It’s Telecom

May 24th, 2011 at 10:00 am by David Farrar

has announced:

The government has today reached agreements with New Zealand and Enable Networks that will complete the roll out of ultra fast broadband (UFB) to 75% of New Zealanders where they live, work and study.

The government will partner with Enable Networks, which is 100% owned by Christchurch ratepayers through the Christchurch City Council, to build an ultra fast broadband network for Christchurch, Rangiora and surrounding areas.

The Telecom deals will see a optic network built in Auckland, the eastern and lower North Island and most of the South Island.

As part of the deal, Telecom must split off its network arm, Chorus, into a completely separate company, so that all broadband retailers can compete fairly to on-sell wholesale ultra fast broadband. Chorus will maintain the Kiwishare obligations currently placed on Telecom.

Congratulations to Telecom, and commiserations to Vector and the Regional Fibre Group. Also congrats to the Minister for turning an ambitious policy into a reality.

There were pros and cons with either party winning, and I suspect the negotiations were very tough.

The major focus for many now will be on the structural separation of Telecom. This is probably going to the biggest change in the telco sector since Telecom was created out of the Post Office. The details of the separation are quite vital – Chorus needs to be totally independent from Telecom as quickly as possible.

Today’s agreements with Telecom and Enable mean the government will reach its goal of bringing ultrafast broadband to 75% of New Zealanders by 2019. The rollout will start immediately with schools, hospitals and 90% of businesses covered by 2015.

I believe the fibre rollout will change New Zealand. With fibre to the home, you will get far far more people working from home, less demand for office space, video-conferencing will be as routine as changing the channel on your TV etc.

Wholesale household prices will start at $40 or less per month for an entry level product and $60 per month for the 100 Megabit product. There are no connection charges for households.

Mr Joyce says today is a very exciting day for New Zealand.

“The future of broadband is in fibre, and taking it right to the home will bring significant gains for productivity, innovation and global reach.”

The prices seem pretty reasonable. What will be interesting is what retail services develop to use the fibre. such as combined phone/Internet/TV/movie packages.

The future is in fibre, and I do believe this will be a contributor to increased productivity and economic growth.

Chorus is going to become (for most of NZ) the provider of both copper and fibre access. It will be an infrastructure company. Over time, I’d like to see Chorus (and the other local fibre companies) move towards providing cellphone towers to retail telcos such as Vodafone, 2 degrees and Telecom. It would make a lot of sense as the LFCs will have the fibre connection for the backhauls, and it would mean each telco wouldn’t need to get consent for their own individual towers, but could just hire space on a tower for their transmitters.

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25 Responses to “It’s Telecom”

  1. George Patton (352 comments) says:

    The rapture has come two days late for Vector

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  2. Ender (105 comments) says:

    “Over time, I’d like to see Chorus (and the other local fibre companies) move towards providing cellphone towers to retail telcos such as Vodafone, 2 degrees and Telecom…”

    How it’s done in aussie (at least in some areas). Hell ugly pylons with tens of dishes and antennas on them but makes for far fewer around the place.

    Only downside to this is the density of cell sites required for high speed high bandwidth cellular access precludes this approach in some circumstances

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  3. Rural Connect (10 comments) says:

    A great deal for the taxpayer no doubt. But the user will in the end pay dearly for this lost opportunity for real competition and innovation.

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  4. David Farrar (1,437 comments) says:

    Rural: It would have been interesting to see what vector could have done. Hopefully though the innovation will occur at the services side, not the infrastructure side.

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  5. side show bob (3,410 comments) says:

    “The future is fibre” , yes but can it milk the cows, spray the weeds, shift the stock, feedout, fence, shear, put the crops in, no thought not.

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  6. reid (16,700 comments) says:

    I’m afraid I’m not sold that it will do anything more than significantly facilitate the home entertainment opportunities. It’s not to me going to transform the commercial horizons. So what if you can work from home. You can do that now, anyway. So what if you can have live teleconferencing from home or the office? These are not step changes for the commercial world.

    Don’t get me wrong, I’m not against it, it’s a fairly standard infrastructure item these days so we may as well do it, all I’m saying is, it’s not going to transform commercial operations as they operate today, although it will transform home entertainment.

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  7. ben (2,279 comments) says:

    A sad, sad day for New Zealand. Nobody has even measured whether this money is worth spending, a gross dereliction of responsibility. Nobody can point to new services this will make possible that justify this enormous investment. There are few services that cannot be supported by the current DSL/cable infrastructure, and zero services with broad demand that cannot be supported by the current infrastructure. Yes its nice to point to video conferencing and say this will change things. It might for a few people. But actually video conferencing is do-able now on DSL. I don’t see much value in higher screen resolution. And as far as I know telecommuting is not widespread even in countries with great broadband.

    David says: “The future is in fibre”

    Well it is now, thanks to an election promise made by a party subsequently elected. But that is not a test of fibre’s superiority. And so a cost of early rollout of fibre, thanks to the government’s subsidy, is that NZ is permanently locked out of what may be better technologies just around the corner. Fibre costs are fortune to lay. Who is to say innovations in wireless access will not be competitive in five years? The cost of this bet is, unsurprisingly, missing from anything Joyce says.

    The value of early rollout must be close to zero. Really: what can’t we do now with the current infrastructure? Remember, companies and people who really want big bandwidth can get it right now, if they pay. All the additional bandwidth this $1.5 billion will provide is to people and companies not willing to pay for it now. So what are the chances this investment is a good idea?

    Nobody knows, because – quite unbelievably – nobody has measured it. If I had to guess, I predict a business case would find NPV of -$1 billion on this investment. That money would otherwise buy a lot of health care, education or interest on debt.

    Am I the only one who doesn’t cheer when government hands out free ponies, even if I happen to like the pony?

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  8. James Stephenson (2,266 comments) says:

    It would have been interesting to see what vector could have done.

    Well given that they’re putting fibre in the ground as they underground their power cables, I don’t think they’re going to stop, they’ll just go slower than they would with taxpayer money coming in.

    The biggest FAIL on this whole project is that we’re *still* going have competition at the physical layer.

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  9. ben (2,279 comments) says:

    James, as a consumer I rather like competition and dislike monopoly. I like living in places where I can get cable and DSL because the deals are noticeably better.

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  10. Falafulu Fisi (2,141 comments) says:

    Good article from Brian Fallow (2010) at the Herald.

    Brian commented:
    It cries out, in short, for rigorous cost/benefit analysis, but that is nowhere to be found.

    All we get are lofty assertions about how vital broadband is to economic growth, productivity and international competitiveness.

    Full article: Do we even need ultra-fast broadband?

    This ultra-fast broadband mania has been driven by the feel good idea of its proponents that it is something nice to have, even if its an economic disaster.

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  11. dog_eat_dog (787 comments) says:

    Ben,

    We can’t deliver videoconferencing at a meaningful resolution, cable television and on-demand services to all areas using DSL. Fibre is more than just about internet browsing and gaming. It opens up a whole domestic entertainment industry. Wireless is laggy and subject to interference. Fibre isn’t.

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  12. PaulL (5,449 comments) says:

    I’m not thrilled about it. The limitation for most NZers is backhaul. Once you have 100Mbps into your home, it will take you approximately 1 hour to exhaust a 10GB plan. The $40 quoted I presume just gets you a connection – you’ll still have to pay an ISP for the actual download quota. No real evidence here of anything that will change the price for that.

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  13. Falafulu Fisi (2,141 comments) says:

    dog_eat_dog said…
    It opens up a whole domestic entertainment industry.

    Examples?

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  14. Jcw (95 comments) says:

    Whats the likelihood of achieving 100mbits/second consistently including at peak usage? HA. The speed of my connection vastly outpaces what my ISP can handle from about 5pm till 11pm (and for longer on the weekends). The value of this product will be dependent on pacific fibre going ahead.

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  15. infused (583 comments) says:

    Enable is so bad… this is going to be fun

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  16. Viking2 (11,674 comments) says:

    side show bob (3,188) Says:
    May 24th, 2011 at 10:46 am

    “The future is fibre” , yes but can it milk the cows, spray the weeds, shift the stock, feedout, fence, shear, put the crops in, no thought not.

    Yea it can., Youj ust need some virtual dogs and a farm slave on remote then you can swan off to the beach and have it all done while you spend your new milk cheques. Easy eh!

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  17. Kneel (6 comments) says:

    @Ben at 10.51
    Better technologies around the corner?
    I’d love to hear what that is. It certainly isn’t wireless.
    There might be flaws in the government’s logic, but this isn’t one of them.

    Fibre might cost more than existing (often old) copper but it is significantly cheaper than new copper … and it has heaps more capacity.

    Neil

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  18. oob (192 comments) says:

    National has just signed the Kiwi taxpayer up to a 3rd world service.

    Note that the CIR on the top tier residential product in 7.5Mb/2.5Mb, which is underneath current ADSL speeds. Advertising a products as 100Mb when it is in fact only 7.5Mb is marketing hyperbole.

    A lost opportunity to create true free market competition.

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  19. Kneel (6 comments) says:

    @PaulL 11.24
    There are no data caps on the wholesale product. Of course, retailers are likely to cap or shape in other places.
    @Jcw 11.39
    There have been enough leaks from the retailers to tell exactly the likelihood of achieving 100 Mbit in the peaks on these products … nil The committed information rate is lower but still MUCH faster than any existing products.
    Neil

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  20. reid (16,700 comments) says:

    Frankly I’d rather be spending the infrastructure dollar on developing a manufacturing plant for the hydrogen pellets. That is what were, in 2007. Now this is the latest development. Think of the ongoing savings if we’re not dependent on fuel oil, ever again.

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  21. Mike Readman (353 comments) says:

    Is it true like The Press is saying that EVERY home and business in Chch will be connected to the network?

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  22. dion (95 comments) says:

    Let the pissing away of public money begin (it’s not like there’s any shortage of THAT, now is there?).

    It’ll be interesting to see how much of the centre right vote Act picks up in the coming election – given that National seem to be doing their best to alienate most of it.

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  23. James (1,299 comments) says:

    Government knows better than us what our money should be spent on……who’s surprised?

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  24. side show bob (3,410 comments) says:

    V2 fibre is the new knowledge wave and the last knowledge wave, as far as super fast internet has not yet saved the world. The fact remains that most of us have to produce something physical, broadband is fine but we do not have an economy that solely lives on ideas or software. Countries like India and China will always beat us and an idea in so far as anything that can be sent by computer is open fair game to pirates. Those heralding the Internet age and super fast broadband have obviously not figured out that one can not live by information alone, a fed helps now and then.

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  25. Rural Connect (10 comments) says:

    David: Vector are doing innovative things now on the infrastructure side.

    Did you know that 1Gbps optical equipment is cheaper than 100Mbps gear? By having a 30Mbps service, additional equipment will be installed that will limit future opportunities for innovation until it is removed. This is how Telecom will control our use of broadband services and so limit innovations. The only reason for installing that lower bit rate gear is an artificial marketing one to generate more “products” and so maximise revenue opportunities.

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