Fallow on Broadband

February 26th, 2009 at 9:13 am by David Farrar

Brian Fallow makes some good points on :

Going further than the current programme of laying fibre to the cabinet, taking fibre to the home is estimated to cost a further $6.2 billion, of which the Government is contemplating stumping up about a quarter.

Brian is quoting the Castalia report, which I covered on Saturday. That estimate is based on using telcos only to do fibre to the home. It has been estimated the cost drops by around $2 billion if you bring utility lines companies into the equation.

But we have something of a tradition of being penny-wise, pound foolish when it comes to infrastructure investment.

We are paying a stiff price for neglecting investment in the national grid.

Auckland would be a better-functioning city right now if it had gone for light rail when Sir Dove-Meyer Robinson advocated it and/or had completed its highway network.

Indeed.

Sceptics of the Government’s plans are on firmer ground perhaps when they question whether they would pay off in lifting the country’s unimpressive productivity levels. Surely fibre to the workplace is what counts there.

However the boundary between home and workplace is becoming fuzzier.

If the aim of this exercise is to deliver infrastructure that will be as important for the coming century as roads and power lines were for the last one, then part of that future-proofing should take account of carbon costs and the gains to be had if telecommunications can be substituted for transport.

When your home Internet connection means you can access the office LAN as quickly as if you were in the office, and when it means you can be video-conferenced to one or more colleagues more quickly that it would take to walk down a corridor, then you will have a significant exodus of people going from work to working from home.

Details about how it will be structured and intersect with existing players are on the non-existent side of scant at this stage but Communications Minister Stephen Joyce is promising more information within a matter of weeks.

“It is a plan to proceed over 10 years, to achieve a step change and do it faster than the market would otherwise do it,” he said.

“The argument is it provides a competitive advantage to New Zealand as a whole to get this infrastructure in ahead of some other countries.”

It is not too much of a simplification to say that, historically, the things which have really propelled the New Zealand economy forward have been technologies which overcome or mitigate the tyranny of distance, like refrigerated shipping in the 1880s or jet travel in the 1960s.

It is hard enough to achieve productivity gains through economies of scale or scope given our small size and remoteness.

We are the only OECD country that is both very remote and very small. To stay competitive we do need to be ahead of the pack when it comes to technologies that, as Steve Joyce said, mitigate the tyranny of distance.

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37 Responses to “Fallow on Broadband”

  1. jacob van hartog (309 comments) says:

    The Governor general is to have the rebuilding of Government House, which is an earthquake hazard but on hold , yet we are to have ‘fibre to the home’. Its absurd , the tyranny of distance is the Pacific not making sure every house in Norsewood has 10 GB/sec

    [DPF: 100 MB/s should do. And the G House is not on hold, just had 10% trimmed from the budget]

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  2. wreck1080 (3,794 comments) says:

    “then you will have a significant exodus of people going from work to working from home.”

    I am self employed and largely work from home. I don’t think there will be an exodus.

    First, is the case of trust. Do you trust your employees are actually working? I’ve known cases of employee dismissal for skiving off while supposed to be working from home.

    More importantly is the human relations side. Working from home can be terribly boring. You don’t get to discuss ideas with workmates and can become disassociated to some degree.

    I could see people taking the odd day here an there to work from home, but not an exodus. But, even if we can get 5% of the traffic off the road each day that would be great.

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  3. PaulL (5,977 comments) says:

    Sorry DPF. 100Mbps can be done without fibre to the home – fibre to the cabinet does it. The tyranny of distance is, as jacob says, the pacific. I can have 100Mbps from my house to my ISP, but there is no way on current prices I can connect to the US or to India, the places I need to connect to. At 100Mbps I’d consume 12.5 MB of data per second, or 45GB per hour. So that’s what, $50 per hour? We’re dreaming if we think that the last mile into the home is the problem that NZers have in running high speed internet.

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  4. virtualmark (1,513 comments) says:

    Fibre to the home is a great ambition, and the geek in me would like a fibre connection to my home as much as DPF and Ernie Newman would. But really, please, can someone tell me what they would use FTTH for that they couldn’t do over VDSL? And can they tell me how much more they’d be prepared to pay over today’s rates in order to have that new service?

    The vocal geek few represent less than 2-3% of the population. That isn’t enough customers to make FTTH work for investors. And by investors I mean taxpayers.

    FTTH can work, but realistically probably only if it’s done in concert with the existing telcos (which basically means Telecom) as an augmentation to their current capex plans, not as a separate standalone competitor.

    And, being nice to Mr Fallow, while I agree life in Auckland now might be nicer with light rail and a full motorway network I think he’ll find that even in Sir Dove Myer-Robinson’s day people agreed they would be nice things to have. It’s just that when it came to paying for them people baulked at the cost, and decided there were more important things to fund. Saying you want the benefits of something but handily ignoring the question of how you would have paid for it is a bit simplistic.

    [DPF: Actually the economic research is that enough people would take up FTTH if built more cheaply through utility companies. It is inevitable we will transition from copper to fibre, so why waste money on extending copper technogies]

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  5. virtualmark (1,513 comments) says:

    jacob … off-topic, i know … but right from when I first read of the plans to refurb Government House I have been astounded at the amount of money being poured into that place. $47 million! WTF???

    Gary Lane brought all of the Sultan of Brunei’s houses in Auckland for $35 million. Including the land. And that included Waimanu, reputed to be the most expensive home in Auckland. Likewise I’d say the most expensive homes in Wellington sell for no more than $4m-$5m, again including the land.

    So $47 million for a refurbishment seems way out of whack. Methinks it would have been a lot cheaper to put a bulldozer through the existing building and start again. And really, it’s not an architectural wonder that needs keeping.

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  6. slijmbal (1,223 comments) says:

    Interesting he used the example of light rail

    there are a huge number of arguments about the effectiveness of light rail and from what I’ve seen of it in the modern era it comes across as the most expensive way to move the smallest number of people from A to B.

    On a similar note the herald published figures around costs of the northern busway in Auckland – it included the hundreds of millions to build (but not the disruption it caused) and how many seats were currently busy per day in the rush hour (rush hour being the only time that matters for this facility) – on our back of a fag packet calculations it looked cheaper to helicopter people in to work. Similarly, the bus stations for the northern excessway had insufficient parking from day one, they’re sat near the traffic jams one is trying to avoid by using public transport so are hard to get to and there is no reasonable supporting public transport to get to the northern excessway – it’s pretty though.

    This does highlight that infrastructure spending needs to be very carefully scrutinised as you’re making 30/40/50+ year decisions.

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  7. virtualmark (1,513 comments) says:

    DPF, I’d really like to see that economic modelling you refer to.

    Broadband uptake is still less than 30% now (it was 20% in last June’s OECD figures, which actually come from just under a year ago). In the 75% of the population the Nats are targeting it might, with a tailwind, be at 40%.

    The industry will tell you their experience has clearly been that broadband uptake is highly dependent on cost, and have a very clear idea of the supply-demand curve for broadband. If you look at the broadband plans on offer they range from $30/month to $80/month, and I have been told by people in the know that the average spend is around $45/month. Certainly $50/month is seen as a key threshold … you have to have good offering below that level in order to get take-up.

    My take is that a utility backed fibre network might get 3-4% take-up straight away from the geeks and early adopters, and then need to fight it out with the xDSL providers for the rest of broadband users. Industry experience to date says those users will choose their provider on price.

    Let’s say it costs $1,200 per house for fibre to the kerb, and then another $1,200 to actually connect them. I really don’t see that a utility-backed fibre network can absorb those costs, plus the costs of the (supposedly higher) bandwidth the fibre users will consume, and still come in at less than the $30/month or $40/month most of the current broadband users are paying.

    As I’ve said before, if utilities could make FTTH economics work then why isn’t Vector rolling it out in Parnell and Remuera today?

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  8. virtualmark (1,513 comments) says:

    DPF … I do agree with you though that it’s inevitable we will transition from copper to fibre. And I’d love a fibre connection to my home, albeit I’m not prepared to pay extra for it.

    But I think that the natural time for that transition is when there are clear plans to roll out services that need the extra bandwidth. VDSL2 can deliver a true 30-40Mbps up and down, at basically today’s cost structures.

    Fibre can deliver a true 70-80Mbps up and down, at a higher cost structure. We’ll eventually move to it, but surely the time to do that is when we can see VDSL2-type speeds are going to be a bottleneck … and by that I mean a bottleneck for more than just 2-3% of the population.

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  9. bevanjs (34 comments) says:

    FTTH could well revolutionise the way a small but reasonable proportion of the workforce operates and where they operate from.

    Basically anyone who gets dressed up to drive to work to sit in front of a computer all day then drive home again. Maybe not such a small proportion of the workforce?

    There’ll need to be a shift in management thinking to support this. Give it time.

    FTTH can provide the level of performance for seamless/thoughtless internet phone and video allowing some services/small businesses to operate in the provinces with much lower overheads for example.

    Maybe loads of smaller players could be offering these communication service with less barriers to entry. Gee I wonder why the big players want to do it at their own pace?

    This could mean access to more affordable existing housing and a revitalising of provincial NZ, easing pressure on city infrastructure/expenditure.

    … The current industry “heavyweights” might be able to give me half of what I need in 5 yrs time, whoopee! They’ll make me beg and pay well for it while not delivering a tenth of what’s available in other countries.

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  10. JC (932 comments) says:

    .. and I’m getting tired of the argument that expensive fibre will be used in non productive ways..

    Well, when I drive down a highway being so called productive, I pass hundreds of cars which I can pretty safely say are not being productive, ie, some are driving to get a bit of nooky (the porn equivalent of the net), some are visiting family and friends, some are shopping and so on. In between are the vehicles doing the heavy lifting of productivity, and in both cases all are paying for their road use in one form or another.

    It’s thus immaterial to say that fibre won’t produce 100% productivity.. if we take that attitude we wouldn’t have built the damn highways in the first place and relied on horse and cart.

    Lets stop the argument and just do it.. the Govt will still get it’s whack somehow and we’ll actually allow people the same degree of recreation that they get from driving the roads.. heaven knows, NZ is notable for one of the longest working hours in the OECD,, so it isn’t as if they haven’t earned some pleasures, and it’s a selling point for immigrants.

    JC

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  11. virtualmark (1,513 comments) says:

    DPF … apologies, the figures in my post at 11:50 aren’t right … teach me to try to dash that off while doing 2 other things and heading for a midday deadline. What I should have said is …

    Let’s say that 40% of the 75% of NZ homes the Nats are targeting already have broadband. Those homes are paying about $45/month for access to the copper and a dialtone. And then $30-$50/month for broadband. Total spend on telecommunications around $75-$100/month.

    The telco’s will tell you their customers aren’t prepared to spend much more than that. The market is **very** price sensitive. People like having faster broadband, but they tend to take it up as and when its price drops into that $75-$100/month envelope. Apart from a small percentage (like me) who’re prepared to pay another $30/month or so for uncapped downloads and higher data caps. But even then, very few people are prepared to pay more than about $120/month for voice & internet.

    So any utility-led fibre network, plus its telco partners, inevitably has to either (i) fit to that $75-$100/month envelope or (ii) offer some new unique service that people just have to have … otherwise they won’t win customers away from the incumbents.

    Option (i), that they fit within the $75-$100/month envelope, is tough. A new-build fibre network will cost a lot more than an already-in-place copper network. Even with 100% take-up I don’t think it could be profitable at the price of the existing copper. And realistically it’s going to get no more than 30%-40% take-up at the absolute best.

    At 30-40% take-up you’re talking around $4,500 of install costs per customer, and that’s being kind. Let’s say it has a life of 10 years (fibre longer, CPE less) and you need a 10% return on capital. That’s $75 a month straight off, just to be connected, before you add the operating costs, call charges, data charges etc etc.

    Option (ii), that they offer some new unique service that people just have to have, is really unclear. Sure, people talk about video. Except that’s content driven not broadcast driven, and all the high-value content is locked up in Sky, TVNZ & Mediaworks, who’re already paying for a satellite that can broadcast HDTV to 100% of the country … why would they pay big $$$ to ride over fibre as well? For them it’s just more costs with no marginal revenue.

    Sure, you could talk about video-on-demand. Except it doesn’t exist yet, and I don’t want the Govt using $1.5bn of taxpayers money on “If we build it they will come”. And VDSL2 has enough bandwidth for a few HDTV streams per house at much cheaper pricing than fibre. And again, the big $$$ from vid-on-demand will go to the content owners, not to the network owners. So that’s not likely to make a step-change to the economics of the fibre network either.

    [DPF: I suggest you read the Network Strategies report that deal in depth with issues of pricing and take up]

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  12. bevanjs (34 comments) says:

    virtualmark (617), I’m not a VDSL2 customer so have no real world experience of it’s performance so I grabbed this from Geekzone.co.nz regarding Telstra’s new product I believe. “When ideal conditions are met – including being in a short distance from an exchange – the service can offer download speeds up to 30 Mbps and upload speeds up to 7Mbps.”

    That’s not flash by any stretch! It’s not even slow LAN access let alone if we dump some rich content services on top.

    Could you please explain where your 10 years comes and quite what it relates to?

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  13. PaulL (5,977 comments) says:

    DPF, two things.

    1. I’m not certain that fibre is inevitable. At the moment it looks the most likely candidate, but history is full of areas where someone invests well ahead of the curve, only to end up with stranded assets when a new disruptive technology arrives. Unless the need is here today, I am very dubious of a huge investment.

    2. Fibre to the cabinet is a good stepping stone. It isn’t like this is a choice between build it all, or build none of it. We can build the lower cost portion that gives the highest value (fibre to the cabinet), and hold off on that last leg to the home for now. We get 30Mbps today, and have the infrastructure in place that at a later date we can run fibre the last leg. There is no wasted investment, there is less chance of stranded assets, and it gives us today (and for the next few years) everything we need.

    On where government should spend money, I think we need to work out what they are trying to achieve. If we want to allow people to telecommute, well 30Mbps is heaps for that. If we want to allow people to offer services from NZ to the world, that cannot be offered today using today’s solutions (particularly using servers hosted in the US), then you are talking about something very different – you’re talking about the amount of bandwidth out of NZ, and the cost of that bandwidth. The NZ govt could do something about that, and it would make a very material difference.

    The cost of the internet to the average punter has two components. The cost for a wire to be connected to my house, and the cost for my data to come from “the cloud” down that wire. The copper line cost is about $15-20 per month, irrespective of bandwidth. The fibre line cost would be at least triple that on VirtualMark’s numbers. The bandwidth cost is around $1 per GB, looking at Xtra’s current plans. So for someone trying to run at 30Mbps (i.e. copper speeds), assuming they have a sustained data rate of around 10Mbps for 10 hours a day, then it is costing them around $45 per day, or $990 per month if they work 22 days a month.

    In short, I’m arguing that our problem today and in the nearish future isn’t bandwidth into the home, it is the cost of connectivity to the cloud. This is partly why NZ has so few “all you can eat” plans. If the government want to help, that is where they should target. Getting us all a 100Mbps connection isn’t going to help – it is going to change my $990 a month bill into $3,000 a month. That is completely unsustainable.

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  14. PaulL (5,977 comments) says:

    bevanjs: I think you’ll find Telstra’s product is ADSL2+. Which is not the same as VDSL2. I believe VDSL is available out to 100Mbps, although in the real world around 30Mbps bi-directional is being experienced. It does rely on the fibre getting to within 300m of the home – in other words, fibre to the cabinet, not fibre to the exchange.

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  15. virtualmark (1,513 comments) says:

    bevanjs … PaulL beat me to it a bit.

    VDSL2 is the newest member of the DSL family, and probably the iteration that nearly all telcos will migrate to. The costs to install VDSL2 aren’t significantly different from the costs to implement ADSL2 … perhaps a little higher now but they’ll drop with economies of scale.

    VDSL2 has a “headline” capacity of 100Mbit/s both up and down (ie it’s symmetric). But in practice I’d say halve those figures for the actual deliverable capacity between you and your nearest telco cabinet.

    Then the fun begins … your mileage will vary in terms of the amount of bandwidth your telco/ISP provisions from the cabinet to the exchange then across the backbone and then across any international links. I’d wager that it will be a long time before we see VDSL connections running even at their probable true speed of 50Mbit/s – there just won’t be the upstream links in place to consistently deliver that speed to any significant number of users. The real bottlenecks are not in the last mile, but that’s where everyone is asking for fibre …

    FTTH has a theoretical capacity of about 100Mbit/s. In practice the actual capacity depends on whether the fibre is “active” or “passive”, and if it’s passive (which it all but certainly will be) how many other people you’re sharing the fibre with (between 32 and 128 with today’s tech). But the actual capacity will be less than 100Mbit/s. And it will have exactly the same upstream bottlenecks that VDSL faces.

    Re the 10 year life. Fibre itself has an operating life of about 20 years. Over time breakages in the fibre impair the signal, and eventually the type of fibre is likely to become incompatible with the then-current terminal equipment. The terminal equipment that’s connected to the fibre, at the exchange, in the cabinet and at the home, probably has an operating life of about 5 years. Over time newer tech comes along that can deliver faster speeds, manufacturers stop supporting old kit, people spill coffee over the box at home etc etc.

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  16. PaulL (5,977 comments) says:

    Further, bevanjs, 30Mbps is actually pretty flash. The average ethernet network is 100Mbps, there are still plenty around at 10Mbps, and a few lucky souls have gigabit. The average wireless network is running at 27Mbps or maybe 56Mbps.

    But, interestingly, that ethernet bandwidth is subject to a collision ratio, so the theoretical maximum is about 64Mbps. And that covers both directions, so the theoretical maximum for a wired ethernet network in your house is around 32Mbps up, 32 Mbps down. In other words, almost exactly the same as VDSL2 (which isn’t subject to collisions). The wireless would do around 10Mbps up and down. In other words – VDSL2 is pretty flash as compared to your local network.

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  17. bevanjs (34 comments) says:

    It’s certainly VDSL2
    http://www.geekzone.co.nz/content.asp?contentid=7962

    The key is that the incumbents need to be pushed on this issue otherwise we’ll get delivered their highest yield model.

    Waiting to see what next year’s next big thing means another year using last years, just like punters waiting to buy the next model computer because if they buy one now it’ll be out of date in 3 months.

    I think you’ll find that as a natural part of the project they could well find themselves re-evaluating the last step if better tech makes itself know at the time.

    Nice to see the NATs aspiring to push this huge potential growth area.

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  18. virtualmark (1,513 comments) says:

    DPF, to be fair I’ve speed-read the Network Strategies report, but not had the time to read it end-to-end in depth.

    The core analysis of things like technology options, installation costs, take-up rates, customer willingness to pay etc etc is consistent with the in-house analysis I’ve seen from the telcos. The numbers are slightly different, as you’d expect, but in the same ballpark. But the Network Strategies report makes several worrying points.

    First, they assume the Government’s $1.5 billion is a grant (page iii and page 102). Frankly, as a taxpayer that makes my blood boil. I want the Government to get a commercial return on every dollar they put into this. I’m okay if they’re prepared to accept a lower rate of return than, say, Telecom needs. But they have to get their money out. Why should the Government flush $1.5 billion of my money down the drain on fibre to the home?

    Second, they assume the commercial operator will take a 15-year payback. I spend a lot of time working with those commercial operators, and I can’t believe their boards would approve a payback period half that long.

    Third, their analysis shows even worse figures for cost-per-connection than I’ve assumed. Exhibit 0.2 and 8.13 are not pretty reading.

    Fourth, their analysis shows that FTTN/VDSL2 is by far the best bang-for-buck See Exhibit 8.11 for example.

    DPF, I thoroughly support the Government taking steps to promote broadband and to incentivise a move to fibre. But giving away $1.5bn of taxpayers money to try and make that happen seems an atrociously poor stewardship of the public purse.

    [DPF: The Govt has made very clear the $1.5b is a subsidy or grant, and not a commercial investment. And you may not like it, but that was the clear policy they got elected on. The 15 year payback period is of course debatable, but infrastructure investors do tend to go in for the long haul more - and the chance to get the Govt money provides an incentive also.]

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  19. virtualmark (1,513 comments) says:

    DPF, FWIW here’s my thoughts on how the Nats could achieve their goal.

    1. Force Telecom to structurally separate out Chorus. Do it as a spin out, giving existing Telecom shareholders a share in Chorus and a share in Telecom.
    2. The Government can then subscribe for $1.5bn of new shares in Chorus. Instantly making them the largest shareholder (prob around 40% shareholder).
    3. Allow Chorus to then go out and raise further debt funding to leverage the Crown’s new $1.5bn of equity. They should be able to get at least another $1.2bn from debt funding.
    4. Rejig Chorus’ FTTN investment plans. Ensure that at minimum it’s FTTC/VDSL2, and that whereever the conditions & geography allow it’s FTTH.
    5. Make it a priority for Chorus to run fibre to every school.
    6. Regulate to require that every time a road surface is lifted that Chorus gets access to trench in some duct.
    7. Regulate to require that every new subdivision must have duct laid as part of the development.
    8. Regulate to require that all ISPs must connect to local internet exchanges where those are available.
    9. Reinstate a version of the Broadband Investment Fund to ensure there’s a pool of money for outfits that want to run fibre backbones to the more distant parts of NZ.

    I think that would end up delivering high-speed broadband to most NZ premises over the next 10 years. And it does it without NZ Inc wasting money with 2 competing last-mile networks. And it does it without destroying the economics of Chorus, meaning that it still has money to spend improving services to the other 25% of NZ that’s not covered by this fibre master-plan.

    It does mean doing a deal with Telecom, which many in the industry will object to for religious reasons. But then, it’s not a deal that Telecom or Paul Reynolds would be happy about.

    [DPF: I agree with a lot of that, in that Chorus, if sold, would be the major part of the solution. It might even partner up with lines companies and/or have them invest in it. The hard part is getting Telecom to sell Chorus]

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  20. PaulL (5,977 comments) says:

    Ah, TelstraClear, not Telstra. I thought you were quoting from Australia. That is certainly not the best speeds that can be attained over VDSL2, so I can only presume it is related to the equipment that they are using.

    Leaving that aside, 30Mbps is still about as fast as your home LAN would be able to absorb anyway, unless you’re running Gigabit.

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  21. virtualmark (1,513 comments) says:

    bevanjs … just picking up on “the incumbents need to be pushed on this issue otherwise we’ll get delivered their highest yield model”.

    I know it’s fashionable to criticise the big telcos in terms of “They take ages to roll out new technology because they’re trying to squeeze every last minute of use out of their old kit before they begrudgingly spend on new stuff”. But whenever I hear that I kind of have to ask back:
    * Do you replace your computer every time the manufacturer releases a new model? Or just every 2-3 years when you think it’s finally got too slow to live with?
    * Do you replace your TV set every time the manufacturer releases a new model?
    * Do you replace your car every time the manufacturer updates it?

    It’s not wrong for the telcos to decide they can’t afford to buy every new generation of kit. The development cycles are shorter (ie faster) than the lifetime of the product. If they tried to keep up with the rate new tech comes available then we’d be paying through the nose for their services.

    Big business doesn’t set out to make evil decisions to spite its customers. But it does tend to make hard-nosed decisions on what rate it can afford to keep spending at. Just like we all do individually too.

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  22. virtualmark (1,513 comments) says:

    DPF … Telecom won’t want to sell Chorus.

    But the Govt has a great negotiating tool. They just have to say “We’re going to spend $1.5bn whether you’re with us or against us. If you’re against us it’s going to wipe a tremendous amount of your shareholders’ value out. If you’re with us it’ll probably increase the value of your shareholders’ investment. We’re the craaazzzyyy man in the room with nothing to lose. Do you feel lucky?”.

    They will bitch & moan. Paul Reynolds will see the justification for his own position disappearing. But Telecom would be rational enough to see that they have little option but to go along.

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  23. virtualmark (1,513 comments) says:

    PS … Telecom would still have its mobile network, it’s national fibre network, and the Southern Cross cable. And it’s huge incumbent customer base. So it wouldn’t be left just sitting in the corner with nothing to work with.

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  24. bevanjs (34 comments) says:

    Without a push there won’t be a jump in how we utilise the internet.

    Its infrastructure that could gain huge lifestyle, financial and productivity benefits for many office dwellers and companies.

    It’d be a big shift in thinking, granted.

    7mbps upload if I’m lucky enough to be sitting on a cabinet isn’t going to allow me to do that. I need to be able to push many hundreds of megs of software to my clients computers at present. I post currently post much of it to them. That’s frustrating.

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  25. PaulL (5,977 comments) says:

    bevanjs: many hundreds of MB of software. Call it 300MB. On 7Mbps upload, that is 342 seconds, or 6 minutes. Is that too long?

    VirtualMark: On fibre to schools. I know someone involved with IT in schools (I think you know who I know, if you know what I mean). The government pushed for rollout of broadband to every school in NZ. The connections are there. Many of the schools didn’t take it up – they can’t afford the data charges. Which just supports my argument.

    How about this for a further idea. National broadband network (irrelevant for this point whether it is fibre or VDSL). And guaranteed peering for every NZ ISP. And all bandwidth within NZ to be free. So I pay for the wire, and any connection to a NZ site gives me free download. International bandwidth still provided by your ISP at the current usurious rates.

    So if we’re serious about telecommuting, I could now video conference to anywhere in NZ all day essentially for free. Or to think of it another way, it’s like the old split between free local calls and toll calls. The internet within NZ would be free, you would pay toll charges (metered bandwidth) for international.

    Now that I reckon would improve productivity. It would destroy a whole lot of business models whilst it was at it, and it would mean a lot more bandwidth into the cabinets than you might otherwise expect. And P2P networks within NZ would take off.

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  26. bevanjs (34 comments) says:

    PaulL (2393) yup, 600 to 800MB typically but that’s just my requirements right now, for my tiny blip in the IT service sector.

    What about in 5 years? What about from an affordable rural property a km up the road from Pahiatua as an example?

    Smaller mortgages, less interest payments heading offshore to foreign lenders, less petrol consumed, less time wasted, these things probably aren’t long term goals of our ISPs.

    As you know 5 years is a long time. I still recall when email went form something senior management had available, didn’t matter if it was down for a couple of hours, then within 2 years it was close to a mission critical application that all staff relied on.

    Model notwithstanding and I can’t imagine the effects of your idea there, we need to be enabling a jump/shift.

    LAN speeds from home upstream and down across NZ … it’ll get gobbled up and we probably don’t know what by just now.

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  27. PaulL (5,977 comments) says:

    bevanjs: I reckon that we need a 6 lane highway from Auckland to Wellington. It would enable us to do things we can’t do today. We don’t know what, but it is definitely something we need.

    I agree that there are things that can be done to improve broadband, that they will improve national productivity, and that the government probably should have a hand in them. The thing is, there is a continuum of things that can be done, and the returns aren’t linear to investment. A huge proportion of the benefit comes from getting the majority of your population onto basic broadband (1mbps down, 256Kbps up). There are probably good returns for giving more (30Mbps/7Mbps) to those that have a use for it, and giving that at a reasonable price (say, $10 per month more than the 1Mbps plan).

    I’m not sure that there are all that many that need more than 30Mbps. I’m not denying that there are some, but it would probably cost us:
    – 1Mbps available to 80% of the population: approx $200 million / benefits huge
    – 30Mbps available to 80% of the population: approx $2 billion / benefits moderate
    – 100 Mbps available to 80% of the population: approx $20 billion / benefits small

    I’m making up the numbers, but I think it is non-linear in the way I illustrate, and I think the benefits tail off for anything above 30Mbps – as I’ve said before, I don’t believe that there is any current function that anybody would reasonably want to do from home that uses more than 30Mbps. In general you can’t write to your hard drive at 30Mbps, so we’re giving you internet that is faster than getting things from your local hard drive. I just don’t see what 99.9% of NZers would do with that.

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  28. virtualmark (1,513 comments) says:

    bevanjs … while I like the idea of being able to work from an idyllic rural location, with access to city-like levels of broadband, I’m not convinced that it’s the taxpayers job to fund that.

    By all means, someone on a rural block just out of Pahiatua could pay for their own 1km of fibre to be laid to get them back to Pahiatua (FYI, both Telecom and FX Networks fibre backbones have PoPs in Pahiatua). Go for your life. But I don’t see that it’s the Government’s job to subsidise those sort of lifestyle choices.

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  29. labrator (1,840 comments) says:

    Had a good debate last year with PaulL about the same topic on this blog. Suffice to say he convinced me of his argument so I’m going to second what he says.

    I’d be interested in how much it costs to get Fibre to the Cabinet and then what the additional costs would be for a person to get an individual fibre to the home from the cabinet. If it’s under $7k and an employee can then work from home that’s not dissimilar to a car allowance and it could be a work expense. Could also possibly add value to the house and then there’s the no car green benefits.

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  30. virtualmark (1,513 comments) says:

    Labrator, the problem with trying to run your own fibre is getting access to dig up the road or run along the poles. And then there’s the question of being allowed to connect to the cabinet.

    The Telecommunications Act allows telcos to dig up the road by right, but individuals like you & me would have to go through a painful process with the council to do the same thing. Likewise, I suspect that if you asked your lines company to run your own fibre along their poles they’d show you the door.

    And I can imagine how the conversation would go if you fronted at Telecom and asked to terminate your own fibre in their cabinet.

    So sorry, looks like we all have to let the big guys do their thing.

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  31. labrator (1,840 comments) says:

    I wasn’t meaning a gung-ho approach, I was meaning a ring telecom and they send you a bill approach. If that’s not practical due to existing ducting then that’s cool. I kind’ve figured every idea, no matter how silly, could have a dollar value pinned to them.

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  32. bevanjs (34 comments) says:

    virtualmark (625)
    Don’t we the tax-payer pay quite a bit now for people to sit in cars on roads, roads that need replacing, repairing, upgrading, etc?

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  33. bevanjs (34 comments) says:

    PaulL … looking 5 to 10 to 20 years on I could see local network speed to homes as more beneficial/productive than bigger straighter roads.

    For a proportion of those office dwellers with mortgages, if they could buy a house for $100k less than present dropping from a $250k mortgage to a $150k mortgage, that’s $120k saving in their pocket let alone over the life of their mortgage and it also enables further saving. It also means less time wasted driving, less consumption, less strain on the roads, reducing travel times for others … you might not need that 6 lane highway. I think it’s a part of the discussion that needs to be included.

    Its not a purely technical argument for us geeks about bang for buck.

    5 mb upstream isn’t much and even that’s going to take time if left to the ISPs.

    Its essential with the potential to significantly increase productivity and extend the life/usefulness of our current roading and big city plumbing/waste infrastructure.

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  34. berend (1,673 comments) says:

    So in order to mitigate the tyranny of the distance, we are building fibre from me to Timaru.

    I’m sure this will help our economy tremendously.

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  35. virtualmark (1,513 comments) says:

    bevanjs … roading is user pays … that’s where your road user charges go.

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  36. bevanjs (34 comments) says:

    virtualmark … and then some I think. Thanks for the correction. I did clock to it as I jogged half way around the bays earlier.

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  37. virtualmark (1,513 comments) says:

    DPF said “The Govt has made very clear the $1.5b is a subsidy or grant, and not a commercial investment.”. Sorry, I missed them saying that. All the speeches & press releases I’ve seen talk about it being an investment, but granted they could give the money away and still view it as an “investment” in broad terms.

    But I really question why the Government should ever enter into any PPP where the Govt knows it’s never going to see its money again but its commercial partners expect to get a commercial return. If Labour proposed to give away $1.5bn to private hospital operators on those sort of terms then I suspect you’d be against it.

    But frankly, I don’t see any need for the Government to give the money away. The proposal I outlined in my post at 4:07 would deliver a commercial return to the Government. And maintain the long-term investment rationale for continued investment in the rest of the country too. It just needs the Government to show some commercial nous in its dealings with Telecom.

    Personally, I think that if the Government really wanted to give away $1.5bn on broadband infrastructure they might be better off putting half of it into building a competitor for the Southern Cross cable and then offering that into the NZ market for free.

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