Blog Comments on National’s Fibre to the Home Plan

April 23rd, 2008 at 3:30 pm by David Farrar

It has been interesting to see the various posts and press releases on National’s Fibre proposal. I’ll try and cover most of them:

Phil at Whoar labels it as “what could well be an election winning policy.

Bomber at Tumeke calls it a “Bloody good idea”. Heh shouldn’t that be damn good idea :-)

Mike at Morphyoss says:

“good on you National for releasing a good policy that will massively benefit New Zealand should they win the election. Now it is up to Labour to respond, remember fibre is extremely important to our economy and it is important that labour do something about that or they will lose the election”

David Slack at Public Address is unimpressed with some of the arguments against:

Here’s my response to the snide folk who have been saying: faster downloading for your YouTube and your porn and your pirated movies. I spend thousands on hosting in the USA because no-one here can set me up with a fast enough server and a big enough data allowance. That money could be being spent here. Ask Rod Drury what it could mean for the Software As A Service businesses he’s involved in.

It’s becoming trite to say it, but it’s nonetheless true: internet infrastructure is as important to us as roads, railways and refrigerated ships. Why not have it in abundance, rather than relatively scarce and expensive? Let a thousand e-commerce sites bloom!

Business NZ says

National’s plan to speed up provision of broadband to most premises is welcome, says Business NZ.

Chief Executive Phil O’Reilly says a public-private partnership is a logical way to spread the cost of such a huge undertaking.

“The challenge would be in working out just how the partnership would operate to ensure as many investors as possible could contribute, and in finding an appropriate regulatory regime.”

The EPMU is also reasonably supportive:

The Engineering, Printing and Manufacturing Union says John Key’s policy of rolling out fibre optic cable to 75% of New Zealand homes is a step in the right direction, but is concerned the task may be impossible given the current skills shortage.

“We really want to see this sort of project happen as any investment that will increase productivity in New Zealand is good for our members but until we see details on wages and training around this it’s hard to see how fibre roll-out will be possible.”

In terms of the issues the EPMU raises about skills and capacity, I don’t think it will be a major barrier (but certainly is a factor). When InternetNZ met with David Skilling of the NZ Institute last week to discuss his fibre proposal, one of the issues we raised was whether there was enough capacity to physically get fibre laid out by 2018 (note National is proposing 2014 as a target). Off memory Skilling indicated that they had talked to two separate engineering firms and their advice was there was enough people and and capacity to do it within 10 years, and even within five years if you really pushed it.

Now that is second or third hand so it doesn’t mean there may not be issues, but it does show some work has already been done looking at the capacity issue. One reason it is important is if supply can not meet the demand, prices could go up significantly. This has been an issue in the roading sector.

Jordan Carter is also pleased:

I am pleased that with John Key’s policy proposal, launched yesterday at a Chamber of Commerce lunch in Wellington, the debate about New Zealand’s broadband future has shifted from “whether” to do fibre to the home, to “how and how soon” to do it.

Professionally speaking, I am pleased there is now a political commitment from one major party to putting money into this. I am looking forward to assessing the various plans that come forward, and I’m sure that InternetNZ will be looking to persuade all parties to invest in this critical infrastructure.

As a Labour person I am quite sure the Nats’ proposal can be bettered, and that Labour will do so. David Cunliffe’s comments have critiqued what the Nats have proposed – the specifics of it, such as they are – but he has not criticised the goal. That’s good, because it is important for New Zealand to get on with it.

As Jordan says, the ball is in Labour’s court. A win-win will be as many parties as possible commited to the goal.

Final point, I ended up next to Williamson at the launch lunch. His zeal for this is impressive, given his record in government. It’s nice to see a genuine change of view and broad, cross-party acknowledgement of the importance of this kind of technology.

I was at the same table, and it is generous of Jordan to note Maurice’s enthusiastic advocacy of this proposal. Some have suggested he would have problems with it, but far from that – he has helped John Key with a fair bit of the research going into this.

In fact I joked to one person, that Maurice was now so enthusiastic about this type of intervention, it was a bit like how a smoker who gives up smoking becomes the most passionate anti-smoker :-)

Also somewhat amusing was that a fellow guest at our table (not knowing Jordan’s political background I think) stated his view that Labour had done an awful job in this area. Now the last thing one wants is a big political debate over lunch, so Jordan was being very tactful with his response. I actually interjected into the conversation and praised most of what Labour and David Cunliffe has done in this area, and said the work they had done to date built a good base, but this was really about taking a big step up from that base.

Anyway I found it amusing to be defending Labour’s record in this area, in front of National’s IT/Comms spokesperson. I must say though I was disappointed with Cunliffe’s response to the policy, but I suppose he didn’t have much choice unless he could convince Michael Cullen to lend him a quick $1.5 billion :-)

Finally on the luke-warm but positive side we have Russell Brown at Public Address:

National’s new $1.5 billion broadband spending proposal — it’s a bit soon to be calling it a “plan” — is nothing if not ambitious: 75% of homes with fibre connectivity in by 2014 is not a goal that has been envisaged as realistic before.

It is ambitious.

The initial step is a doubled of the Broadband Challenge Fund to $48 million, and there’s a very welcome commitment to “open access” (whether that means dark fibre or open access on the operator’s terms isn’t clear). There’s no indication as to whether National is talking about a monolithic FibreCo-style operator, or multiple providers whose interconnection is subject to regulation.

They are critical details, and that is why it is not planned any actual digging and laying will start until 2010. One has to get the structure and policy right and you really need time to do that. However while those details are being worked out there are things one can do in the very short-term which will make the task easier – such as ensuring duct or fibe is laid every time a current road is dug up. Some firm guidance (or instructions!) to local government can help reduce the cost a lot, as can environmental regulations.

What benefits would this massive investment bring over new DSL technologies via the existing residential copper network? For a start, it would work as advertised: 24Mbit/s DSL is more a theory than a reality for most users (although Telecom’s programme to bring the fibre closer via cabinetisation will help) and it’s extremely asymmetric — much fast down than back up. The problem of long cable runs basically disappears when you install fibre. You’d be doing it eventually anyway: when the existing copper expires, there’s no point in replacing it with more copper.

Absolutely. Fibre to the Home is inevitable. It is just a matter of timing – do we want to wait until 2040 and be last in the OECD, or try and secure some advantages by being early, to counteract our geographical disadvantage.

Russell also points some credit my way for “tireless advocacy”. While obviously I am an advocate, and have been for some time, I don’t think anyone should doubt this came about because of John Key’s personal belief and commitment to this infrastructure investment. I understand he has spent scores of hours in talks and discussions on the issue, and probably knows the ins and outs better than most industry specialists now.

Two others who are influential and helped make it happen were Maurice WIlliamson and Bill English. Jordan Carter has already noted Maurice’s passion for this plan. Bill has had a bit of stick for his comments a year ago which were sceptical of crown investment. The role of the Shadow Minister of Finance is to be sceptical and hard nosed on colleagues spending ambitions. I wouldn’t quite say his or her initial response should always be no, but hey it’s a reasonable negotiating position to start from :-)

I am not Bill’s spokesperson (for which we are both grateful :-) ) but I think people will find he is fully behind the initiative (in fact I understand all of Caucus is quite wildly enthusiastic about it) and his job is to help make it happen as Minister of Finance. If anyone thinks there is some violent behind the scenes struggle about this policy, I think they will be sadly disappointed.

Now of course not everyone has been positive, and for those who want a libertarian critique I refer you to Liberty Scott who labels it as Think Big Mark II and argues in favour of leaving it to the market.

Also against is NZ First (they just whine about Telecom) and Kiwiblogblog which claims it will be wasteful government spending as we will never need home Internet speeds faster than Telecom’s ADSL2+ rollout.

Sounds to me a bit like the infamous “640K ought to be enough for anybody” statement in 1981, attributed to (and denied by) Bill Gates. I am very confident they will be wrong by similar levels of magnitude!

UPDATE: The Standard has also come out against it.

I think it is has been extremely enlightening that basically all the left wing blogs where the authors use their real names have been supportive of the policy, while the left wing blogs where the authors are anonymous are against. I’ll leave it to others to draw conclusions on whether this is a coincidence or not, and what this may indicate about who the authors are.

UPDATE2: I missed a couple of comments. No Right Turn labels the policy as good at first glance. And since I wrote the blog post, Dancer at The Standard has labelled the policy as a good thing.

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National’s $1.5 billion fibre to the home plan

April 22nd, 2008 at 3:00 pm by David Farrar

I have just returned from a Wellington Chamber of Commerce lunch at Te Papa where John Key announced the next National Government will invest $1.5 billion into extending our current fibre network, with the aim of having 75% of homes in NZ having fibre to the home by 2014. It got a very warm reception from the business audience

I am delighted, in fact beyond delighted. I’m thrilled. This is a stunning bold initiative, and one that I think is great wearing all my different hats.

Having served as the Public Policy Chair for InternetNZ (Internet Society of NZ) for the last five years, this is a massive step towards the vision we have of a high speed connected nation. And the level of funding and target timeframe is almost better than could be expected.

Fibre is to today’s economy what roads and rail were to us 100 years ago. One has to invest in the infrastructure before you get a return on it, from the services that can be delivered over it. This is why there is a legitimate role for the Government – there is a timing mismatch if you do not have the state invest capital in infrastructure development.

Especially pleasing was seeing a reference to the fact that the fibre network will need to be open access, and also done in such a way not to crowd out existing fibre plans. If implemented, this will be a public/private partnership with the public capital allowing the private sector to invest more.

As a National Party supporter, I’m also very pleased. I think it positions John Key and National as having an economic development plan which is focused on infrastructure investment. At a time when the Government has no real answers to the economic challenges facing NZ (except to say we can’t control petrol prices of food prices or house prices), and is mired in the repercussions from some silly stunts, National has seized the policy initiative.

What is good about today’s announcement is it is not in an area you normally expect National to lead. Everyone expects National to be tougher on law & order, and everyone expects National to cut taxes more than Labour. But this has been about showing a future looking vision of where New Zealand is heading.

Finally I’m just pleased as a New Zealander. The future of NZ does worry me. Seeing so many people leave for overseas, seeing our national income fail to keep up with Australia paints a gloomy picture for the future.

We have real challenges ahead of us – both economically, and environmentally. And the sad reality is that there are relatively few policies which are good for economic growth but also good for the environment. It can be a delicate balancing act.

But rollout of fibre to the home will, I believe, has significant benefits for us economically, environmentally, and in quality of life. What David Skilling calls the weightless economy, where our remoteness is less of an issue, will be a big part of our future. And having ultra-high speed broadband everyone will position us well to compete globally. No it is not guaranteed – few things are. But I think it is an investment very much worth taking – and for less than the cost of Dr Cullen’s cancelled chewing gum tax cuts.

The challenge now is for other parties to rise to the challenge set by John Key. For as much as it would be electorally advantageous to National for Labour not to make a similar commitment, I hope they do show similar ambition.

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Fran on F&P

April 20th, 2008 at 8:06 am by David Farrar

Fran O’Sullivan looks at the decision by F&P to shift its Dunedin production line overseas.

Chairman Gary Paykel has had plenty to say, largely behind scenes, about the difficulty of running internationally competitive manufacturing export businesses from countries that pay First World labour costs, are distant from the world’s major consumer markets, have outrageously uncompetitive transport costs and, in particular, are slammed by a crazy monetary policy which, in New Zealand’s case has had our dollar rubbing up at US80c for far too long.

There seems a degree of inevitability.

But despite his warnings and those of other manufacturers the Government did nothing major to offset the situation, despite labelling 2007 Export Year. It could have explored a special tax rate, as suggested by New Zealand First and United Future, to gear business towards increasing its export footprint offshore from manufacturing bases here. But didn’t.

It could also have cut Government spending, as the OECD suggested, to take the pressure off monetary policy. But didn’t.

The New Zealand dollar has appreciated 27 per cent against the greenback in the past two years. Investors are sucked in by interest rates that dwarf those in other OECD countries as the Reserve Bank tries to squeeze out inflationary pressure.

The Government can not stop individual manufacturers making decisions as to what is best for them. But they can play a significant role in setting an environment which is friendly for businesses to prosper.

New Zealand manufacturing is not dead – far from it. Statistics New Zealand’s manufacturing survey for the December quarter showed total manufacturing sales increased 8.3 per cent and manufacturing volumes rose 3.4 per cent.

But the ability of manufacturers to withstand higher compliance costs, such as the KiwiSaver superannuation phase-in, will get tougher if the exchange rate persists at current levels.

Every extra cost is what may push an employer and manufacturer past the tipping point.

But the reality is that Fisher & Paykel’s move is also a consequence of globalisation. The New Zealand Institute’s David Skilling has promoted the necessity for more businesses to go offshore and relocate closer to markets.

Skilling’s weightless economy is predicated on the notion that if New Zealand keeps the brains trust here – the designers and engineers who create the products and the company headquarters – New Zealand will benefit.

That is the likely best future for us. China is becoming or has become the world’s manufacturer. We need to specialise in areas where we have a comparative advantage.

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Fibre, fibre, fibre

April 8th, 2008 at 10:07 am by David Farrar

Very welcome news on Monday that Kordia is going to invest in a new fibre cable between New Zealand and Australia. Initially it will have 240 Gb/s of capacity. But it it not just the capacity that is welcpome, but the competition it will provide to Southern Cross Cable and Telstra who have pretty much all the international bandwidth.

Southern Cross Cable has also announced a boost in capacity to 860 Gb/s so we will in a few years have 1 Tb/s capacity. But that only allows 125,000 to be using the Internet at the same time at 8 Mb/s or 1 MB/s.  The SCC has 2.5Tb/s maximum capacity but new technology may push this even further.

The other fibre that has been in the news had been the NZ Institute’s proposal for how to get fibre rolled out to 75% of premises by 2018.  Basically they propose the creation of a dedicated fibe company which will do the last mile fibre to homes, and provide open access to all providers at a regulated price. They estimate this will cost between $4 and $5 billion based on 25,000 kms of fibre duct at $150,000 per km.

They also estimate that $3 to $4 billion of that can be met by private investment and that a Government commitment of $1 billion over ten years ($100 million a year) is needed to reach 75% of the population.

Bernard Hickey supports the plan and says:

The goverment has already posted a budget surplus before accounting gains and losses of $3.649 billion in the seven months to the end of January. That’s an average of $521 million a month.

Meanwhile our productivity growth keeps slowing, as this chart on the left shows. Just imagine if many of us could work from home with much faster connections and we could access overseas markets more easily.

Surely it’s time our government did something useful with that money to invest in the nation’s future. I can think of nothing better than spending $1 billion of public money to build a broadband network that would generate around $4 billion a year in economic benefits. It would pay for itself in extra tax revenues within a year or two. Just imagine if the government had done this three years ago instead of wasting money with its nutty free student loans (bribe).

I’ve yet to fully get to grip with the pros and cons of the NZ Institute proposal, but I think it is an excellent contribution to the debate, and am trying to learn more about it.

Rod Drury has also blogged in support of it:

The FibreCo solution is very logical and I think takes into account the concerns of the many stakeholders around this issue. Some very smart people took the time to really think about this.

I like that it balances private and public sector needs. It builds on what we learned as a country in the 70’s, 80’s and 90’s. It is a savvy financial solution.

I think there is going to be a lot of discussion this year on fibre.

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How to supersize the NZ economy

April 7th, 2008 at 1:26 pm by David Farrar

On the 15th of April, in Auckland, the Centre for Independent Studies is hosting a free forum on big ideas to supersize the NZ economy. The speakers are:

  • Dr Don Brash, former Reserve Bank Governor
  • Andrew Little, National Secretary, EPMU
  • Phil Rennie, CIS Policy Analyst
  • Dr David Skilling, Chief Executive, The NZ Institute

It is at 6 pm on Tuesday 15th  at theQuay West Suites, 8 Albert Street, Auckland.

It is free, but please go here to register.

I’ll certainly attend if in Auckland on that day. I like the balance of speakers they have arranged, so there will be plenty of ideas.

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