Kiwiblog

Telecom have announced:

Telecom, Vodafone and Telstra announced today they have signed a non-binding memorandum of understanding (MoU) to co-invest in the construction of a new submarine cable between Auckland and Sydney.
The new cable, tentatively titled the Tasman Global Access (TGA) Cable, will significantly improve New Zealand’s international telecommunications connectivity as well as strengthen links into fast-growing Asian markets.

The total cost of the TGA cable is expected to be less than US$60 million. The cable will incorporate three fibre pairs with a current design capacity of 30 terabits per second – approximately 300 times the current internet data demand out of New Zealand.

30 terabits a second isn’t bad!

The TGA cable will achieve significant international connectivity benefits for New Zealand at a fraction of the build cost of another, much longer trans-Pacific cable, the consortium partners said.

It would be nice to have another trans-Pacific cable also, but this announcement is good news as it means more competition and more capacity. What is pleasing is that it is not just Telecom (who have the biggest stake of Southern Cross) but also Telstra and Vodafone.

Telecom chief executive Simon Moutter and Vodafone New Zealand CEO Russell Stanners jointly commented: “The business case for a new cable between New Zealand and Australia is compelling, providing greater capacity and global redundancy capability. It also reflects the growing importance of trans-Tasman internet traffic: for example, around 40% of both Telecom and Vodafone’s international internet traffic is now Australia to New Zealand, versus just 10% in 2000.

“We are seeing increased data content being provided from Australia-based servers by global companies and being accessed by New Zealand internet users. An additional cable connection with Australia will strengthen the business case for international data servers to be located in New Zealand.

I’ve blogged on this in the past. NZ will never be big enough to have global datacentres here, but if we can get the Googles and Apples of the world to do regional datacentres in Sydney, then we will pull more and more of our data from Australia rather than the United States.

Stuff reports:

The price of broadband could fall by about $12 a month in two years’ time if internet providers pass on swinging cuts to Chorus’ charges that were proposed yesterday by the Commerce Commission.

Good.

But Scott Bartlett, the boss of New Zealand’s fourth largest internet provider, Orcon, is doubtful. He said Telecommunications Commissioner Stephen Gale already seemed to be signalling “almost in code” that the commission would back down from the steep cuts when it finalised its decision on wholesale pricing in June.

Prime Minister John Key signalled that the Government was concerned about the effect cheaper copper-based broadband could have on the fibre-optic ultrafast broadband network, in which the Government has agreed to invest $1.3 billion.

He did not rule out using legislation to overturn the proposed price cut yesterday.

I think that would be a bad thing. The Commerce Commission should be left alone to set the price of copper access based on existing competition law.  I’m a huge fan of the fibre rollout, but we shouldn’t try and get people to move to fibre by having copper priced artificially high.

Chris Keall at NBR writes:

There are a number of reasons a Kim Dotcom-backed cable will never fly.

Pacific Fibre co-founder Rod Drury added another when he talked to NBR this morning: the accused pirate wouldn’t get approval to land the cable in the US.

Mr Drury saw Mr Dotcom’s overtures to Pacific Fibre as little more than clowning around on Twitter.

Amazing how one tweet gets so many stories. Keall notes:

Even at the height of Megaupload, Mr Dotcom didn’t have $US400 million to spare for a Sydney-Auckland-LA cable.

His Plan A is to fund the new cable through his revived file-sharing service, Megaupload – due to launch January 20, but its success is far from assured (the entrepreneur is asking for investors via a recently launched splash page).

His “plan B” proposal to fund the project by suing Hollywood studios is the stuff of fantasy.

And as for the parallel suggestion of crowdfunding … that’s a neat idea for a $ 1 million project. Not so much for one that costs half a billion.

Nice to see some critical analysis.

The HoS reports:

Kim Dotcom is proposing free broadband to all New Zealanders as he tries to resurrect the ill-fated Pacific Fibre cable connecting New Zealand to the United States.

Dotcom last night revealed his ambitious plans to build the $400m cable – which would double New Zealand’s bandwidth – set up his new Me.ga company, creating jobs and a data centre to service the rest of the world.

He would provide New Zealand internet service providers such as Telecom and Vodafone with free access for individual customers and charge a fee to business and central government.

Kiwis would still be charged a fee by the internet companies, but it would be as low as one-fifth of current bandwidth plans and three to five times faster with no transfer limits.

The $400m would be partly funded by Mega, raising additional funds from investors.

He added he could fund the project by suing Hollywood studios and the US Government for their “unlawful and political destruction of my business”.

I am keen to get more international bandwidth for NZ, and more competition with international cables.

However this pledge can in no way affect the legal process that Dotcom is facing. The extradition hearing in March 2013 must be based on the law, and whether the charges by the US Government are ones that warrant extradition. It is not the job of the NZ court to determine guilt or innocence – that is the job of any actual trial in US courts.

If Dotcom wins in the US courts, then I’ll welcome his investment in fibre for NZ. But his pledge can not and should not affect the legal process underway.

Stuff reports:

Today’s confirmation that Chorus will provide free ultra-fast broadband connections to many residences with awkward access is good news, a telecommunications commentator says.

Network provider Chorus announced in partnership with the Government today that it would contribute $20 million towards the cost of connecting “non-standard” homes, in an effort to encourage greater uptake of high-speed broadband.

Up to 30 per cent of homes within the UFB rollout zone are thought to have fallen into the Chorus “non-standard” category.

Paul Brislen, of the Telecommunication Users Association of New Zealand (TUANZ), said many urban houses were more than 15m from the street, Chorus’ previous limit for free fibre.

So today’s announcement that Chorus would extend that limit to 200m was “tremendous”.

“That captures 99.3 per cent of the [UFB network] population, possibly even more …That means everybody that can get connected will be able to without extra cost.”

Excellent.

However, Brislen said there was a drawback in that the offer only lasted until 2015, by which time only about a third of the network would be completed.

“Most of the connections for residential customers won’t take place until after 2015, so we need to use this to get the ball rolling and then revisit it rather quickly.”

I suspect come 2015, things may get extended – time will tell.

Chorus, which has contracts to provide 70 per cent of the Government’s UFB network, has so far rolled out 1500km of ultra-fast fibre, enough to connect 72,000 customers.

But to date, only 700 have signed up.

Brislen said the problem was that speed alone was not enough to encourage many customers to switch to UFB. Overseas, penetration of ultra-fast broadband was about 38 per cent and a good uptake in New Zealand was important to justify the expense.

Absolutely few will sign up for speed alone. What will push uptake is when companies such as Sky roll out TV and movies on demand services that work far better over fibre. A killer home video-conferencing app that works through your TV set and is as simple to use as a TV remote will also get people flocking to it.

Tom Pullar-Strecker reports at Stuff:

A select committee inquiry is likely to be held into whether schools are well able to take advantage of the new teaching and learning opportunities created by ultrafast broadband.

National Party MP Nikki Kaye said she would today call on the education and science select committee to kick off an inquiry into “21st century learning environments and digital literacy”.

Ultrafast broadband could open up many more opportunities for online learning, but schools were moving at different paces to embrace the opportunities, she said.

“I hope that the overall outcome is that we are able to identify possible savings in technology and buildings, develop recommendations regarding optimal learning environments, and identify the skills required for teachers and students to achieve their full potential in the modern world.”

As the committee is comprised equally of government and opposition MPs, one opposition member would need to support the inquiry or abstain for the motion to pass.

It’s been announced that the select committee has voted to proceed with such an inquiry. I think it is a good and important issue for Parliament to be looking at.

Schools have been changing somewhat to take account of today’s technology but it has been relatively piecemeal and evolutionary. Some schools are doing absolutely amazing stuff, while others are struggling.

93% of schools will be fibre connected by the end of 2014. This can have significant ramifications for how they operate. You may be able to live-stream classes, so sick students can follow from home. Or classes could be archived on the web for them to catch up. Should every student have an Internet capable mobile device? Should tests be done over the Internet? There may be opportunities for interesting speakers to be webcast into multiple classrooms and schools. Plus you have the potential for five year olds to learn how to read and do maths through interactive applications. The possibilities are almost limitless.

This appears to be a first principles review of what do we want our fibre connected 21st century schools and classrooms to look like. The ramifications could be quite significant.

The good thing is we already have some pockets of excellence around New Zealand for some of this, so it is not about having to start with an empty slate. It is about discovering what is already happening out there, and coming up with a blueprint applicable for the whole sector.

Hamish Fletcher at NZ Herald reports:

Orcon has beaten its competitors with the announcement of ultra-fast broadband prices, but there is still no word on what content packages will be available to entice consumers to sign up.

Chief executive Scott Bartlett revealed Orcon’s fibre plans yesterday and said the entry-level option of $75 per month for residential customers was on par with what the company charges now.

This plan, which includes phone services, comes with download speeds of 30 megabits per second, upload speeds of 10 megabits per second and a data allowance of 30 gigabytes per month.

That’s not a bad price for a fibre connection. But the data cap limit is laughable. I have twice that with my copper connection.

30 Mb/s is 3.75 MB/s. That is 225 MB per minute. That is 13.5 GB per hour. So the monthly data cap of 30 GB will last two hours and 13 minutes at 30 MB/s.

Data caps should be in TB, not GB.

Tom Pullar-Strecker at Stuff reports:

Sky Television is considering creating a new type of set-top box that would do away with at least some scheduled television channels and instead let people watch programmes whenever they chose.

The move could make traditional television listings largely redundant. Chief executive John Fellet said an example of a channel that could benefit from the change would be the Discovery Channel, which features programmes such as Man vs. Wild, starring Bear Grylls.

Instead of broadcasting programmes at a certain time via satellite, viewers would select programmes from a “pool” and they would be streamed to their television over ultrafast broadband.

The set-top boxes would be integrated with social media, so they could recommend programmes based on people’s past tastes or what their friends were watching.

Sky could make programmes available at any time as it had already bought the rights, Fellet said. “Going to a `pool’ concept, which can only really happen with UFB, is an easy decision.”

This is no doubt the future. I like the idea of using social media to recommend programmes.

If Sky were really smart they would look at incorporating video-conferencing software into their set-top boxes, so that people can video-conference by simply pushing a button on their Sky Remote. If they manage that, they’ll have customers for life. Imagine if you can do a six way video-conference through your TV by merely pushing the “V” button and then a short-cut key per individual you want to link in.

Even better, think if you can split the screen between TV and video-conference so you and some friends can remotely watch the same show and discuss it as you view it – as if you were in the same room.

Hamish Fletcher in the NZ Herald reports:

CallPlus plans to offer internet users hooked into the ultra-fast broadband network at least a terabyte of data each month.

While New Zealand may be looking forward to the 100 megabit speeds on the fibre internet network, commentators are worried the infrastructure will not be used to its potential as data caps will restrict the amount customers can download each month.

Slingshot and CallPlus director Malcolm Dick said his companies could offer unlimited data on the ultra-fast broadband network if more internet links out of New Zealand were built.

“A couple of years out … you’d hope that all those caps would be removed and it would be the same as in Europe and the States. Certainly in the worst case we’re looking in the terabytes [of internet use a month]. It will be up to at least a terabyte, I reckon, it has to be,” Dick said.

Having more content hosted and cached in NZ would help also, but sadly it is cheaper for major content providers to host in the US than in NZ.

A 1 TB data cap would be a lot better than the current offerings. But let us look at how quick it might still be gobbled up.

Say you are on the 30 Mb/s plan. That is equal to 3.75 MB/s. A TB is around 1 million (2^20) MBs so a 1 TB cap would last for around 280,000 seconds or 4,660 minutes which is around 78 hours.

Now a month has around 720 hours in it, but you don’t tend to spend all day on the Internet and you don’t spend all your time using the maximum speed.

So a 1 TB data limit would look to be pretty good to me.

Steven Joyce has announced:

The government has today reached agreements with Telecom 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 fibre 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.

I blogged back in March on the Telecommunications Bill going through Parliament, and some of the issues around it which were causing concern.

Steven Joyce has just announced:

Regulatory forbearance on wholesale prices for the ultra-fast broadband network will be replaced with contractual mechanisms that would apply if the Commerce Commission regulates prices lower than those contracted, Communications and Information Technology Minister Steven Joyce announced today.

In announcing the move, Mr Joyce says that he had listened carefully to industry concerns in regards to the plan for regulatory forbearance over the 8 ½ year build period of the contract.

“While I think their concerns are more theoretical than real, given that pretty much everybody has been happy with the very competitive prices announced by CFH to date, we have been able to find an alternative solution which will give the infrastructure builders confidence to stay committed to their low capped prices, and customers confidence that they are will continue to get the best prices over that 8½ year period.”

This is an excellent outcome, and congrats to the Minister for devising it. It retains price certainity for investors (which means we get more fibre laid for $1.5b) but also leaves in place the security of the Commerce Commission to ensure consumers are not being over-charged.

If for some reason the Commerce Commission found prices should be lower than contracturally agreed (which is unlikely but predicting the future is difficult in such a innovative industry), then the Government bears the risk as the entity that entered into the contracts with the local fibre companies.

The Minister get big kudos for making the decision. I think it is also worth handing out kudos to the various ICT groups and Opposition MPs who pressed for changes. Both Labour and ACT MPs on the Select Committee were very receptive to pushing for changes.

I had been concerned that all the good work the Government was doing in investing the $1.5b into fibre would get over-shadowed by the arguments over the proposed regulatory forbearance period. This decision means all eyes will now go to whom will get the contract for the 85% of areas not yet allocated.

That decision is due in a matter of days, maybe weeks. And after that then there’s going to be a lot of work for people in digging up roads, putting in trench, laying fibre etc. The combined public and private spend will probably be $4 to $5b over the next eight years or so.

As we head towards fibe connected homes, I think we will see significant changes in society – many more professionals working from home, virtual offices for some firms, video-conferencing as common as TV,  movies and TV on demand etc, mass storage on the cloud etc. It’s an exciting future.

Now this is cifty thinking. Claire Rogers reports:

Homes and businesses could have ultrafast broadband on tap if trials by British firm i3 Group to deploy fibre cable through water pipes are successful.

The company said it was talking to all the bidders for the Government’s $1.5 billion ultrafast broadband scheme as well as Crown Fibre Holdings and expected to begin trials of its Atlantis fibre cabling system soon.

Chief technology officer Alasdair Rettie said it was working with those bidders to identify locations for the trials but some would probably take place in Auckland.

The Atlantis system deploys fibre encased in a tube through cold water pipes and is designed to be used in the final stage of a fibre rollout, connecting premises to fibre in the street.

The biggest cost of fibre is digging up the ground to lay it. If it can be pushed through existing pipes, without degrading the quality of longevity, then tha could be a real cost saver.

There’s been a number of news stories on the Government’s Telecommunications Amendment Bill, which is currently before the Finance & Expenditure Select Committee. A typical story is this one at Computerworld.

The telecommunications sector is always somewhat controversial, but this bill has attracted criticism from just about everyone – telcos, ISPs, the Commerce Commissions and user groups. This post is aimed to explain what the debate is about, and reflects my views.

It is worth noting that most of what is in the TAB is not controversial, and is generally well supported.

Three aspects which are controversial are:

1. a “regulatory holiday” for the local fibre companies until 31 December 2019.
2. “re-averaging” the costs of local loop unbundling and unbundled bitstream, which will lower the wholesale cost in rural areas but increase the wholesale cost in urban areas by around 20%
3. possible structural separation of Telecom if they win the majority of regions for fibre rollout

In this post I will leave (3) for now as that little baby is so complicated it needs its own post. I want to focus on (1) and (2) and these will apply (if passed) regardless of whether Telecom wins most of the regions for urban fibre, or the lines companies led by Vector win most of the regions.

You may ask why would the Government consider giving the future fibre companies an exemption from the normal regulatory oversight of the Commerce Commission? Well the short answer is because the companies bidding to be future fibre companies have asked for it.

Okay well companies ask for lots of things from the Government. Many companies would like to be exempt from the Commerce Commission until 2010. Why would the Government agree to this?

The answer is because then the bidders will make better bids. They value having a regulatory holiday, so they will agree to roll out more fibre for the same subsidy. It is what Sir Roger Douglas (very perceptively) said was a regulatory subsidy instead of a greater direct financual subsidy.

Now before we talk about the pros and cons of this approach, you need to know the background. In the 2008 election National pledged $1.5b towards having ultra-fast broadband rolled out to 75% of NZ over the next decade. This was a lot of money (Labour committed only $300m – 1/5th of what National did) and it was in my opinion a great policy.

Work done by the NZ Institute concluded that investing in ultra-fast broadband, would result in significantly higher economic growth, and there is evidence from other countries to back this view up.

Now the cost of rolling out fibre to 75% of NZ is hard enough to estimate, let alone what the direct commercial returns will be on doing so in ten years time. The amount of subsidy needed to achieve the 75% target was estimated at $1.5 billion, but this was an estimate. An opposition does not have the resources available to get a precise projection, and even when you do have access in Government to Treasury, even then projections can be wrong.

To some degree one was never going to know until the actual commercial negotiations conclude, whether $1.5b was enough. InternetNZ did try to get some idea of how much it would cost to reaach the goal of 75%, and what would be the best way to go about it. They (which includes me)  commissioned a report from Network Strategies, a specialist economics consulting firm, which is here.  It was published in 2008.

The report concluded that the cost of fibre to 75% of NZ was around $3.3b if one utilised existing utility companies for at least half of it, and that the government’s contribution would need to be around $1.75b. So the $1.5b was a pretty good estimate, but may be not quite enough.

So this takes us back to why the Government is seeking to legislate a regulatory holiday – it makes it more attractive to its potential commercial partners, and helps close the gap. So the motivation is good – to save the taxpayer money.

However that does not mean it is the right decision. If there is a funding gap between the 75% target and what you can achieve with $1.5b, I would rather it be dealt with directly, not indirectly by way of regulatory holiday. Options are to increase the $1.55b on offer, or to reduce the coverage area from say 75% to 70% or push out the timeframe from say 10 years to 12 years etc.

The concern over the regulatory holiday is that whomever wins the contract, will be exempt from the Commerce Commission regulating access to their services until 2010. The Government will be relying just on the contracts they had to regulate the price, However this places Crown Fibre Holdings in the unenviable dual role of being an investor and a regulator. Also 2020 is almost nine years away, and that is a lifetime in the Internet world. The costs and prices of fibre and data may have changed massively in that time. Many people are very nervous about what could happen in the next nine years. This is partly because of the lessons from the past with Telecom (note again they may not be the fibre companies).

Now the Minister has pointed out that as the local fibre companies can not be owned by a company that will provide retail services over them, then it is less likely there will be a need for regulation, as the fibre companies should operate on an open access platform to all providers. But a lot of devil is in the detail. For example you could have Chorus (if they win) saying it will operate a volume discount scheme that only Telecom Retail will qualify for due to its size.

The Minister also says that as the fibre products will be competing against the regulated copper and that the challenge will be ensuring uptake, which will keep prices down also. I suspect Steven is right on the prices – but from my thinking why remove the safety net of the Commerce Commission, in case you’re not.

Now the other major change is that the calculation of costs and hence prices for the current copper based broadband services is to change from deaveraged to reaveraged. At present the costs and prices reflect the fact it is cheaper in urban areas than rural areas. The Government is proposing to legislate to change this, which means the price of broadband over copper will increase in urban areas. The estimate I have seen is by 20%.

So again why would you do this? The answer is the same. It means those bidding for the fibre contracts will be motivated to invest more money into them. Because if the price of broadband over copper increases, then you can be confident that more customers will switch over to broadband over fibre.

So again the rationale is quite understandable, but again that does not mean it is necessairly a good thing. It means people in urban NZ will pay higher prices than they should for broadband over copper for the next six years or so. Should the Government be effectively tilting the playing field to favour fibre over copper?  Again I’m in favour of tilting the field by way of Government subsidy, but not in favour of tilting the field by interfering with a regulatory regime that actually has worked very well in the last few years.

As I said, in a separate post, I’ll cover the possible structural separation of Telecom, and how this may result in a really great outcome or a really lousy outcome, depending on how the structural separation is done. And the consequences of getting it wrong will reverbate for a couple of decades. This is not something to rush.

The Government has announced that Telecom has won most of the remaining areas for fibre to the home rollout. This includes Auckland and Wellington, but in Christchurch and Dunedin the local lines companies are still  in the running, with both them and Telecom proceeding to negotiations.

This is pretty exciting, as it means Telecom will structurally separate, with Chorus becoming a standalone telecommunications infrastructure company. This will be the most important change in the telco sector for a generation. The details of how the separation occurs will be crucial in determining how beneficial this is.

Vector will feel hard done by, but that is the nature of a tender process. Their involvement has probably meant the bid by Telecom is significantly better for taxpayers than would otherwise have been the case.

Telecom will be pleased to have won the bulk of the country, but not be that happy that they may not end up with Christchurch and Dunedin – they’ll need sharp pencils.

So the overall picture is:

* Hamilton, Cambridge, Te Awamutu, Tokoroa, Tauranga, New Plymouth, Hawera & Wanganui – WEL Networks
* Whangarei – Northpower
* Dunedin – Aurora Energy
* Christchurch, Rangiora – Enable or Telecom
* Timaru – Alpine Energy or Telecom
* Elsewhere – Telecom

No Right Turn has breathlessly labeled as corruption the Government’s announcement of the first ultra-fast broadband contracts.

Why? He blogged:

So, what does this look like by electorates? UFB will be rolled out to:

• Whangarei, held by National’s Phil Heatley, with a majority of 14,663;
• Hamilton East, held by National’s David Bennett with a majority of 8,820;
• Hamilton West, held by National’s Tim Macindoe, with a majority of 1,618;
• Taupo, held by National’s Louise Upston, with a majority of 6,445;
• Taranaki-King Country, held by National’s Shane Ardern, with a majority of 15,618;
• Tauranga, held by National’s Simon Bridges, with a majority of 11,742;
• New Plymouth, held by National’s Jonathan Young, with a majority of 105;
• Whanganui, held by National’s Chester Borrows, with a majority of 6,333.

So, the first thing to note is that only National-held electorates get broadband; those with Labour MPs need not apply (sorry, you voted for the wrong person and so must be punished). The second thing to note is the targeting of marginal seats New Plymouth and Hamilton West. It’d be interesting if someone who knew about IT policy used the OIA to delve into National’s rollout decision, but from here it looks like pure pork-barrel politics. And I don’t like it one bit.

Idiot/Savant is like the boy who cries wolf. He slanders so many people as corrupt, that it becomes a meaningless label. Basically it just all comes over as hysterical rants.

His idiocy was picked up and blogged by Clare Curran, but even Clare worked out what weak ground he and she were on, and later did updates backing away “before David Farrar at Kiwiblog has a go”.

I will indeed have a go at such gross stupidity, and even worse effectively slander. Where do I start.

1. National holds every single seat outside the four main cities (which due to their size are more complex decisions) except for Palmerston North. So I guess the first contracts should have gone to Tasmania, to stop them including National held seats.
2. Six of the eight seats listed are very safe seats with majorities over 5,000
3. This is not a case of some areas getting funding, and some not getting funding. All medium to large urban areas will be getting fibre to the home. This is purely an announcement of the first two contracts. Other contracts will be announced in the near future – the difference between being announced first and second is absolutely minimal.
4. Ever heard of MMP?

Clare initially blogged:

Steven Joyce is a crafty fellow. But even he will overplay his hand one of these days.

Then later as she realised every non metro seat bar Palmie is national held:

Oh and before David Farrar at Kiwiblog has a go and points out that Labour holds only Palmerston North of the general electorates outside the metropolitan centres, that’s true. But it would have been smart for the government to think about this. Instead it doesn’t look so good.

So Steven in the one blog post goes from the too crafty manipulator of funding to National seats to being not very smart for not thinking about the look. He can’t win can he!

Frankly I am sure Steven didn’t spend one second thinking about electorate boundaries with the contracts, and am personally very pleased with that.

Oh and here’s one for the conspiracy nutters. 25% of NZers will not be covered by the UFB initiative. And pretty much 100% of them live in National held seats. So 100% of people in Labour seats will get UFB and only around 65% of people in National sears. Yes, obviously pork barrel politics.

Steven Joyce has announced:

The cities of Hamilton, Tauranga, Whangarei, New Plymouth and Wanganui will be among the first to benefit from the government’s rollout of ultra-fast broadband (UFB), says the Minister for Communications and Information Technology Steven Joyce.

Crown Fibre Holdings has concluded negotiations with two partner companies, following shareholding ministers’ approval of the deals over the weekend.

The partners are:

• Northpower Limited
• and Ultra Fast Fibre Limited, owned by WEL Networks,

The new companies will rollout fibre in Whangarei, Hamilton, Cambridge, Te Awamutu, Tauranga, New Plymouth, Wanganui, Hawera and Tokoroa.

Northpower will commence its roll out in Whangarei before Christmas with Ultra Fast Fibre expected to begin laying fibre early in 2011.  Both companies will have completed their rollouts by 2015.

These joint ventures represent nearly 16 per cent of UFB premises and a combined value of more than $200 million.

This is excellent news. It shows the regional approach has worked, in preference to one nation-wide contract.good to see there will be some fibre laid before the end of the year.

There was some suspicion that Northpower and WEL would not end up with the contracts, despite being announced as preferred bidders. People speculated that Telecom might grab it away from them in a negotiation for a nation-wide contract.

So good to see there will be some fibre laid by the end of the year.

CFH will shortly announce a list of parties with whom it will next elect to negotiate with in the remaining 25 UFB regions.

All eyes are on this.

My view is that Telecom/Chorus will be successful if their price is the same or close to the Regional Fibre Group – say within a couple of hundred million. There are long-term benefits to getting Telecom to structurally separate, and having Chorus as a stand alone infrastructure company.

But it is possible the Regional Fibre Group will have undercut Telecom. They have certain cost advantages such as current ducts and poles and resource consents. Over 70% of the cost of fibre is digging up the road, and the less of that you have to do, the cheaper you do it.

In an ideal world I’d have Telecom sell Chorus to the Regional Fibre Group – then you’d have an integrated infrastructure provider. However I’m not sure Vector and co could afford to buy it!

Four recent Telecom issues, so will talk about them all in the one post.

First they have a new data roaming deal.

The new pricing gives customers 100 megabytes (MB) of mobile data for $100 while roaming overseas in these locations that’s the equivalent of $1/MB.

Customers will be charged $8.00/MB for the first 12.5MB and a remaining 87.5MB worth of data for the rest of their billing month will be free.

A year ago we were all paying $30/MB for roaming data, so this is a good step in the right direction.

If you are on a big trip and will use close to 100 MB this is a damn good deal. If you will only use 10 MB or so, then not so great.

Vodafone charge $5/MB in Australia and $10/MB elsewhere (off memory). So if you plan to use more than 20 MB in Australia Telecom are better. And for US and UK they are cheaper at any rate.

My personal price point is around $1 – $2/MB. I will grudgingly pay that for international data for my mobile devices.

Secondly Stuff reports on the UFB tender:

Telecom will today step up its campaign to become the Government’s broadband partner, releasing a poll on its website that says more Kiwis would prefer its network arm Chorus got the job of building the ultrafast broadband network than electricity lines companies headed by Vector. …

UMR said 48 per cent of those polled would prefer to see Telecom broken up and have “an independent, stand-alone Chorus extend the existing fibre network”, while 28 per cent favoured the Government investing in a new network rolled out by electricity lines companies led by Vector.

Vector spokeswoman Philippa White responded: “Essentially the decision as to who will partner with the Government for the UFB build sits with Crown Fibre Holdings”.

The poll is interesting but to some degree irrelevant. Because it ignores the most important factor – cost.

If the Regional Fibre Group/Vector and Telecom/Chorus both say “Yes we can do fibre to the home to 75% of NZ if the Crown invests $1.5b”, then my view is you would absolutely go with Telecom/Chorus due to their existing infrastructure.

If the two bidders are even “close” to each other – ie Chorus says we can do it for $1.7b and Vector/RFG for $1.5b, then you’d probably still go with Telecom/Chorus – just to avoid the possibility of Telecom using the copper network to make the fibre network unprofitable by undercutting them.

But what the poll ignores, is that there may be a large difference between the two bids. If Vector/RFG are saying we can do 75% in 10 years for $1.5b and Telecom/Chorus are saying we can do 75% but need $2.4b to do it within 10 years, then one goes with Vector (in my opinion). And this scenario is not impossible. The lines companies already have infrastructure assets and resource consents which may allow them to do the job far cheaper than even a structurally separated Chorus.

So at the end of the day it is not a popularity contest between Telecom and Vector. The actual commercial details of their bids are vital.

Thirdly, Telecom have put together a one stop shop website about UFB and their bid. I’ve already read most of the site – lots of useful info there.

Finally, we have an announcement from Telecom and Vodafone about a joint bid for rural broadband:

Telecom and Vodafone have announced they have made a joint bid for the Government’s $300 million rural broadband initiative, bids for which are due in today.

Telecom chief executive Paul Reynolds said the solution would New Zealand’s two largest telecommunications providers “combining their extensive resources and skills to bring the benefits of high speed broadband to rural communities as quickly as possible”.

One goal of the rural broadband initiative is to ensure 93 per cent of New Zealand’s 900 rural schools have access to 100 megabit per second broadband, with the rest getting a 10Mbps service.

The other goal is that 80 per cent of rural New Zealanders get a 5Mbps service to their homes, with the rest able to access broadband with a speed of at least 1Mbps.

Telecom said the joint solution would involve extending Telecom’s existing fibre infrastructure to key rural points of presence, including schools and hospitals, and expanding Vodafone’s wireless infrastructure “that harnesses the power of this fibre to deliver high speed broadband services wirelessly”.

Telecom said any service provider would be able toretail services over the new infrastructure. “This means that rural customers will have not only faster data services but also a much wider choice of technologies and suppliers for these services.”

Telecom would be responsible for building fibre to schools and hospitals, cellsites and rural exchanges and cabinets.

Vodafone would be responsible for the design and build of “open access tower infrastructure” that Vodafone and Telecom XT would share, “as indeed could any other wireless service provider who wishes to do so”.

I’m very supportive of this. I think open access cellphone towers are where the future is. It makes a lot of sense economically, and from a resource consent point of view, to share this infrastructure.

Once we do have announcements on who will be the local (or national) fibre companies, there could well be a role for them in providing future cellphone towers, which Telecom, Vodafone, 2 degrees etc could all put gear on. The fibre company of course would provide high capacity backhaul. There are some technical challenges around size of towers and having all the gear high enough to get a good signal, but these are workable.

So good to see Telecom and Vodafone moving in this direction.

Crown Fibre Holdings have just announced three parties who are entering prioritised negotiations for the fibre roll-out. This will come as a surpise to those who assumed that Telecom/Chorus will win a nationwide contract. The three parties are:

• Alpine Energy (Timaru);
• The Central North Island Fibre Consortium (Hamilton – including Cambridge and Te Awamutu – Tauranga, New Plymouth, Wanganui, Hawera and Tokoroa); and
• Northpower (Whangarei).

This is a welcome step forward, and residents in those communities should be pleased.

CFH note:

“All shortlisted parties remain important contenders for future negotiations of binding agreements.  CFH is open to either a Telecom, New Zealand Regional Fibre Group solution, or some form of combination for the balance of the UFB project.”

So Telecom (and the NZ Regional Fibre Group) can still win the rest of NZ. If they did, presumably they would co-operate with the winners in the above areas. There is of course a risk Telecom/Chorus will try to undercut, if they don’t win a significant portion of the business. That will lead to infrastructure competition which is good in the short term, but inefficient in the long term. Services, rather than infrastructure, is where you want the competition to be.

Stuff reports:

Telecom has confirmed plans to split into two businesses in a bid to take part in the government’s ultra fast broadband scheme.

The company said today it proposed to create a new company, “Chorus2” as a separate standalone entity through a demerger – a process giving existing shareholders pro rata stakes in the new company.

I have been a long-term proponent of structural separation, and believe it will be good for shareholders and good for the country.

While on separation day, the shareholdings of the two companies will be the same, over time they will attract different profiles of shareholders. The main Telecom will be a competitive business paying higher dividends, but with more risk involved.

Chorus will be an infrastructure company, paying lower dividends, but with much guaranteed business. In time I would expect companies like Infratril to seek stakes in it.

While the Government will claim the decision is nothing to do with them, the reality is that by setting rules around ownership for the fibre to the home initiative, the Govt has been the catalyst for this decision which will correct a major problem of the last 20 or so years – a vertically integrated monopoly. The removal of vertical integration means we will get better choice and competition at wholesale and retail levels.

Telecom’s decision to split Chorus off will significantly increase its chances at winning some or even all of the regions for the fibre initiative. However it does not mean they are automatically the preferred choice. Companies like Vector may be able to do it cheaper in Auckland because of their existing infrastructure.

Structural separation is a pre-condition to full involvement in the fibre initiative, but it is not a guarantee of success.

There may be options out there though, such as Chorus gaining the nation-wide contract and sub-contracting companies like Vector and Citylink where they already have assets. Or Chorus could buy a company like Citylink.

Alternatively the Regional Fibre Group could get ambitious and aim to buy 51% of Chorus. It is going to be an interesting two to three months.

Stuff reports:

Kiwi startup Pacific Fibre yesterday announced a deal with Asian telco Pacnet to share the US$400 million (NZ$548m) cost of building and operating its proposed 13,600-kilometre cable joining Australia, New Zealand and the United States. The project aims to be a competitor for the Southern Cross Cable, half-owned by Telecom, and reduce the price of international data traffic  a major part of internet service costs because Kiwis download more than 85 per cent of their net content from overseas.

Well done to Rod, Lance and the team for turning what was ambitious talk into almost reality. This is a big step forward.

Tom Pullar-Strecker writes:

The proposal that the Government take a direct stake in Telecom’s network arm Chorus is alive and well, after briefly being misdiagnosed with an acute case of “copper-poisoning”.

Telecom chief executive Paul Reynolds was leaning towards a full demerger of Chorus when he briefed analysts on options for the possible breakup of Telecom on Thursday, the idea being that Telecom shareholders would be issued with shares in Chorus, which would become a separate listed company.

But the two options are not incompatible. The Government could take a stake in Chorus and the remaining shares could be distributed to Telecom shareholders. Indeed, that may be the best outcome. Nor is there a reason why Telecom shouldn’t be allowed to retain a minority stake in Chorus under that or any other scenario. The more investors the merrier.

I am supportive of structural separation of Telecom. And I believe the preferable way to do it, is to issue all existing share-holders direct shares in Chorus. Over time they would attract infrastructure investors seeking lower but safer returns, while Telecom would attract investors in a competitive higher profit arena.

I would place a limit of any “customer” of Chorus owning more than a certain percentage – say 5% or 10%.

It makes no sense for the Government to set up a separate fibre company to partner with a demerged Chorus to lay fibre to three-quarters of New Zealand under its ultrafast broadband (UFB) investment initiative. After talking to Mr Reynolds following the investor briefing, it is clear that is not what he is suggesting.

“We see a demerged business, somewhat related to the existing Chorus, containing both copper and fibre into which the Government and Crown Fibre Holdings could invest on a nationwide basis and with which others could partner. The concept is you are building one national access business that has copper and fibre in it.”

This is certainly an option. One could put the $1.5 billion into Chorus as capital, with special shares not requiring a dividend (for example).

However one has to also be careful with assuming that even a structurally separated Chorus is automatically the most efficient and effective provider of fibre to the home in all areas.

From what I have seen (including a detailed study of the likely costs), electricity lines companies (such as Vector) will be able to roll out fibre to the home considerably cheaper than telecommunication companies due to their existing assets and resources consents. Vector for example has a strong case in Auckland.

There may be a win-win though if Chorus sub-contracted work in certain areas to companies such as Vector and Citylink, if they can do the job more efficiently. Maybe Vector would even want to take a stake in a separated Chorus?

We also have Axia from Canada in the fray, with considerable experience in rolling out fibre. They also may be offering a cheaper or better option than a separated Chorus. I don’t know, not having seen their bids.

I regard it as a major plus, that the process to date has led to Telecom willing to go down the structural separation path. However that does not mean they are automatically the successful bidder.

The decisions in this area will have a profound impact on NZ infrastructure for the next 30+ years. For my 2c the Government should not rush into a decision. It is much more important to get this right, than to worry about whether or not the actual roll-out starts on schedule.

There is a discussion on Scoop about what people would do with fibre to the home, sponsored by Vector’s fibre to the door campaign.

For me there are four major things it would allow me to do:

1. Video Conferencing. I don’t mean through a webcam on Skype. I mean full steroids video conferencing through my TV set.  Just as I have 50 TV channels, I want 50 video conferencing pre-sets. I want it so I can push four buttons and be immediately connected to a five-way video conference. That would allow me to work at home far more, and travel far less.
2. Remote File Access. I can access files on a remote server now. For example I used to be able to remote access the National Party HQ server. But it would take me a couple of minutes to connect, and copying or opening files was deadly slow. What I want with fibre to the home is that files on my office server open as quickly as if I was on the office LAN. Potentially I even want all my files stored on the Internet and I can access them from anywhere almost as quickly as if they were on my laptop.
3. TV and Movies on demand. With fibre speeds to the home, I want to be able to push a button or two and for (hopefully) $1 or so, a movie will start playing in real time, or maybe the series finale of MASH or the 1963 first episode of Dr Who.
4. A LAN in every house. With fibre to the door, the logical thing is to wire up the house. So then one can view your security camera remotely. You can switch on or off the power to any heaters or appliances. You can grab files off your desktop PC while travelling. You can even turn on a light to keep burglars away. Over time, most of your appliances will be IP connected.

So they’re my four things I want to be able to do. I’m sure there are many more.

Absolutely thrilled to just get a press release from the newly formed Pacific Fibre:

Pacific Fibre, an early stage international fibre venture founded by a group including New Zealand businessmen Stephen Tindall, Sam Morgan and Rod Drury, announced its plans today, aiming to break the digital divide between New Zealand, Australia and the rest of the world.

Other founders include Mark Rushworth, former Vodafone Chief Marketing Officer, technology industry veteran John Humphrey, and strategy consultant and entrepreneur Lance Wiggs.

Pacific Fibre is engaging in early discussions with cornerstone investors and customers. The group is looking to secure funding and build a 5.12 Terabits/sec capacity fibre cable to be ready in 2013 connecting Australia, New Zealand and the USA – the initial proposal is a cable which will deliver five times the capacity of the existing Southern Cross system. …

The current proposed cable configuration would be 13,000 km long, and have two fibre pairs with 64 wavelengths (lambdas) each at 40 Gigabits/sec per lambda. The maximum lit capacity initially would be 5.12 Terabits/sec, but would be upgradeable to over 12 Terabits/sec as the emerging 100 Gbit/sec per lambda technology becomes reality. The newer cable and repeater technology that Pacific Fibre proposes to use will be substantially more easily upgradeable than that of existing cables.

Further competition and capacity on the international bandwidth front is much needed. Superb to see such a talented group of people come together to try and make it a reality.

I, for one, would invest in it. And look forward to the benefits another cable would bring.

I’m somewhat staggered to see Frog has blogged against the Government’s fibre to the home programme, and hope that his view is not that of the Green Party.

I’m rather dismayed to see a Green blog repeating moronic nonsense such as fibre will only be used for faster porn.

There are many areas of policy I disagree with the Green Party, but generally I have found myself in agreement with much of their Comms/IT policies – they voted against the original S92A on copyright, they promote open source software, they have been against Internet filtering and censorship, and they supported the operational separation of Telecom.I’ve gone out of my way to praise them in the comms/IT areas I agree with them on – which have been many.

But I can’t believe Frog doesn’t see one obvious benefit (putting aside all the others) from fibre connected homes, and that is the massive impact this may have in having people work from home – this means less fuel consumption, less congestion and less greenhouse gas emissions.

There are two things that would enable people to work from home much more, both which fibre will help enable.

The first is being able to access your work files as quickly and easily as if you are in the office. Sure you can do remote access at the moment, but it is often painfully slow, and nothing like actually being in the office.

The second is near instant high quality video conferencing with multiple people. I don’t mean waiting five minutes as you start the program up, and everyone else does the same. I mean you go to your TV set, push three buttons, and hey two seconds later you have a four way video conference.

Once we have fast enough Internet to do the above, I predict that the number of staff who work at least half the week from home will grow exponentially. Obviously not in some areas such as retail, but some companies may end up with just a meeting room and server as their office, and all their staff working from home. In fact I know of a couple of firms already doing this.

The Dom Post reports:

Wellington homes and businesses will get ultrafast broadband under a plan submitted to the Government by fibre-optic company CityLink, matching a proposal Vector has unveiled for Auckland.

Vector chief executive Simon Mackenzie said all 450,000 homes and premises in Auckland would be connected by the lines company within seven years with fibre that could provide broadband speeds a hundred times faster than average speeds provided today.

The first third would be connected in the “first couple of years”.

“We are not talking about being constrained at 100 megabits a second down and 50 up. This is capable of gigabits and terabits beyond.”

CityLink managing director Neil de Wit would not disclose details of its proposal, but said it was comprehensive and covered the “whole of the four cities of Wellington”.

Vector has done s similar proposal for Auckland.