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After Fives after match report

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Enable put on a great After Five session last night in
Christchurch.

As you know, Enable is building the UFB in Christchurch but
what I didn’t know is it’s also responsible for another area around the main
city – in effect the satellite towns that feed Christchurch.

The project is going well. I went out on a site visit and
saw a crew drilling along a 30m driveway to reach the property at the back.
Even though the other two residents hadn’t signed up for UFB at this point, the
team were laying in the spurs ready to hook them up should the need arise and,
given the rest of the street’s willingness to swap to fibre (there were four
connections being put in on that street alone) it’s surely only a matter of
time before they put in the call.

What interested me most about the deployment is the uptake
rate – Enable is running at over double the national average at 6% uptake.

That may seem like peanuts but don’t forget the main
residential build doesn’t start for another couple of years yet so to see such
good numbers come in when the country as a whole is barely hitting 3% means
it’s worth taking a second look at Enable’s model.

Enable is co-marketing the fibre deployment alongside its
Retail Service Providers (RSPs) and even without the two big names in the fixed
line broadband world – Telecom and Vodafone – it’s still signing up a
tremendous number of new connections each month.

In addition, word of mouth is strong and that’s in no small
part because of the excellent clean-up job the crews do when laying the fibre.
Instead of the nightmare of trenches, refurbishments, multiple holes in walls,
delays and the like, the teams make sure they clean up after themselves, that
reinstatements of driveways and footpaths are of a top-notch nature and that
they are constantly communicating with both residents and RSP partners. It’s
clearly paying dividends.

Enable has all but completed deployment in some of the
smaller dormitory townships outside Christchurch proper, which means those
people who do live outside the city bounds will find they can work remotely via
fibre instead of driving in and out of the city every day. Enable CEO Steve
Fuller says that’s important to his team as the company is mostly owned by the
council which also needs to consider usage of the roads. If only other councils
were so engaged in the UFB’s potential.

We didn’t agree entirely on the government’s review of the
telco act but I can see where Enable is coming from with its views on investor
certainty and I hope they can see what we’re talking about when I say I don’t
want the Commerce Commission sidelined as regulator.

What must be a concern for both LFCs and customers is that
the move to allow Chorus to pocket price its copper lines in areas where it
doesn’t have the UFB contract is unfair and unacceptable. Quite why MBIE
included the concept in its discussion document is beyond me but the idea that
Chorus will be allowed to keep copper prices high unless it faces competition
is bizarre at best and anti-competitive at worst. I’d hate to see Enable and
the other LFCs go to the wall because Chorus can lower its copper prices and
block migration to the UFB (to follow the government’s own logic), especially
given the stark differences in deployment results.

Thanks again to Enable for a great day and a great After
Five.

Next up for the After Five sequence we have a change of
pace. ASB’s chief economist Nick Tuffley will be talking about the state of the
economy and ICT’s role in it and ASB is hosting it at its new building in
Auckland’s Wynyard Quarter.

After that we have Network 4 Learning talking about its role
in education and what N4L hopes to achieve in the coming years once all the
schools in the country have access to high-speed broadband.

Times and dates and places will be posted on the website on
Monday.

 

NB – the newsletter version of this post differs somewhat owing to my poor handwriting skills. 

 

Overbuilding networks is not on

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Let’s talk about overbuilding of networks.

Several years ago I visited the telco regulator in Hong
Kong. His biggest challenge was keeping out of the way of telcos, because over
there the market really does rule the roost. Why? Because with six or seven
copper networks, three or four fibre networks, six or seven 3G networks and at
least four proposed LTE networks, there was plenty of competition at the most
basic level.

Overbuilding is good.

However, as he said to me at the time, that’s fine once you’ve
got build out to every customer. Prior to that, overbuild is a waste of time
and resources.

New Zealand is not in that situation. We don’t have a
ubiquitous network built out to cover every building or every customer. We don’t
have competition at the lowest level, and indeed the government’s decision to
fund what are, in effect, four regional monopolies would suggest there’s little
chance we’ll ever have the population to support multiple networks overbuilding
each other. With only four million customers (in a variety of guises) the costs
far outweigh the benefits.

Except that we are already overbuilding.

In central Auckland I have my pick of fibre providers for
business grade, point to point fibre. There’s FX Networks, TelstraClear fibre
(now owned by Vodafone), Vector and of course Chorus to name the first four
that come to mind.

In Wellington there’s CityLink as well, plus there are any
number of other providers.

They’re typically not offering the same kind of fibre
service that the Ultra Fast Broadband (UFB) project will build. It’s very fast,
it’s uncontended (that is, it isn’t shared in the way the UFB’s G-PON network
will be shared) and it’s expensive as a result.

For most CBD dwellers (I’m thinking businesses here, not
residential) the move to UFB will be a cost-reduction move that means more
contention for a lesser charge. They’ll figure out what that looks like in
terms of their own risk profiles and everyone will get along.

However, there are pockets of fibre deployment that are
already in service and which Chorus and the LFCs should be taking into
consideration as they build out the UFB.

Nelson, for example, has had The Loop for around a decade
now, and at the launch of the Chorus UFB deployment the mayors of both Tasman
and Nelson were at great pains to ensure everyone knew about it. It certainly
came as something of a surprise to the Minister whose speech revolved around
bringing the future to a corner of the South Island. We’ve got the future
already, Minister, they told her.

The explanation from Crown Fibre and Chorus at that point
was that the UFB requirements wouldn’t be met by the fibre network in Nelson
but that hopefully the UFB pricing would help reduce the cost of The Loop’s
fibre to its customers as well. Competition is good and healthy, but there’s no
overbuilding going on, I was told.

The Loop tells me its prices are already lower than the UFB
prices, and that yes in fact overbuild is going on.

Inspire.Net is another ISP that’s been laying fibre for many
years in the lower North Island. Because it’s not a national provider,
Inspire.Net wasn’t considered for the UFB or RBI deployments, but it already
has a large tract of the country fibred up and operating today.

Surely there won’t be overbuilding going on there, right?

Sadly, that’s not the case. UFB fibre is being deployed in
Palmerston North right over the top of existing Inspire.Net fibre and alongside
TelstraClear/Vodafone fibre. The UFB and RBI fibre is required to be deployed
to schools in and around the country so they’ve gone so far as to put a pit
outside a school which already has fibre delivered by one of the existing
operators. This despite Chorus telling an audience in Whanganui that fibre won’t
be deployed to the farms because the cost of putting a pit in and breaking out
the fibre is just too expensive, despite promising just that a year ago.

The UFB project is supposed to provide fibre to 75% of the
population. Chorus has won the lion’s share of the project and is claiming to
be overspending to the tune of around $400m. Something’s got to give, and
apparently that pressure means the government will run over the top of the
Commerce Commission decisions around copper pricing so as to make sure Chorus
doesn’t lose any more cash.

I have an idea. How about we not overbuild existing
networks. How about instead of trying to squash these smaller players we
require the UFB fibre network companies to work with existing fibre operators
and so avoid spending money to deliver a second or even third fibre network to
these places where existing services already operate.

Instead, why not lease capacity from these existing network
operators? Why not work with the other network providers, instead of
overbuilding them – at least until we have full coverage.

Chorus, UltraFast, Northpower and Enable could then get on
with building fibre to new parts of the country, places where there is no fibre
today and where new customers will be able to connect up. It will cost less to
deploy and we’ll save Chorus its $400m, or a goodly chunk of it, without having
to favour one operator over another.

Once we have the whole country covered we certainly can look
at overbuilding. In the long run I’d be more than happy for
infrastructure-based competition to take off. But publicly-funded network
deployments should not be used as a way of quashing competition and certainly
not at the expense of operators who have already put in the long hours and hard
yards delivering the service. I don’t want my money being spent on that – quite
the opposite.