Chorus goes mainstream with VDSL

Chorus has announced it will introduce VDSL to the mass market
as part of the wholesale bundle currently available to retailers.

That means instead of the niche, pricy product we see on the
market today, VDSL will cost the same to the retail ISPs as ADSL products do

This is a fantastic move and one that TUANZ has been backing
for quite some time for a number of reasons.

Firstly, most residential users won’t see fibre for several
years to come. In order to help drive demand for fibre, TUANZ has long
maintained that VDSL is the perfect introduction to faster broadband services.
If I can get 30Mbit/s down and 10Mbit/s up on copper, when fibre finally does
arrive in the market I’ll be more interested in the 100/100 plan than the entry
level stuff. This is great for the retailer (better margins) great for the
network provider (better uptake) and great for the economy because we’ll have
more people keen as mustard to take up the fibre offering.

Secondly, it’s a way out of the copper wholesale price
debacle foisted on the industry by the government’s clumsy intervention in the
Commerce Commission’s wholesale price determination.

The Commissioner is required under the Telecommunications
Act (introduced by the current government in 2010) to in effect review the
wholesale price of ADSL services and move from a “retail minus” model to a “cost
based” model. That move would see the wholesale price of ADSL services slashed –
something that Chorus screamed blue murder about and which the government
foolishly accepted would hurt uptake of fibre.

As we discussed in our submission on the copper pricing,
VDSL is an unregulated service and the simple answer to Chorus’s woes is to
move as many customers over to that unregulated offering as possible, because
the margins for Chorus would be much better than under the regulated scheme.

EDIT: Chorus tells me it has not matched the regulated wholesale price but rather, added VDSL to the regulated price list. That means whatever the Commerce Commission decides for copper pricing VDSL is included alongside ADSL. This intrigues me – more on this in future I expect.

Thirdly, this should be great news for the retail ISPs, who
have a pent-up demand for faster broadband but a lack of opportunity to deliver
it in the market. By offering faster broadband today, the retail ISPs will be
able to build the products and services that we all want – content,
predominantly, for home users, but also cloud services for SME businesses and a
range of other things we don’t know we need yet.

Once they’ve built that customer base they will have a much
easier time of it moving them over to fibre once the network is deployed.

Chorus appears to be having a bob each way on the whole
question of migration – VDSL will only be offered until the middle of 2015 and
will stop selling it as fibre is deployed (where Chorus has the UFB – I wonder
if it will continue to offer VDSL in areas where it isn’t the UFB operator),
but by then we should be well on the way to migrating to fibre. We’ll have to
keep an eye on that – if the rollout slips then we’ll need to talk about
keeping VDSL on, but I have high hopes that we won’t need it. It’s a useful way
of “encouraging” customers to migrate – either go back to ADSL speeds or swap
to fibre. I know what I’ll be doing.

Of course, VDSL has its limitations (one of the reasons why it is not a
competitor to fibre). It’s only better than ADSL in a very short-run scenario
(less than 1000m as the copper lies) which means some customers won’t see any
difference at all and so won’t be encouraged to move over.

Ironically, given the Australian situation at the moment, we already
have in place a “fibre to the node” network that means most of us are a lot
closer to fibre today than we’ve ever been in the past. The upcoming Australian
election is likely to see a change in government and the chances are they’ll
scrap the NBN deployment in favour of the same kind of network that we already
have today.

This is great news, and now I’m left with just two questions – how much
will it cost and when can I have it?

Whither VDSL?

The UFB rollout is slated to take until the end of the
decade and arguments about whether that’s 2019 or 2020 aside, for most of us
it’ll be years before we see the fibre van roll up outside our homes.

For the foreseeable future, we’re locked in to a copper
world here in suburban New Zealand. While I fully support schools, hospitals
and businesses getting access to fibre as a priority (SME businesses stand to
gain the most from the UFB rollout and New Zealand will benefit from the
increased efficiencies that will bring) it does mean there’s a balancing act to
be maintained and unfortunately home users are on the wrong side of it.

But that’s OK because the advances in technology in the
copper world mean we should be able to see better services on our copper networks
in the meantime.

Over on Computerworld, a comment from Malcolm Dick (he of
CallPlus/Slingshot fame) caught my eye. Malcolm points to a recent announcement
regarding VDSL 2+ with vectoring:

“which gives download speeds of
100[Mbit/s] and upload speeds of 40[Mbit/s] on copper runs of 400metres long –
I would guess that covers around 800,000 households in New Zealand.”

Even standard VDSL as it exists today would be great – not
so much for the download speed but for the upload.

Currently, as you know, I’m running TUANZ from home – I have
a very good ADSL2+ connection and regularly get in excess of 15Mbit/s down.
This is fine for my uses for the most part, but the upload speed of at best
1Mbit/s is a killer. I’d be much better off with a 50Mbit/s down, 30Mbit/s up
speed which, given my location (less than 600m to the Mt Roskill exchange),
should be readily attainable.

Except there are very few VDSL sellers out there and worse,
the data caps are so incredibly low. It would cost hundreds of dollars a month more
to connect to a VDSL port, for no apparent reason.

Today, each VDSL port costs a premium of about $20 over and
above an ADSL port. Why? Because that’s the price the Commerce Commission has
set.  It’s a premium service, so it needs
a premium connection price, goes the theory.

Given the difference isn’t in the card in the slot but in
the backhaul and in the contention rates and so on , this is an artificial
price which keeps the retail price too high to be of interest to either
retailers or consumers.

Retail ISPs keen on selling VDSL will need to increase both
backhaul capacity and make sure the service delivers a higher level of quality
than ADSL2 does in order to attract customers. I get that, but an artificially
high price point that simply delivers extra cash to Chorus doesn’t really cut

And then there’s the “copper versus fibre” model. The
argument goes like this – ISPs should not be wasting their time and money
investing in copper because fibre is coming and copper is a competitor. We
should artificially inflate prices on copper to ensure customers are
“encouraged” to take up fibre instead.

That’s all well and good if we all have access to fibre
(which we don’t) and if there is absolutely no other incentive in making the
leap to fibre (there will be plenty of incentives) but that’s not the case.

Instead I would suggest faster copper speeds serve as an
enticement to fibre – that a customer who has already moved up to 30Mbit/s is
more likely to want 50Mbit/s or even 100Mbit/s when that becomes available.
They’ll have discovered the apps they need to make such speeds worth their
while and their service providers will also have figured out which services
customers want. All of that is good for the fibre rollout because when it
finally arrives at my doorstep I’ll have an incentive to move – an incentive
other than “copper’s so expensive now I might as well”.

The telcos I’ve spoken to are all keen to rollout VDSL
services. They see the upside to it as they’ve seen the upside to unbundling
the copper lines today. They get increased margin, customers get better
service, they win more custom as word gets around and everyone’s happy. There’s
investment, there’s competition and there’s a dynamism in the fixed line market
that we simply wouldn’t have believed only three or four years ago. We were
late to unbundling, yet it’s still delivering results.

If we are to hike the price of copper lines to encourage
migration to fibre, we run the risk of snuffing out the nascent competitive
market in our fixed line world – that at a time when two of the three largest
players are about to join forces. That would be a tremendous leap backwards for
the industry and we, the customers who can’t get on to the UFB fibre, would pay
in terms of service and price.

Copper isn’t a competitor to fibre today. It might be once
the UFB is built but for the next seven years or more, it’s simply the only
choice we have for bulk broadband services. It’s important we get the regulated
price settings right.