Barton on Fibre plans
February 12th, 2009 at 8:32 am by David FarrarChris Barton looks at the Government’s fibre plans:
We do know fibre-optic cable is at the centre of Joyce’s rewiring plan and the mechanism to get there is the much-vaunted public-private partnership.
So far so good. But just who does Joyce plan to partner with? And will he be seduced by Telecom’s wiles?
There’s no doubt Telecom would love to bed Joyce. Such a tryst – Telecom building, operating and no doubt, wanting to own, the new wires – would secure the firm’s monopoly dynasty forever.
I think Mr Barton needs to take less Viagra before he writes his column 
But it’s also clear such a dalliance would be a terrible mistake. Not to mention a betrayal of voter trust and a very poor return on taxpayers’ money.
And getting the maximum return on the Government’s investment is crucial.
If Joyce is still uncertain about what to do, he should re-read the very fine piece of analysis prepared for Internet New Zealand by Network Strategies. There, in glorious return on investment detail, is a simple answer to who the Government should partner with instead of Telecom – electricity lines companies.
Why? Because if New Zealand wants to rewire its aged telecommunications to a fibre-optic future, the electricity lines companies are the cheapest, most efficient way to do it.
Plenty of power poles and ducting are already going by our homes, already with resource consent, making it much easier to string or trench fibre to our doorsteps. How much cheaper? Without the lines companies, Network Strategies estimates a fibre network will cost $5 billion.With the lines companies on board, the cost drops to $3 billion – making the Government’s $1.5 billion investment look like a very realistic sum to fulfil its election promise.
A $2 billion difference is far from insignificant. I am of course on the Board of Internet New Zealand, but we were as surprised as anyone I think that the research turned up such a massive price difference.
There are other reasons why this is very good idea. Most of the 27 lines companies in New Zealand are owned by consumer trusts – an ownership structure that tends to be sympathetic to longer payback periods and fits well with local initiatives that recognise the importance of broadband to a region’s economic and social wellbeing. And some, such as Vector and Counties Power, are already providing fibre to homes or businesses.
And even more importantly, lines companies do not tend to be in the business of providing services over their lines – they are an access provide rather than a service provider. This is actually crucial as you then avoid a vertically integrated monopoly, and then multiple service providers can comptere and offer different packages over the fibre.
But there are two problems. The first is what such a network would do to Telecom’s share price. There’s no doubt it would have an unsettling effect. But if the new wires are “open access”, it’s hard to see how Telecom can complain too much.
Open access means companies get equal access to the infrastructure on non-discriminatory terms and conditions, so all comers are offered the same wholesale products or services at the same price and equivalent conditions. In other words, consumers get choice and Telecom competes for business with everyone else, probably getting a whole lot more efficient in the process.
The impact on Telecom is a real issue – not just in terms of share price, but also their fibre to the cabinet plans. Would they continue? Would they sell Chorus if the line companies get the nod to build the fibre to the home network? Could there be a win-win – maybe some partnership with lines companies and Telecom/Chorus? So many issues, which is why a decision should not be rushed.
Related posts:
- Focus on Fibre plans
- Fibre to the Home Report
- TPS on fibre plan
- Telecom proposes national fibre solutions
February 12th, 2009 at 8:44 am
Fibre to the door is a Utopian solution that I don’t think will ever happen in NZ, it’s just not cost effective. A much more realistic plan would be Fibre to the local cabinet (end of each road), and using the existing copper for the last leg (eg VDSL2). The downside of this would be visual pollution “eek look at all them ugly cabinets in our neighborhood.”, so this probably won’t happen either – so we will still be stuck where we are, in the dial up ages.
Vote:February 12th, 2009 at 8:55 am
>>but we were as surprised as anyone I think that the research turned up such a massive price difference.
even given that Mercury Energy? has been bigging up their comms network planms for several years?
Vote:February 12th, 2009 at 9:03 am
coventry, Telecom are already rolling out such a “Fibre to the node” solution, and most of the cabinets are below ground level. Lines companies can only get away from the visual pollution by “hiding” the fibre amongst the existing visual clutter of their electricity lines…
In all of this discussion, nobody seems to understand that there are two aspects to be discussed, yes the access network is key and “Fibre to the Home” is a easy concept to grasp but if we give 100Meg to 75% of the population the core network isn’t going to cope.
Whatever and whoever provides the last mile access, only Chorus (Telecom) and TelstraClear can realistically provide the core transmission so this picture of “Telecom monopoly or Telecom goes bust” is simply wrong.
Vote:February 12th, 2009 at 9:12 am
LESS Viagra?
Vote:February 12th, 2009 at 9:35 am
The concept of stringing last-mile telco infrastructure across the electricity distribution network has been looked at by the industry at several junctures, but always seems to come up short.
On the surface it seems a good fit … the lines networks already run wires to every building, and they have poles and other infrastructure that can be taken advantage of. But really the good news stops there. And that’s just not enough good news.
Straightforward difficulties include … the lines companies have little or no experience of fibre and of telco technologies, they typically lack other crucial infrastructure like workable locations for cabinets, Pops and backhaul connections, and there’ll be strong resistance from residents to stringing additional cables along the ungainly poles (just ask TelstraClear).
But the really significant difficulty is this … the economics of two competing last-mile networks just don’t work. The basic numbers are very clear, I can’t see how a new-build fibre network can be price-competitive with Telecom’s existing copper. And despite geeks best dreams the market research says less than 10% of the population is prepared to pay a premium price to have fibre instead of copper. And even that 10% of the population can’t consistently articulate why they **need** fibre, they just think it will somehow be better.
Ask yourself this … if it was straightforward for lines companies to put fibre infrastructure in place and make money from it then why isn’t Vector (the most fibre-ambitious utility in the country) running FTTH in Remuera and Parnell (the most wealthy suburbs in the country). That they aren’t should be clear signal that the economics don’t work. And they won’t work even if it’s our taxpayer dollars funding it rather than Vector’s shareholders dollars.
I do think an investment in fibre infrastructure is a good thing. I do think Government contribution to accelerate it is a good thing. I really don’t think many people barracking for it have stopped to think about the economics of it. And I am very concerned that the Government is going to waste $1.5bn of our taxpayer money on something that will end up damaging not helping the industry.
Vote:February 12th, 2009 at 9:44 am
Tried to add a paragraph to the previous post but the editing timeout is set too short
Lest I be thought to not be onboard with this FTTH policy … I do believe there’s a path for the Government to put their $1.5bn into fibre in a way that (i) gives a positive return to the Govt and other investors, (ii) doesn’t destroy Telecom (which would genuinely be a bad thing, someone has to provide service to the other 25% of the population who aren’t tagged for the fibre master-plan) and (iii) retains the investment incentive for the rest of the industry.
But that option doesn’t include lines companies. And it needs a sensible rapprochement with Telecom in order to not end up destroying value for both the Govt and Telecom’s shareholders. And it needs geeks to be realistic that they are about 2-3% of the population, and what technologies they might dream about having aren’t necessarily hugely important to the other 72%-73% of the population this policy is trying to cover. And we need to have a healthy degree of “but they would say that” scepticism when the industry, TUANZ and other vested parties speak.
Vote:February 12th, 2009 at 9:54 am
If we go with lines companies we may have a standards problem. Having a different fibre network in every region in NZ would be a hindrance to this market – sure you’d have open access, but open access isn’t much use if you have to have knowledge of the detail of each region to make the network operate.
If we decide that we’ll deal with this by the government just setting the standards – we’re on a hiding to nothing. The government setting the standard for internet technologies – what is the chance that they’ll pick the right technology v’s some superficially attractive but ultimately dead-end technology? The market is much better at these things.
I think fibre to the cabinet is all we need at the moment, and I think Telecom are probably in the best position to deliver that to us. If the cost of them doing that is a true structural separation of lines and retail, then that is probably in the best interests of taxpayers, consumers and Telecom. Once we have FTTC, we have the infrastructure to start rolling out FTTH as and when demand appears for it.
To describe why I think copper for the last mile is enough, we need to consider what it is we’d do with something faster than copper.
I continue to note that VDSL2 (over copper) can deliver 100Mbps bidirectional. Many people don’t understand just how fast 100Mbps is. Most people’s home network can’t handle 100Mbps – your typical wireless network can do around 50Mbps, your typical wired network will do 100Mbps.
Assuming you have a home network that will get you up to 100Mbps, the next question is what you’d possibly use that bandwidth for. Almost no home computers are capable of generating data at 100Mbps – you can’t read from your hard drive that fast. If you are trying to video conference, even high definition video runs at around 4-5 Mbps. You could maybe run 10 video conferences simultaneously in high def. No idea why you’d want to do such a thing.
For downloading, the question is what you’d download that would use that bandwidth. You can watch HD TV real time with around 4-5 Mbps. You might have 3-4 TVs in the house, so there’s 20Mbps. You can’t download TV and store it at 100Mbps – your hard drive won’t let you write it that fast. You could maybe video conference again, and maybe that video conference is with 10 people in different locations, all in high def. But it just doesn’t make sense.
So if we’re struggling to work out how we’d use the copper technologies that are available today, why would we want to lay new cable that gives no additional service to anyone? In 5 years time maybe someone will have a use for the optical cable – but then in 5 years time we’ll be on to VDSL3, whatever speed that may offer.
Vote:February 12th, 2009 at 10:12 am
PaulL … cheers, when I wrote my initial comments on the problems with the lines companies I knew there was one at the tip of my tongue but I couldn’t think of it. It was the “balkanisation” problem with different lines companies each taking subtly different paths with the implementation.
Ta.
Vote:February 12th, 2009 at 10:14 am
Satellite is the answer for NZ.
As long as the tariffs make sense.
Vote:February 12th, 2009 at 10:18 am
One of the difficulties for FTTH here in NZ is that the “triple play” idea is pretty much a dead duck here. There’s routinely talk about how FTTH will allow for video as well as voice and data. But there are two main problems:
First, VDSL is more than fast enough to do video too, so FTTH isn’t a must have.
Second, it’s really unclear just what video content people would be accessing. Sky, TVNZ and Mediaworks have already locked up the high-value content, and they’re already up for the costs of satellite broadcasting that reaches every part of the country. So why would they take on extra distribution costs??? Any new entrant is going to have to scratch around with low-value programming that homeowners aren’t prepared to pay for.
Sure, you could artificially make it happen by the Jim Anderton approach … All Black games have to be open-access … which’d let any video-over-fibre guy start to chisel away at Sky. But does that really help consumers? It certainly nukes Sky’s share price, and that’d rile a lot of people up. Including Rupert Murdoch.
Vote:February 12th, 2009 at 10:35 am
Just read the other Herald article today by John Drinnan titled “Pressure to spell out broadband plans” and he raises a good policy point that I know is getting a lot of discussion in the industry at the moment …
It’s quite unclear whether the Nats are pursuing FTTH for a business/commercial objective or a social objective.
If there’s a social objective to just ensure that a broad swath of the population have access to fibre then that steers you towards one set of choices … possibly including some choices that says getting a commercial return on the Govt’s $1.5bn isn’t crucial.
But if there’s a business/commercial objective that says NZ Inc will be more profitable if we invest in fibre, then that steers you towards another set of choices … possibly including some choices that say FTTH isn’t actually important, it’s all about improving international links, running FTTBusiness etc etc.
I’ve had three senior people in the industry, all from different companies, all express that same question to me in the last few months. No one is quite sure what the Government is trying to achieve with this policy (beyond getting elected of course!).
Vote:February 12th, 2009 at 11:36 am
RakiaGeorge said “Telecom are already rolling out such a “Fibre to the node” solution, and most of the cabinets are below ground level.”
Well the Cabinet’s they are rolling out in Auckland a) aren’t underground and b) are huge
See: http://www.chorus.co.nz/f68,9506/9506_Chorus_Cabinets.pdf
And sadly even though I see Chorus guys working (shock horror) on the way to my work, they wont be doing our Exchange till July 2010.
Vote:February 12th, 2009 at 11:45 am
Thanks Virtualmark and PaulL for explaining a few facts, does get confusing sometimes. We use satellite broadband and does everything we need it to do, so far. I guess there are business that would find satellite to slow but surly there wouldn’t be to many. Satellite is expensive and we have had issues with heavy rain drowning the signal but this happens very rarely. I agree with Glutaemus Maximus, given our small and widely spread population and challenging topography satellite is probably the only viable option.
Vote:February 12th, 2009 at 12:12 pm
side show bob … very interested to hear you use satellite, can I ask where you live? And what do you use for the uplink part? Does that go by good old copper? Satellite is a good solution for people in remoter areas, so I don’t diss it.
The advantage of satellite is that, as you say, it can cover the whole country on day 1.
The disadvantages of satellite are that the overall total bandwidth is well down on what’s achievable with a fibre network, there’s quite a lot of latency, there’s a real launch risk with any satellite, and if it goes Phhhtt then it’s hard to get a serviceman out that night.
I do think it’s got a place in the mix. But probably only ever serving bandwidth out to the furtherest-flung points in the country. My mother-in-law lives in the Marlborough Sounds, boat access only, and satellite would be a good option for her.
Vote:February 12th, 2009 at 12:40 pm
My folks have satellite broadband at home. It is OK, and they’re rural so the cost of FTTH for them would be astronomical. But they are probably in the 20% of the population that aren’t covered by John Key’s plans.
For those that are in relatively dense areas, then fibre somewhere makes sense. The question is whether we’re talking fibre to within 300-400m of your home, then copper for the last little bit, or whether we’re talking fibre all the way into your doorway. A very large proportion of the cost is in that last 300-400m, conversely, most of the benefit is in getting the fibre to the cabinet. Any rational cost benefit analysis says “lets do the cheap bit that gives us 90% of the benefit, and we’ll leave the last 10% for some later time when we work out what it is good for.”
Unfortunately, a political analysis says “lets have a big idea that can get us elected.” I still think National should focus on “fast broadband to 80% of the country”, and stop being so hung up on whether that fast broadband comes over copper, over fibre, or over satellite. Nobody cares what technology we use, we just want our nature movies to come down faster.
Vote:February 12th, 2009 at 12:50 pm
PaulL … in that regard I was very interested to see the language in Stephen Joyce’s press release last Thursday.
The word “fibre” doesn’t appear at all … it’s now “ultra fast broadband”. And the word “home” doesn’t appear either … it’s now “ultra fast broadband to the premises”.
I suspect that’s quite deliberate changes in language, and presages a broader approach than just fibre to the home.
Vote:February 12th, 2009 at 1:08 pm
Hi virtualmark, I live in rural Taranaki. For years we suffered with dial up and were told that we could not expect broadband over any land line for at least ten years or more. Wireless = useless, the only option was satellite. Went with Farmside and rocket broadband. Just did a speed test, 991 kbps download, 128 kbps upload, no copper involved all goes up into space. The speeds do vary but the download speed is usually consistent. Sure it’s probably not the fastest system in the world but it beats the shit out of 46kbps on dial up.
Vote:February 12th, 2009 at 4:59 pm
Solution is:
Cities and Towns:
1) Fibre to the curb
2) VDSL to the home
Rural
Vote:1) Fibre as far as it can go
2) High speed wireless links to suitable points
3) Mesh network wireless to spread it
4) Satellite for truly difficult places.
February 12th, 2009 at 9:48 pm
VDSL and ADSL2 only really work if you are extremely close to a cabinet or an exchange. Otherwise you’re maxed out at around 8Mpbs (theoretical max). I’d be happy with fibre to the node, CAT to the home
Will look much prettier if it has to be hanging from the line, you can get it in a whole bunch of colours 
Vote:February 13th, 2009 at 12:50 am
Extremely close meaning how close? In Canberra I had VDSL @ around 15Mbps (Internet @ 8Mbps, plus streaming TV), and I think the cabinets were within 300m or so of the houses. Works fine.
Vote: