the same things in the same way.

The Act allows the police, or SIS or GCSB, to call on the telcos for information about customers. Typically this involves a search warrant or similar legal document made out about a particular customer’s account. Telcos can then intercept TXT messages or phone calls or data connections. They can track email trails, they can locate cellphones using GPS or cellsite triangulation. They can access your communications.

Typically the telcos take this kind of intrusion very seriously indeed. They have teams that handle these enquiries, they move with urgency and they get the job done.

(Incidentally, this is partly why the copyright notices cost $25 each – the same team that considers whether or not a search warrant is valid will also look at a copyright infringement notice because both documents are legally challenging and because they involve infringing on a customer’s privacy to a huge degree. It’s not as simple as looking up the records for an IP address and sending on the notice.)

The government says the Act needs updating. It says there are two arms to this legislation – interception and network security.

Interception seems to me, at any rate, to be working well. The telcos respond quickly (I’ve not heard of a telco not responding in a timely fashion) but won’t have a bar of the government agencies taking shortcuts. For a while there was talk of the police faxing through warrants rather than showing up. That was deemed unacceptable pretty sharpishly and I haven’t heard anything similar since then.

Network security, likewise, works well. The GCSB stays out of the way and the telcos roll out state of the art deployments that should be as secure as they can be. Ironically, the Act requires the telcos make their networks hackable – that is, the Act itself is a single point of weakness, albeit one tucked away inside the networks’ operation centres. Left to their own devices, the telcos wouldn’t be willing to entertain any question about their security capabilities. It’s a selling point, it’s basic hygiene and it’s vital to their on-going commercial role.

So what needs fixing?

Well, since 2004 the telco world has changed. No longer do we buy all our services from our telcos. Instead we buy a pipe and get our services from other providers.

Currently these over the top providers (OTT) offer TXT, email and data-centric comms but shortly I’m sure it’ll be voice as well (think Viber, Skype and the like). These services show up to the network operators as bits of data, encrypted by a third party player, sent from one device to another. They have little visibility of what the content is (they can make an educated guess of course – certain services use certain ports, for example) and they certainly can’t crack that encryption to see what’s going on.

Over the top providers don’t always need the telcos’ support to operate, so it makes it very difficult for the telcos to capture this data on behalf of agencies which might, in say three months’ time or a year or more, need to access it.

The new Bill will, apparently, require the telcos to work closely with the GCSB on network security.

I wonder what that means. Will the telcos (private, commercial entities) be required to do things the way the GCSB wants? Will they be required to build things in to their networks that they might not want to include? Things that give them no commercial benefit?

Secondly, I wonder what the enforcement protocols are all about. Are the telcos moving so slowly they need a kick in the pants? What kind of enforcement are we talking about – monetary? Something else? Will we need to start registering telcos in some formal manner so we can revoke that registration should they not fall into line?

Will we be introducing a regime that forces telcos to somehow crack the security of Microsoft, of Google, of Apple? How will that fly with these companies? How enforceable is that from New Zealand?

And if we think about it, aren’t these OTT providers telcos in and of themselves? Don’t we consider Microsoft, for example, to be a telco? It owns Skype – clearly the world’s biggest telco – and it sells OTT services that used to be the purview of the telcos. Surely our definition of what a telco is needs to be updated?

Let’s take Microsoft’s Office 365 as an example. If you buy it from Dick Smith, you get a box with a code and away you go to download and use the service. If you buy it online from Microsoft itself they don’t bother with the box, but the product is the same.

Buy it from a telco (a Gen-i or a system integrator for example) and it’s a telco service and will be governed by the Interception Act. Will that not drive customers to avoid the telcos? Will that not cost the telcos in terms of both lost sales and implementation costs?

The danger is of course that all this cost will be dumped on the telcos. There’s no commercial gain to the telcos in doing any of this – the storage needed, the interception gear required, the teams they’ll have to pay to make it all work – so that cost will be passed on to the users.

On top of that, we run the risk of trying to do the impossible. If a government says simply “make it so” and steps back, we could see telcos being penalised for not hacking Gmail accounts. Is that what we need? Is that going to do anyone any good at all?

Without knowing what the problem is the government wants to solve, it’s rather tricky to understand where this is all going. All of the above is based on the Minister’s press release, which is rather brief. The Bill itself will be available next month and TUANZ will be taking a close look at the detail. It’s important we get this right because if we get it wrong the consequences could be quite miserable.

Mobile

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Telecom has announced its plans for a 4G network rollout. Starting in October, the country’s biggest telco will start with the main centres and work its way out to smaller centres, deploying an 1800MHz network similar to Vodafone’s.

I’ve been using the Vodafone 4G network around central Auckland for the past week or so and two things have become apparent – speed tests suggest quite a degree of variability at this stage, and the speed test app uses quite a bit of data. I’ve hit my 1.5GB limit for the first time ever and still have half a month to go to the end of my period.

The variability is a concern. I’ve only tested when my phone says it has an LTE connection but the range extends from 3.3Mbit/s down, 1.39Mbit/s up through to 88.69/47.22, which singed my fingers ever so slightly. I typically see a score in the 20Mbit/s range for download and about 15Mbit/s up.

This is only a category three device, of course. The Cat 4s are out later this year and both Vodafone and Telecom say they’ll have them on offer – that raises the lid on theoretical maximums to 150Mbit/s which quite frankly is astonishing.

My usage has changed as a result. If I’ve got downtime somewhere I tend to flip through the news stories and now each one pops as if I were in the newsroom itself. No lag whatsoever. I’ve had to hit refresh a couple of times thinking the Stuff app had stuck again on old news, but no. It was brand new news. Even BBC video clips load with an unheralded ease.

Which of course means I can watch more, and do more, with my phone. Which means I use more data. Which means I will need more data and if Telecom can offer that, I would hope it will see the competitive nature of the telcos brought to the fore, which will be very nice indeed.

Both Telecom and Vodafone have said they will roll out 4G services on the RBI towers and this for me is the best part of the whole launch. Rural New Zealand is poorly served for broadband and mobility – having both delivered in a timely fashion will be great news. Better still, once you’ve got a tower in place with fibre backhaul the speeds per customer off each of these towers should be really quite good. Your rural LTE experience could well be better than the urban equivalent, with its higher density of users per tower.

Because the towers are paid for as part of the RBI programme the cost of rollout is greatly reduced and that means the telcos will be more likely to put kit on those towers.

But both telcos have said they’ll need to wait for the auction of the 700MHz spectrum before they do so. My understanding of radio frequency issues borders on the ignorant (although not as ignorant as those cell tower protestors) but my understanding is that the footprint of each tower at 700MHz is far superior to that of 1800MHz and that the ability to operate over rural landscapes (trees, cliffs, water) is much better.

Vodafone tells me the amount of spectrum available will influence the speed capability. It has a lot of 1800MHz spectrum and will end up with a lesser amount of 700 so that too will impact on the speeds and throughput, but all told whatever the rural user gets it’ll be a lot better than today.

So where are we at with the auction? The minister has said we’ll have one (step one) and that they’ll announce details later on this year (step two) but we’re none the wiser as to how the auction will be run, what size blocks of spectrum will be allocated or what the reserve price will be.

In Australia the reserve price set by government was so high Vodafone Australia pulled out of the auction entirely.

There will be a degree of tension within the government regarding the auction. On the one hand, Treasury will (I’m sure) be pushing the government to maximise its return on investment. That is, make sure the auction brings in as much money as possible. Perhaps we’ll see one block of 20MHz and two of 15MHz (or similar) in order to push bidders towards the bigger block. The more spectrum the more throughput so that will be attractive and that will drive up the bidding.

On the other hand, the economic value of the spectrum lies mostly in its use and the less the telcos spend on spectrum the more they’ll have for network deployment. The cost of spectrum in the UK in 2000 saw BT almost bankrupted and in Europe several telcos did indeed go to the wall. The rollout of 3G was far less aggressive than we’d hoped and the user uptake took several years to get going.

Three equally sized blocks would lead to only a couple rounds of bidding while the three telcos sort out which one is going to buy each block and then they’ll stop bidding. That means less income for the Crown but a faster deployment of network in rural areas.

TUANZ would like to see three equally sized blocks and a reasonably low reserve price to encourage the telcos to deploy. My concern is that 2Degrees be squeezed out of the 4G race with too high a price and that would be a disaster for the industry as a whole, particularly given how much change a truly competitive industry has delivered.

4G wars

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Telecom has announced it’s launching its LTE network in
October and will steadily roll out services throughout the country using Huawei
equipment.

There are several aspects to this that are worth discussing.
The impending 4G war with Vodafone – data caps and the $10/month premium charge
that Vodafone adds on your bill for 4G are all up in the air now.

Then there’s the choice of Huawei over incumbent
Alcatel-Lucent which while not surprising is still quite telling.
Alcatel-Lucent will continue to manage the 3G network (Telecom’s much vaunted “faster
in more places” XT network that famously hit a wall at high speed and caused
Telecom no end of embarrassment and not a small amount of money) but basically
this is the end of the line for ALU’s relationship with Telecom. I put that
down not only to the XT debacle but also to Alcatel’s lack of a single-RAN
solution. That is, to roll out 4G Telecom will need new boxes on the poles
rather than just changing out the cards in the existing boxes. That makes the
deployment much more expensive than either 2Degrees or Vodafone’s similar
rollouts and that’s a problem.

(EDIT: As has been pointed out, Alcatel will continue to run Telecom’s fixed line network and its operation centres and has just won the contract to upgrade the optical transport layer. I’m just talking about the mobile side of things here)

This also will mean trouble for 2Degrees – it now has to
spend yet more money rolling out 4G just to keep up. This at a time when it’s still
deploying 3G, with a looming 700MHz spectrum auction and when pundits are
suggesting it should probably look around and buy a fixed line operator (Orcon,
for example) or face being marginalised.

But I’m more interested in Telecom’s promise to roll out LTE
on the rural towers built by Vodafone as part of the Rural Broadband Initiative
(RBI) which is very exciting news for all concerned.

Currently the RBI deployment is flying somewhat under the
radar, predominantly because of the road crash that is early UFB deployments.
There are no stories of customers being cut off for days, of Chorus techs
standing around in clumps staring at holes in the ground, of cost blowouts
because of the difficulty of digging through footpaths.

Instead, we hear very little about RBI. Vodafone and Chorus
presumably are rolling out network coverage. Presumably customers are
connecting and presumably they’re reasonably happy with the service.

Vodafone promised the rural broadband pricing would be on
par with urban prices, and while the price points are not too dissimilar ($100
for phone and broadband being one example) the data limits are woeful. You have
a choice of 5GB or 15GB a month – neither of which comes close to urban levels.
That same $100 in the city would get me 100GB of data. Given we want to
stimulate the rural economy, you’d hope there would be pricing for business
users on the RBI, but while I can get 1TB of data for $20/month from Vodafone
in Three Kings, that level of use on the RBI would require me to sell the
entire South Island to pay my debt.

There’s also a lack of competition in rural New Zealand.
Aside from Farmside (the obvious candidate) there aren’t too many other
resellers of Vodafone’s service, nor are there partners clamouring to add their
equipment to the RBI towers – or rather, if there are they’re keeping very
quiet about it.

Both Telecom and Vodafone have said they will go all out on
the RBI towers once it secures some 700MHz spectrum and hopefully once that
starts we’ll see some actual competition for what could be a lucrative market.

Interestingly, I’d expect to see faster speeds on the rural
LTE network than on the urban.

I’ve been using Vodafone’s LTE for the past couple of weeks
and while my peak speed was an impressive 88Mbit/s down and 47Mbit/s up, most
of the time it’s around the 15-20Mbit/s down range, with upload being slightly
less.

I’m putting it down to my being forced to share the network
with others, something that’s a perennial bone of contention (ha) among
wireless users.

Rural customers would, hopefully, have less to worry about
because there are fewer of them per tower.

Given the towers are being built under a government subsidy,
they’re going in to places where commercially there just aren’t enough
customers to justify deployment. That means the number of customers per site is
likely to be far fewer than in an urban environment. Which should mean you’re
more likely to see the higher speeds in rural areas (backhaul notwithstanding
as it’s fibre-based capacity from Chorus).

When you add in some of the cool stuff Huawei showed me in
China (NB: I flew there courtesy of Huawei) – things that will come up in the
next round of revisions to the LTE standard – rural customers will be well
placed to go mobile.

All told it’s an exciting time to be a mobile user. I’m
hopeful we’ll get some decent pricing out of the two main players (and of
course, 2Degrees will be there by default as it roams on Vodafone’s network)
and that can only be a good thing for rural New Zealand.

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Virtual competition

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In the UK Tesco is a major supermarket chain but also
a serious player in the telco space. It’s gone from simply selling mobile
phones in blister packs to the full suite of Tesco-branded services, from
mobile to fibre. You can download movies, listen to unmetered streaming music,
buy toll calling packages and so on.

Tesco isn’t alone in this. Virgin Mobile is one of the
world’s leading mobile brands and has shaken up every market that it’s entered.
It operates in eight countries around the world, including Australia, the US
and UK, and it regularly scores highly in customer satisfaction surveys.

Neither company owns a network or ever intends to.
They are virtual operators and I’m curious as to why we have nothing on the
same scale in New Zealand.

Mobile virtual network operators (MVNOs in the
parlance) are operating here, but are so far below the radar as to be
non-existent.

Black+White launched with much fanfare but has almost
vanished since then. CallPlus and Orcon –both big-name brands in the ISP space
– have mobile offerings but you’d be hard pressed to find anyone using them.
The plans seem uninspired somehow and certainly can’t compete with the big
names, Vodafone and Telecom, despite using their networks.

In Australia MVNOs account for 13% of the market, yet
in New Zealand the total for all MVNO offerings is probably in single figures.

I think I can see why – MVNOs in New Zealand are on
account only, and New Zealand is predominantly a prepay market. Immediately,
most of New Zealand’s customers are unable to consider switching to an MVNO
provider because there is no prepay option.

Neither Telecom or Vodafone offer prepay MVNO services
and I wonder why that is. Vodafone in particular has a large percentage of its
customer base on prepay – could it be that Big Red doesn’t want to risk
cannibalising its own customer base?

Until MVNOs have access to prepay services and can
build their own plans and tariffs, we’re not going to see the kind of dynamic
marketplace that the UK or Australia has and that’s a loss for customers.

We’ll be asking the government to explicitly include
MVNOs in its review of the Telecommunications Act with a view to better
understanding the barriers to competition and why it is that a model which
works so well overseas simply doesn’t in New Zealand.

Cost based modelling

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The Commerce Commission has made the only decision it could
regarding the UBA wholesale price determination process – it will continue to
work towards a final determination due before the end of the year.

Sadly the government has already said the Commission’s work
is irrelevant because it will introduce a review and a new Telco Bill that will
supersede the determination before it comes into effect in 2014. The
Commission’s work, vital as it is, will be completely sidelined in the process.

Chorus has also indicated that it’s likely to ask for a
“final pricing principle” on the UBA price alongside the UCLL (that’s the
unbundled service) FPP it’s already asked for. An FPP is a major piece of work
whereby the Commission works out how much the service actually costs (I know, I
agree it’s a bit odd that it doesn’t do that as standard but when you’ve sat
through as many economists’ presentations on cost models as I have you realise
that the Commission’s true role is to keep economic lecturers employed) and is
likely to take quite some time. The Commission has indicated that it may miss
the December 2014 timeframe and slip into 2015 because of that.

Actually I don’t mind the Commission doing the FPP work. I
think it makes sense to know exactly what we’re dealing with. The problem is,
the government doesn’t want to know what it actually costs to deliver broadband
over copper lines, it wants to make sure Chorus can continue to build the UFB
and as Chorus has said it won’t be able to if the price of copper drops (for
reasons I’ll get to in a minute) the government won’t have a bar of an actual
price point.

This is a shame because the review of the telco act could do
with a dose of facts, to put it mildly.

Currently the government is being led by Chorus’s world view.
Any reduction in wholesale rates will reduce Chorus’s income stream and
therefore jeopardise its ability to pay for the UFB deployment. On top of the
losses to copper line revenue, Chorus also faces a huge blow-out in terms of UFB
deployment costs to the tune of $300m in the first year alone, and so
logically, obviously, you can’t possibly inflict even more of a loss on the
company or it might go out of business/not deploy UFB/all end in tears (delete
where applicable).

There’s only one word for this and as we’re a
family-friendly website I can’t use it, so let me just go for “hornswoggle”
instead.

I know this to be true because Chorus is still talking about
paying out 25 cents per share as a dividend, possibly the largest dividend payout
in New Zealand this year and a rate (given the current share price of $280)
that I haven’t seen since the early years of Telecom’s privatisation where the
US parent consortium took out more money than it paid year after year till the
coffers ran dry.

If Chorus can afford that level of dividend it can cope with
a Commerce Commission determination in the $8-$12/month mark and can spend a
bit of effort on sorting out its installation process so it doesn’t cost $3500
per install.

Several things need to happen and a review of the Telco Act
isn’t one of them.

Firstly, the government needs to step back and let the
market figure out what’s going on. This random intervention model doesn’t work
and just scares the investors (let’s remember, Chorus’s investors aren’t the
only ones in this game).

Secondly, Chorus needs to figure out how to install UFB
without it costing the earth. The other LFCs can do it – so can Chorus.

Thirdly, the Commerce Commission needs to get on and deliver
us a wholesale price that uses actual cost and not retail-minus as it is
supposed to.

Fourth, those government departments that are pushing Chorus
not to do anything useful with VDSL should butt out and let the company offer
the services its customers want – in the interim while we gear up for UFB, that’s
fast fibre. It’s going to be at least another three years before most of us
start to get UFB – that’s three years of training us up to demand UFB speeds
and the best way to do that is with faster copper products.

And if the government insists on pushing ahead with its
review (of an Act it introduced, let’s not forget) then it should use the
Commerce Commission’s work as a benchmark. After all, if we know what it
actually costs Chorus to deliver these services, isn’t that going to be just a
little bit important?

Eric Hertz

/in /by

Americans tend not to have a sense of humour, I’ve found. They take it all too seriously and don’t enjoy life as much as you’d expect.

Eric Hertz was not that kind of American. Instead, he drove a Chevy Camaro in Bumblebee Yellow that looked like it came from the Transformer movie. He laughed when I offered to lease him space on my iPhone charger during a Commerce Commission conference on termination rates. And he and his wife Kathy had become permanent residents, living life to the full in New Zealand as locals, not as temporary visitors.

If the news from today is borne out, Eric and Kathy are missing after their plane crashed in the sea off the west coast of the North Island. Searchers have returned to base for the night – they’ll resume in the morning but barring a miracle, this is a recovery mission, not a rescue.

It’s not overblown to say that Eric has lead 2Degrees to make dramatic changes to the New Zealand telecommunications space. Without 2Degrees we would be facing a duopoly in mobile telecommunications and wouldn’t have rollover minutes, shared data or any of the other innovations 2Degrees has brought to market.

The company has changed the landscape of competition for the New Zealand telecommunications market in an incredibly positive way and we as an industry are all the more poorer for today’s news.

Eric and Kathy could have come in, done the job and left for a life “back home” in North America. Instead, they’d become New Zealanders and made it a mission to travel and see as much of New Zealand as they could. They were as New Zealand as they could be.

Our sympathies and thoughts are with Eric and Kathy’s family and with the team at 2Degrees.

Would you like fries with that?

/in /by

Last week I called for a national digital architecture and I’ve
been having several email conversations about how to proceed with this somewhat
nebulous plan with a number of people far brighter than I am.

One thing seems certain – there’s a desire and a keenness to
get on with it, lest New Zealand be left behind.

Quite how far behind is evident in this blog post (“Computer
science in Vietnam”) which I strongly urge you all to read. It won’t take long,
unless like me you get struck dumb by what you’re reading.

 If we don’t come up with a way forward that brings all New Zealand with it, we’ll have to teach our kids how to say “hello and welcome to our beautiful country” for all the rich visitors who will journey here. Assuming we haven’t dug up all the natural beauty in the mean time, of course.

TUANZ calls for a national digital architecture

/3 Comments/in /by

Telecom is laying off a large percentage of its workforce and as awful as that is for those involved, the company needs to do this to become competitive in the marketplace.

We have the government investing over a billion dollars in the fibre network and a couple of hundred million in rural broadband, matched and exceeded by the industry’s own spend in the area, yet we don’t have any way of articulating just what that will do to the economy of New Zealand as a whole.

We have research which suggests that ICT will overtake tourism in terms of share of the GDP in the near future, yet we’re also told that only 30% of businesses have a website and a large percentage of business owners don’t see the benefits of digitising their companies.

We have some schools making tremendous use of technology in classrooms and other schools where parents lobby to ensure they don’t have to buy iPads for their kids.

We have politicians who still don’t understand the basics of how the internet works and who treat it as some kind of bargaining chip in negotiations with the US over trade access when ICT could become as large and as important to the New Zealand economy as dairying or dead animals.

If New Zealand is to take its place in the global digital economy we need to consider the ICT industry, the investment in infrastructure and in education and how we tie it all together, otherwise we will struggle to keep our heads up. We need to pull in the same direction and that takes coordination, it takes a strategy. It calls for a plan.

In 2008 TUANZ called for a national digital architecture to be formed, providing some kind of cohesion and coordination for the country as a whole and the time has come to revisit the issue. We need a plan to ensure we take advantage of the skills and experience we have, to invest in the areas that will provide a return and will provide growth in the economy. ICT is clearly the rising star, but we have to do more than pay lip service to it.

What would you like to see in such a plan?