Chorus ups the ante on fibre speeds

Chorus has announced a new line-up of fibre products designed to encourage uptake of the UFB.

In essence, this is a very good move. In a world where VDSL can offer equivalent speeds (albeit with caveats on that) at the same price but without the horrendous experiences of having your street/garden/house dug up to connect, any fibre service will need to offer significantly more in order to compete.

Chorus is proposing a 100Mbit/s download speed and 20Mbit/s upload speed service s its new entry level product for residential customers.

Business customers can get a 1Gbit/s symmetrical service for a wholesale price of $275 a month.

This is great news as it gives customers a real reason to move to fibre. Stuff 30/10 – if I can get 100/20 for the same price, I know where I’m going.

It’s good for Chorus too, because the more customers taking up fibre, the fewer there are on copper which, as you know, is fully regulated and will be providing far less revenue in the future than it did in the past.

Ultimately, we want more investment in fibre, more customers using fibre and less effort and money spent on the copper network. Once the fibre has been installed to my house, I’ll be ringing someone (Telecom, presumably) to come and take out the copper connection.

For many in government, this question of what happens to the copper network is a big issue. I don’t see it that way. Eventually, 75% of the population will have fibre to their home. At that point, the copper network in those areas can be switched off and pulled out of the ground. It is surplus to requirements and given the price of copper on the open market, should fetch quite a pretty penny.

On top of that, Chorus won’t want to keep two networks operating when it doesn’t have to. I would back switching off copper to that 75% as soon as the lines are in. It’s not forced migration, but it is a one-way door. There is no going back once the fibre is connected.

That leaves us with the 25% of the population that won’t get fibre under this current project. That’s also clear cut, in my view. Chorus is still required to offer those essential services, the old Kiwi Share services, to that population base, and until there’s an alternative it must continue to do so. Of course, we need to come up with that alternative as quickly as possible, and make sure it’s capable of delivering on the broadband future promise.

At the recent NorthPower launch celebration, the Prime Minister hinted that the UFB network isn’t going to be static once it’s completed. He suggested (vaguely, mind you) that there could be more to come, and frankly that’s a good thing. Solving the rural broadband problem is going to be key to any future economic strategy in New Zealand.

There are caveats around Chorus’s new product set. These are commercial offers, and exist outside the Crown Fibre contractually-obligated regime. They’re Chorus offers, so may not be offered by the LFCs who will once again be miffed at Chorus making changes they’ll have to either match or ignore. By going it alone, Chorus runs the risk of alienating its LFC partners and we could end up with a two-tier structure of Chorus versus the LFCs. That’s down to Crown Fibre’s management plans, and I’d strongly urge CFH to do more to coordinate these kinds of activities.

The devil will be in the detail, as ever, and we need to know about the quality of the service. What will the committed rates be, what happens next year when these contracts expire – will the prices go up – and what role, if any, will the Commerce Commission have in the future fibre price disputes, because these are commercial products, not the ones offered through the Crown Fibre contracts and so, presumably, are open to regulation.

But when you’re facing declining revenue in the copper world, as we’ve said all along, the best way forward is to encourage the migration to fibre and these new plans should certainly help with that.

Chorus’s costs

Chorus has a few tough decisions to make if yesterday’s financial reporting is anything to go by.

Where to prioritise its spending, where to make cuts and how to manage the regulatory process are all key questions the Chorus senior management will be asking themselves.

First things first, as you know TUANZ disagrees with Chorus on its handling of the regulatory process. The company should have seen the Commerce Commission UBA price point coming and had three years to prepare for it.

Fortunately, after a year of fluster from the government, we’re now back on track with a Final Pricing Principle (FPP) process to determine the costs of both UBA and UCLL components of the wholesale regime.

If I were Chorus I’d ditch the legal action against the Commission’s determination. It’s hard to see how that is anything but a delaying tactic at this point and could very well derail the whole process. Let’s just get on.

The good news is, regulatory issues aside, Chorus seems willing to do just that, focusing on the real heart of the matter – its cost structure.

Chorus has managed to bring the cost of each UFB premise passed to $3000. That’s a staggeringly high figure – in its bid process Chorus was estimating it would cost roughly half of that, and I have it from the LFCs that they pay significantly less per connection on average. This is the real problem and it’s good to see Chorus addressing it head on. Staff levels will have to fall, says CEO Mark Ratcliffe, and the company will have to consider how much and how it invests in copper lines.

This will be difficult for some customers – particularly those who are on the waiting lists for broadband. They may be years away from getting UFB and are hoping for more investment in the copper network to get them on to ADSL or VDSL in the meantime.

Unfortunately, not everyone is going to get copper broadband. Chorus’s main focus is on delivering the UFB and moving customers to that as quickly as possible. I suspect from here on in, it won’t be increasing the foot print of its copper network and will switch to maintenance only for most of us.

I’m in two minds about this. On one hand, customers need broadband today and as it’s now the 21st century we really shouldn’t be talking about people not being connected.

But on the other hand, copper is yesterday’s news and I want everyone (or as near as we can get) on fibre as quickly as possible.

Where Chorus must continue to invest in the copper realm is, of course, that quarter of the population that will never see a fibre connection under current plans. We need to make sure they don’t get left behind and I’m looking to the political parties to tell us what they plan to do about the digital divide.

The second point is Chorus’s ability to make money. As a regulated monopoly, it’s somewhat constrained in this. Chorus says it will be looking at new revenue opportunities and will be working with its customers (the ISPs) to determine what products it can come up with that they’ll actually be interested in buying.

When I first heard that, alarm bells rang. New ways to make money, eh? So you’ll be throttling everyone back to crawling speed and forcing the ISPs to buy bigger and better plans?

Chorus says no. In fact, to quote spokesman Ian Bonnar the company “categorically rules out” going for this so-called nuclear option.

I’m very pleased to hear that because the rumours among ISPs is that this is what was being planned. Certainly until yesterday I hadn’t heard Chorus deny it, rather it wouldn’t rule anything out. Now it has and that’s for the betterment of the industry as a whole.

So where can Chorus reduce its spend? I visited Northpower’s deployment last year and saw an overhead rollout moving swiftly and efficiently. Two-person teams connecting houses to fibre via overhead lines wherever possible. The record stood at just over an hour to connect one property.

We need more of that kind of approach deployed throughout the rest of the UFB network, I think, and it’s well worth looking to the other players to see what they’re doing well and what can be applied elsewhere.

But the single biggest thing that can be done to help Chorus, and indeed all the fibre companies, is to revisit this asinine resource consent process we currently have in place.

Even though this is a government project for the betterment of all New Zealand, even though this is a once-in-a-generation network replacement that will see us right for the rest of the century, the fibre companies have to jump backwards through hoops to get consent from all involved.

It’s foolish, to put it mildly.

Why aren’t we treating this as a replacement for what’s already in place and allow the fibre companies to install without needing all the red tape? Northpower tells me it could double the footprint of its fibre network in Northland if it didn’t have to spend so much on consents, and Chorus and the other LFCs would likewise make a tremendous saving.

That’s a network I’d like to see – perhaps we can whittle down that 25% non-fibre number and solve the digital divide as we go.

One thing is obvious – the day will come when each area is completed and Chorus can switch off the copper network. That needs to be managed and planning should start now. Whangarei will be fully fibred this year – there’s no need for Chorus to continue maintaining a network that is surplus to requirements, yet no thought has been given to Chorus’s requirement to provide the network of last choice. Once fibre is available to all properties in an area, the copper can go. That’s something we need to plan for right now.


I’m a boy so I like diggers. Always have. There’s
something about giant machines moving large piles of dirt about the place
that’s just really cool. Man (always the male) versus nature, or some such.

If diggers are cool, tunnelling machines are even more
so. I left the UK before the Chunnel was built but remember watching with awe
as giant science fiction machine worms burrowed into the dirt under the Channel
and even shed a small tear when I read that the machines were entombed next to
the tunnel on completion. They’re simply too unwieldy to remove.

The New Zealand Herald carried a piece on our own
tunnel project and the machines that are coming from China to carry out the
work. Despite the gushing prose, this isn’t something we have “never seen
before in New Zealand” unless you exclude the Manapouri hydro scheme but it is
really quite impressive nonetheless.

This project will take two years and will dig a
motorway under Auckland from Owairaka to Waterview, a distance of 4.5km. The
cost estimate is a cool $1.4bn.

By now you’re probably wondering why I’m prattling on
about digging a tunnel. We need to ship things about the place, we have a lack
of rail infrastructure and the roads are really all we’ve got for moving goods
and people around Auckland, so the theory goes, which means more roads.

I drive a lot and I don’t have a problem with more
roads. I know that doesn’t exactly tick the green credentials box, but Auckland
is already a basket case for transport and having spent five years riding a
scooter to work (and being killed twice) unless we make some fairly dramatic
changes to the roads, rail and ferry infrastructure, cars are really the only

By now you’ll see where this is going. The Southern Cross
Cable, Pacific Fibre, the new Trans-Tasman cable and all the rest cost far less
than this tunnel, yet they’re not seen as economic drivers, but a drain on the
public purse, so they’re left to the private sector to undertake.

The economic lift from building a second NZ-US cable
has not been determined. Will it add anything? Will the UFB add anything? We’ve
got general figures from equipment makers that talk up just how much such
services add to the economy but there’s been little work done on it by anyone
other than those with a vested interest. I’d like to see some numbers please,
because if we can pour $1.4bn into a hole in the ground, surely $400m for a
cable that will help us present New Zealand as a content hub rather than a
content consumer would be money well spent.