Kiwiblog

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.

Tom Pullar-Strecker reviews the fibre investment plan:

Communications Minister Steven Joyce appears genuinely chuffed with the financial model for the ultrafast broadband initiative that he and his team of cerebral but experienced advisers have dreamt up.

The plan released on Wednesday is certainly ingenious.

The fact Steven is one of the very few MPs that has owned and run a major business, made him the ideal Minister for this portfolio.

The Government will, if necessary, foot the entire bill for rolling out fibre-to-the-street, minus any construction overruns, while private investors in local fibre companies (LFCs) will only buy back their share of the infrastructure as they connect up homes and businesses.

That could help nullify the “Catch 22″ that threatened to leave the initiative stillborn – private investors couldn’t guess their return without knowing how ubiquitous the national network would be, which would depend on other investors’ assessment of their likely return.

And Steven has first hand experience of the need for commercial investors to be able to estimate returns.

There is another reason to take the initiative more seriously.

Instead of injecting a “one-off” $1.35 billion into the public-private partnerships in the vain hope that would be enough to garner sufficient private investment to get the whole job done, the Government is now considering investing far more over time. Investment vehicle Crown Fibre Holdings will be to recycle receipts from private investors as they buy shares in LFCs, after the first fibre customers sign up.

The Government’s investment at any one time will be capped at $1.35b, but the total it commits over the life of the scheme could be double or triple that.

“$1.35b is what Crown Fibre Holdings will have access to in order to fund the infrastructure,” says Mr Joyce. “There is certainly the possibility that some or all of the money will be reinvested, but it’s simply too soon to say how much will be reinvested or how many times that might occur.”

Does this mean 75 per cent of people can be assured of getting fibre within 10 years? Hardly. But instead of scuppering the scheme, if $1.35b is not enough to get the job done, it might simply take longer.

This is the most critical part. The big question I, and others, have had, is what if the planned level of investment is not enough to get to 75% of NZ. Do you then scrap the plan, or do you accept a lower coverage target. The answer is neither – you just recycle the crown investment, so you get there eventually, even if it takes a bit longer.

I am going to be fascinated to see what offerings are made by the various telcos, ISPs, lines companies and local government.

A mixture of good and bad in Clare Curran’s blog on productivity:

We have a productivity taskforce set up by the National Government and led by the ignominious Don Brash. It’s likely to come up with an argument for economic growth which is about selling our state assets and keeping wages down, or cutting jobs to create more profits. Because that’s what the conservative side of politics believes productivity to be. Gordon Campbell’s piece on this a couple of months ago is worth reading.

Labour, on the other hand, is an enabler. We want economic growth. We don’t want it at the cost of creating greater gaps in our society between those on no income and those who do have one.

This is just puerile. National bad. Labour good.  She declares that the conservative side believe productivity is about cutting wages and jobs. Slogans are not substitute for analysis.  Fortunately we get this later on:

1. Open government. In particular open software.

The NZ Government currently spends around $2 billion a year on IT, in software, hardware and all the services that go with it.  We have lots of government websites, but we don’t have an open source policy and we don’t practice open government. We have attempted to harmonise govt IT and networking through the previous Labour Govt’s digital strategy. Much of that appears to have been ditched. There’s an awful lot more work to do in this area.

The US government, under Obama, has made a commitment to cut its total IT spend of $76 billion by between 50% and 80% by driving its systems into open source and cloud computing.

Could we save $1 billion?

I think there is considerable potential in this area, and delighted to see Labour take an interest in it.

2. Working from home. Telework

Ten year’s ago, a study funded by the Auckland Regional Council found that spending $3 million on an awareness raising programme about the benefits of telework targeting employers, could take 10% of Auckland’s traffic off the roads. There’s research overseas demonstrating that you can save up to 15% in workplace productivity and lower overheads through flexible arrangements with your employees working from home. And then there’s the greenhouse gas savings, and the boost to local communities. Let alone the social capital through having more parents at home, more often.

Yep – very much the way of the future. I will point out this is one of the reasons why National pledged $1.5 billion for fibre to the home in 2008, as compared to Labour’s $340 million.  I think the fibre rollout will see a very significant increase in people working at least some of the time from home, and some smaller firms doing away with offices all together. In fact some have already started.

3. Saving time. Improving our basic computer skills

Consider this. The UK National Health Service employs 1.2 million people. I’m told they recently put 100,000 staff through a programme to upgrade their basic computer skills, called the International Computer Driver’s Licence (ICDL). This is a reputable programme, developed through the European Union.

An analysis of its effectiveness showed they’d saved 38 mins/day for each employee. Or four weeks per person per year. Crikey! And that was because each staff member knew how to work better with the software they used every day at work and how to solve their own problems.

Not a bad idea also.  We agree on the details, if not on the rhetoric!

Clare Curran has blogged at Red Alert:

Communications and IT Minister Steven Joyce has just told the House in question time that there has been no delay in rolling out ultrafast broadband.

It’s amazing how this government can tell a barefaced lie with a straight face. The election was almost a year ago. The $1.5 billion delivery of broadband to 75% of New Zealand homes was a core election promise. Supposedly ready to go!

If Clare is going to use terms like bare faced lie, I’m going to have to point out how that description is one which better applies to her own blog post.

John Key announced the ultrafast broadband policy in May 2009. I was there when he did it. So was most of the industry. And they know what John Key said. So they get very puzzled when Clare claims the broadband package was supposedly ready to go. Let me quote John Key’s speech:

Delivering on these five principles will require a carefully thought-through and negotiated investment and regulatory model. National will conduct these negotiations in our first year of government.

2009 is the first year of Government. If anything, Steve Joyce is three months ahead of schedule. Everyone in the industry knows that National said the policy was a policy about what they wanted to achieve, and they would take 12 months working out the best way to achieve it.

And frankly it is somewhat bizarre that Clare keeps demanding that decisions should have been made quicker, because she has also blogged what an incredibly complex area this is. If the Government had made decisions more quickly, I suspect Clare would criticise that. Being in Opposition does not mean you have to criticise everything.

Clare then compounds things by claiming:

They axed the previous Government’s programme which was poised to rollout and put everything on hold for months while they recast a plan which now looks remarkedly like the previous government’s. That’s taken all year.

Now I was a big supporter of most of what the previous Government did in the Communications/IT field. But it is not at all correct to claim the previous Broadband Investment Fund is the same as what National is doing. The previous fund was not for a national fibre network reaching 75% of New Zealanders. It was $325 million (compared to $1.5 billion) and was not for fibre to the home. It was for mainly broadband to businesses and MUSH (municipalities, universities, schools and hospitals).

Now that was a good fund and certainly better than doing nothing (from my point of view). But to be blunt National trumped that with a policy that was far more ambitious and with far more funding – around 400% more.

Personally I suspect the former Minister, David Cunliffe, would have loved to have matched or exceeded National’s policy – but the simple fact of the matter is he couldn’t get the extra funding out of Clark and Cullen.

So while there are of course some similarities between the former BIF and the current Government’s proposal (mainly that they both use a regional competive process which is hardly surprising) they are in no way the same plan. And again, most people in the industry know this.

This government talks about investing in infrastructure. It seems to think that infrastructure is purely the network of roads, wires or fibre required to create a physical structure. What Mr Joyce, who is also the Associate Minister of Infrastructure, doesn’t seem to get, or pays lipservice to, is that with broadband, you can just invest in the fibre. You’ve got to invest in what will pass through the fibre. Services that will benefit society. And that’s the government’s role.

I’m not sure what Clare is suggesting here but I don’t want the Government competing with telcos, ISPs, Sky TV etc etc as the applications and services level. The infrastructure level, which is inherently non-competitive in most cases, is where I want the investment to happen.

It’s unknown whether the private sector investment required to make up the shortfall between $1.5 b and $6 billion will manifest itself, because its unknown what level of public investment will be made in the health, education and enregy sectors which will stimulate demand. That’s the real question.

No it is not. Expecting the Government to declare today what services it might seek to deliver in ten years time over the network is incredibly naive – especially considering the pace of change in the Internet industry. Any declaration today is likely to be more inaccurate than a Treasury forecast of the deficit!

The private sector will make their investment decisions on the basis of international experience and their own market research. They will not make them on the basis of what the Government may do online in ten years time.

In light of the Government’s fibre to the home proposal, there seem to be three distinct paths forward for Telecom. They are:

Structural Separation

If Chorus is sold off, then Chorus would be in a very strong position to effectively gain most of the $1.5 billion on offer, by partnering with the Government to set up many of the regional fibre companies – or even one national fibre company.

The likely sucess in gaining most of the $1.5 billion would increase the value Telecom would get by selling Chorus. Also Telecom might not have to sell all its shareholding in Chorus – it could, I beleive, still retain a minority stake as an investment.

This would leave Telecom with its wholesale and retail arms. They would probably immediately have most of the current obligations imposed on them, such as equivalence, dropped.

With much reduced capital expenditure needs, and a cash inflow from the sale, Telecom should be in a position to increase the dividends it pays.

The downside will the inability to leverage the advantages of also owning the existing infrastructure. They’ll be paying an outside company to utilise their lines – the same as everyone currently has to do to Telecom. They will also be more at the whim of the market. If they lose market share to competitors, they won’t have the compensation of the fact the competitors are still paying them access fees.

Infrastructure companies tend to be safer, but have lower dividend returns. Competitive companies are a more risky investment, but can produce higher returns.

Participate as a minority partner

If Telecom do not structurally separate, then they are deemed a “partner” that owns a retail operation. This does not preclude them in any way from full participation in one or more local fibre companies (or even to still propose they be a partner in a national fibre company).

The key restriction is that will not have the right to appoint a majority of Directors to the Board of the LFC, and the Chair of the LFC Board must be agreed unanimously by all shareholders.

I’m not sure how important control of the Board of an LFC will be to Telecom. The initial partnership agreement with CFH setting out terms of investment and how extensive a fibre build will be is arguably the more important factor.

It is quite possible Telecom could decide to participate and invest in one or more LFCs. This will also help protect their investment in current legacy assets.

Do not participate

The third option is for Telecom not to bid to be a partner for any LFCs, or they do bid and are unsuccessful.

If this is the path chosen, then Telecom will be in a fairly strong position to ask for some of the current requirements imposed by operational separation to be removed. There would be issues over timing, of course.

It is likely Telecom would not undertake any more major infrastructure investment (such as further cabinetisation or further upgrades to VDSL2) beyond their current commitment of $1.4 billion. This would save them money in the short term, and in the long term they would become a customer of the LFCs for their higher speed products.

Telecom could do quite well relieved of the need to keep rolling out faster and nearer infrastructure. For many of their customers, the current speeds will be adequate for some time.

It is possible that they might keep up an aggressive investment programme to try and compete with the local fibre companies, and even drive them out of business. That would be a very ballsy call though, considering the firm policy of both major political parties is that the future fibre infrastructure must be open access and not part of a vertically integrated monopoly.

Telecom’s decision is going to be one of those really big ones – on much the same scale as which mobile phone technology to go with. The wrong call can cost a lot of money. The senior staff and board have an unenviable task looking at their company, considering its strengths and weaknesses, and deciding on the best path forward.

I’m very very happy with today’s announcement from Steven Joyce:

Communications and Information Technology Minister Hon Steven Joyce today released the details of the government’s $1.5 billion ultra-fast broadband investment initiative. …

Key highlights of the proposal include:

• An open, transparent partner selection process, which will be initiated in the next month.




• Government investment directed to an open access, wholesale-only, passive fibre network infrastructure.




• A new Crown-owned investment company (“Crown Fibre Holdings”), which will be operational by October, to carry out the government’s partner selection process and manage the government’s investment in fibre networks.




• Crown Fibre Holdings and each partner establishing a commercial vehicle, a “Local Fibre Company” (LFC), to deploy fibre network infrastructure and provide access to dark fibre products and, optionally, certain active wholesale Layer 2 services.




• Provision for national and regionally-focused proposals, as well as consortium and proposals aggregating any combination of LFC regions.




• Independence, equivalence and transparency requirements for LFCs.




• Expansion to 33 candidate coverage areas based on the largest urban areas (by population in 2021).

What is really good is the commitment to open access to dark fibre, and the regional approach to the issue. The Government has held firm to most of their draft proposal, with the main change being an increase in the number of coverage areas to 33.

Computerworld reports on positive reaction:

“This ushers in the biggest and most fundamental change to telecommunications in New Zealand since the privatisation of Telecom 20 years ago,” TUANZ CEO Ernie Newman said in reaction to the news.

“The paper builds very constructively on the work done previously,” Newman says. “It takes into account most of the key issues raised in submissions, and sets a timetable with milestones. It is an excellent blueprint on which to build.” …

InternetNZ also welcomed the plan, saying it is “delighted” with today’s announcement of a regionally-based approach to investment.

“This is a world-leading programme that can be expected to deliver the infrastructure New Zealand needs,” spokesperson Jordan Carter says.

“Steven Joyce and the Government have put in place a framework that over time can deliver a widespread fibre rollout across urban New Zealand.”

Those unsure about the benefits of ultra-fast broadband, might want to read the guest post from Rod Drury earlier this week.

Chris Keall (and Kelly Gregor) at NBR cover the proposal in detail. Keall highlights a new focus:

In the proposal document released today, the minister also flags that “The capacity and reliability of New Zealand’s international data connectivity will become increasingly important as LFCs’ [local fibre companies'] networks are deployed over the course of the UFB Initiative.”

The Commerce Commission recently identified slow international data as a roadblock to better domestic broadband performance, with testings showing that overseas pages take twice as long to load as those hosted locally – even with our current copper-dominated networks.

International bandwidth and data costs are often cited as a big issue also.

In a fit of good timing, Juha Saarinen has an article in Computeworld on dark fibre, and how you basically can not get it from Telecom or TelstraClear. Have a look at this price comparison and weep:

James Watts, who runs Palmerston North-based ISP Inspire Net, says the reason dark fibre is attractive to his customers is because they can “do whatever the hell they want with it.” Inspire currently charges $595 and $995 for intra-town dark fibre pair leases, depending on contract terms, and double that for inter-town unlit circuits.

To light the circuits, Watts says his company sells Gigabit Ethernet transceivers for $140 each.

A similar 1Gbit/s circuit from Telecom apparently costs $7000 a month, plus installation charges.It’s $69k a year according to Telecom’s pricing book.

Finally a focus on the issue of fibre providers being discouraged from also operating retail telecommunication services, both here and in Australia. Steven Joyce said in a Q&A:

Will Telecom have to structurally separate its network business to participate?

Any such decisions are up to Telecom.  The Government has made it clear that it will only invest money into fibre companies that are not controlled by shareholders who also operate retail telecommunication businesses.  The Government is also clear that potential partners who already own fibre assets can table options that involve those fibre assets being vended into any new fibre companies.

Preventing vertically integrated monopolies is crucial. This basically means Telecom can not be a majority shareholder in any regional fibre company unless they structurally separate (ie sell off Chorus). They can have a minority stake however.

In Australia, the Government has done similiar:

The government could also deny Telstra access to new spectrum for advanced wireless broadband unless the telco sells off its cable network and 50 per cent stake in Foxtel (25 per cent owned by News Corporation, owner of The Australian)

If you want to be part of the future, you need to be separated.

For those who think separation is not a big issue, think what it would be like if Air New Zealand owned the airports and could set access terms for other airlines. Or if Ford owned the roads and set the rules for what other cars could drive on them, and for how much.

So as I said, very pleased with the announcements today, and now working my way through the details.

The Herald reports:

Telecommunications engineers continued their strike against a division of Telecom yesterday as the Council of Trade Unions (CTU) called on the Government to halt negotiations over broadband with the company.

I’m not exactly what you call a cheerleader for Telecom, and I’m not saying who has the better case in this dispute with the EPMU and engineers. But I am firmly against any suggestion the Government intervenes in the dispute by trying to heavy Telecom re broadband.

The Government should make decisions around the fibre to the home project purely on what will achieve the best result. Now personally I think lines companies have a lot to offer as well as telcos, but I want it decided on best return for investment – not intervening in an industrial dispute.

Another good development yesterday in the fibre broadband project. As I blogged Telecom put forward a couple of constructive proposals.

Vector announced yesterday:

A group made up of lines companies and local fibre companies has been formed to support the Government’s vision of introducing ultra-fast fibre broadband to New Zealand.

Vector Chief Executive Simon Mackenzie said that the NZ Regional Fibre Group brought together the collective wisdom and experience of several different regional operators with expertise in open access networks.

“We welcome the opportunity to submit on the Government’s Broadband Investment proposal which will leap frog New Zealand to world class broadband.

Members of the New Zealand Regional Fibre Group include Vector, Aurora, Northpower, Waikato based WEL Networks, Unison, PowerNet, Christchurch City Networks, Network Tasman, and Velocity Networks.

Telecom has released today their proposal to the Government for how best to utilise the $1.5b available for fibre to the premises.

Their first option is an acclerated fibre roll-out by Chorus. Milestones would be:

1. All 93 hospitals connected within 30 months
2. 2,000 schools connected within 30 months
3. Remaining 600 schools (including those outside the 75% zone) within 36 months
4. Possible extensions to medical centres, pharmacies, libraries, maraes and community centres
5. Would build fibre to all new homes in the 75% coverage area (at present only builds to developments of at least 50 lots)
6. Extend the fibre network to pass more homes, and subsidise connections into individual homes.
7. Have shorter cooper loops to increase speeds to non fibre homes on VDSL2

It would see the Government investment and their existing investment co-ordinated (not competing) so there is no over-build. All infrastructure would be open access and dark fibre would be made available to all comers.

It is not promising full fibre into every home, but it is advancing a lot towards that goal.

Their second option is to have the Crown Fibre Network Company to contract Chorus to build a national fibre ducting network of up to 10,000 kms home. So they will not provide the fibre, but will provide the duct for it. Now ducting is estimated to be 80% to 85% of the cost of fibre deployment (off memory) and a lot of people say that it is only the ducting that needs to be open access.

Service providers would fund the actual fibre connection to the premises.

Telecom also offer some hints that they could be willing to sell off some or all of Chorus (which would make their proposal extremely attractive). They say they are open to “alternative partnership models”.

Really pleased to see Telecom put forward constructive and viable proposals. It will be fascinating to see who else steps up to the plate.

Kevin Rudd has just announced a major shift in policy:

THE Federal Government has announced the “largest infrastructure decision in Australia’s history” after deciding not to award the national broadband network contract to a company.

Prime Minister Kevin Rudd said the Government would lead the development of a national fibre-to-the-home broadband network up to “100 times faster than what many people use now”.

“Years of failed policy have left Australia as a broadband backwater,” he said.

“This new super fast national broadband network is the single largest national building project in Australia’s history.”

Mr Rudd said the Government would seek investment from the private sector to build the network.

Construction would begin in the middle of the year and take “seven to eight years”, he said.

Sounds somewhat similiar to here.

NBR reports:

The winning telco in Australia’s national broadband network tender? None of the above. At a press conference this morning, prime minister Kevin Rudd said the government will drive the building of a fibre network itself – taking a leaf out of New Zealand’s book.

The government has also dramatically expanded the scope of the network from fibre-to-the-the node to fibre-to-the-home, putting the total build cost in the vicinity of $A43 billion.

The government’s share of the network, beyond the initially promised $A4.7 billion, will be funded by an infrastructure bond.

The network will be built by a private-public company, with the private investors able to hold up to a 49% stake – a set up that echoes the public-private fibre companies proposed on this side of the Tasman by Communications and IT minister Steven Joyce last week. …

“Fibre to the home, fibre to the business and fibre to the premise is what the 21st Century economy is all about,” says Mr Rudd.

Well done Kevin Rudd. This may also provide some opportunities for companies to pick up work on both sides of the Tasman.

Ever since National announced its $1.5 billion fibre to the home policy in May 2008, Labour has told fibs about it. Great big fibs.  As National was pledging an amount around 400% more than Labour, they couldn’t do their normal cries of “It isn’t enough”.

So they claimed it would all go to Telecom, and entrench their monopoly status. And they kept repeating the lie.

And then yesterday when National announces further details of its policy, Labour has the cheek to claim that National has shifted its policy, and adopted Labour’s policy.

So get this – you tell lies about what a party’s policy is, and when it is clear the lies will no longer work, you then claim they have done a u-turn.

In the House Labour claimed:

Can the Minister confirm that by shifting from its pre-election policy of a single, regulated, utility model for delivering broadband to one that is regional, open, contestable, and technology-neutral, National has adopted Labour’s broadband investment policy framework; if this is true, why did National not campaign for that rather than the opposite?

Now let us first look at National’s policy:

National will contribute an investment of up to $1.5 billion in Crown capital alongside additional privatesector investment to accelerate the roll-out of ultrafast broadband for New Zealand, subject to five key principles:

Totally consistent with what was announced yesterday.

That this investment does not line the pockets of or give undue advantage to existing broadband network providers.

Again totally consistent with what was outlined yesterday. And totally contradictory to Labour’s claims over the last year that all the money would go to Telecom.

That the network is open-access so that many service providers can compete to provide broadband services over it.

Again totally consistent with yesterday’s announcement.

Nowhere at all does the policy say National will have a “single, regulated, utility model for delivering broadband”. National made it very clear it was open minded on what the model will be, so long as the principles outlined were adhered to.

I’ve praised Labour for their engagement over the copyright issue. And I think the Comms/IT policies pursued by Labour over recent years have generally been very good. The co-operation and mood in the industry is radically different to five years ago, and Labour’s record has been very good as a major contributor to that.

But this is why I’m pissed off by the fibs/lies they told over National’s broadband policy.  Most of what Labour did was not opposed by National. I think National realised that this is an area where one shouldn’t be party partisan and at the Internet debates in 2005 and 2008, we got more agreement than disagreement.

But Labour, presumably shocked by the fact National pledged 400% more on broadband investment, has done nothing but spread bullshit over National’s policy, rather than actually say “Hey we support this goal”.

Unlike their admirable forward looking position on s92A, Labour seemed caught in the past trying to say that nothing should change from when they were in power. They foolishly attacked the Government for ceasing funding to the massive loss making Govt Secure Network (that almost no one in Government was using) and they complained about replacing a $340 million level of pledged investment with a $1.5 billion level of investment.

Anyway after months and months of lies about how Telecom had written National’s policy, how Telecom had donated to National, how this policy was a $1.5 billion subsidy to Telecom, how it would give Telecom a perpetual monopoly over our futures, maybe the bullshit will stop. I certainly hope so.

The NZ Herald editorial approves:

Preventing a repetition of the vertically integrated monopoly enjoyed by Telecom’s copper network was always going to be a cardinal requirement of the Government’s $1.5 billion investment in an ultra-fast broadband infrastructure. …

Commendably, Mr Joyce has stuck to his guns despite pressure from the country’s three biggest broadband providers – Telecom, Vodafone and TelstraClear. In public, this took the form of a report that questioned the economic benefit of the Government’s plan, and suggested their own long-term network improvements would deliver broadband speeds adequate for the needs of everyday internet users.

In private, there must have been sustained lobbying, given the delay in confirming the Government’s plan. The minister has demonstrated a resolve that deserted several of his predecessors. In addition, he has signalled a welcome willingness to look at codes of practice, regulation or legislative changes if this is required to ensure good practice.

Incidentially I am on TV3 Sunrise at 7.15 a discussing the policy.

Steven Joyce has released details of the Government’s $1,500 million investment into ultra fast broadband so that it reaches 75% of NZers within a decade. Key details:

• A Crown-owned investment company called Crown Fibre Investment Co or CFIC will be established.
• CFIC will invest alongside private sector co-investors in regional fibre companies that will deploy and provide access to fibre optic network infrastructure in the 25 towns and cities covered by the initiative.
• CFIC will select local partners based on the amount of additional fibre coverage being proposed, the proposed capital structure, the commercial viability of the proposal, consistency with government objectives and the track-record of the partner.
• It will be an open infrastructure model that will ensure all telecommunications companies have the option of using the fibre.

The Govt also has a Q&A.

This looks a very good process. Most people in the industry thought a regional approach was preferable to a national approach. So there will be up to 25 local fibre companies that are part owned by the Crown and part-owned by private operators.

A key aspect will be the market structure:

It is expected that ISPs, network providers or other service providers will purchase access to dark fibre and install their own active electronics.  Local Fibre Cos themselves will have a limited ability to install their own active electronics as well, subject to Crown Fibre Investment Company approval.

In turn, these parties (except the Local Fibre Cos) may use these elements to produce a retail broadband (or other) service, which is sold to end-users.  The Local Fibre Cos cannot do this due to their restriction on selling retail services.

These parties may alternatively use these elements to produce a wholesale “bitstream” type of service, which is sold to ISPs or other service providers (Local Fibre Cos can undertake this activity, but as noted above this is subject to Crown Fibre Investment Company approval).  The parties that purchase these wholesale services will then use them to provide a retail service.

So generally the local fibre cos will provide access to dark fibre only. In some areas they may be allowed to provide wholesale bitstream services, but only if needed by the market. And in no circujstances can they provide retail services. Joyce is clearly motivated to avoid the vertically integrated monopoly legacy we have over the copper lines.

Also good to see focus on regulatory issues:

In addition, the government will assess how best to facilitate access to and use of fibre cable deployment on telephone and electricity poles, local authority-owned passive infrastructure such as ducts, micro-trenching and fibre-optic cable “drops” from the street-side into customer premises.  This may involve codes of practice or regulatory or legislative amendments.

And for those outside the 75%:

The government made a pre-election commitment to provide $48 million to improve rural broadband.  The Minister for Communications and Information Technology is currently developing options around this commitment and expects to make announcements regarding the direction of the government’s rural telecommunications policy in the near future.

The framework looks very good to me. The hard part will be evaluating the competing bids – a top class selection criteria, process and panel will be needed.

The NZ Herald has an exclusive preview of a report being released at 10 am today, that was commissioned by Telecom, Telstra-Clear and Vodafone.

As readers will know, National was elected on a major promise of spending $1.5 billion to help ensure ultra high speed broadband to 75% of NZ homes.

The three telcos have released a report which basically says the Government should not spend $1.5 billion in this area, because all their existing offerings are adequate. I’ll try not to laugh.

Now you have to consider how unusual it is for the major players in a sector to try and stop the Government spending $1.5 billion in subsidies, rather than try and get some of the $1.5 billion.

So why would the big three be fighting against a huge investment in their sector? Because they are scared shitless that it won’t go to them. They are very worried that electricity lines companies may get to provide most of the infrastructure for fibre to the home. And this means the telcos would have to compete in offering services over that fibre network, plus offer complementary services over mobile and wireless.

Labour have been running what is basically a blatant lie for nine months, about National’s policy. They have been scare mongering that National is just going to give the $1.5 billion to Telecom, which would help perpetuate Telecom’s market dominance. Now ask yourself, would Telecom be partnering up with its two biggest rivals, to fund a report that argues the $1.5 billion should not happen – if Telecom thought there was any liklihood that $1.5 billion would be coming their way?

Now I don’t know what the Government is going to do. I’m not even sure if they have made decisions yet. But I think Liam Dann has it somewhat wrong in this article:

Bill English and John Key will already be having serious doubts about their ability to commit $1.5 billion.

The world has changed dramatically since Maurice Williamson – then opposition spokesman on telecommunications – made the $1.5 billion promise.

It was John Key, not Maurice Williamson, that made the promise. I was there at the speech. John was taking, and Maurice was sitting next to me clapping furiously – like all of us. Now this is not to say that Maurice was not a passionate advocate of the policy – he was, and he helped make it happen. But anyone who suggests John Key is not committed to this policy is wrong (in my opinion). It is no secret that John was a very strong advocate for it.

And while the credit crisis is an issue, the Government has made clear that they are looking to bring forward infrastructure spending, not reduce it.

Dann says the benefits of fibre to the home must be jobs, not just movies on demand. I agree. I think fibre to the home will allow many businesses to reduce costs as staff can work from home, which provides both economic and environmental costs. Dann says:

And cost-benefit debate needs to focus on jobs not, unfortunately, speed for the home user.

Last month a report by the Economist noted two studies which found some evidence of increased broadband spending equating to increased employment.

Washington-based Brookings Institution concluded that for every percentage point increase of broadband penetration, employment increases by 0.2 per cent to 0.3 per cent per year. But that is not huge growth.

Not huge? So if we get 10% more broadband penetration we will have extra employment growth of 2% to 3% a year. That is an extra 40,000 to 60,000 jobs a year.

I look forward to reading the full report. There certainly are difficult issues for the Government to deal with. For example if most of the funding does go to electricity lines companies, it would be desirable for this not to hinder current investment plans by the Telcos. I am sure the Castalia report will be a useful piece of research, as they had access to the telco’s commercial data.

Chris Barton looks at the Government’s fibre plans:

We do know fibre-optic cable is at the centre of Joyce’s rewiring plan and the mechanism to get there is the much-vaunted public-private partnership.

So far so good. But just who does Joyce plan to partner with? And will he be seduced by Telecom’s wiles?

There’s no doubt Telecom would love to bed Joyce. Such a tryst – Telecom building, operating and no doubt, wanting to own, the new wires – would secure the firm’s monopoly dynasty forever.

I think Mr Barton needs to take less Viagra before he writes his column

But it’s also clear such a dalliance would be a terrible mistake. Not to mention a betrayal of voter trust and a very poor return on taxpayers’ money.

And getting the maximum return on the Government’s investment is crucial.

If Joyce is still uncertain about what to do, he should re-read the very fine piece of analysis prepared for Internet New Zealand by Network Strategies. There, in glorious return on investment detail, is a simple answer to who the Government should partner with instead of Telecom – electricity lines companies.

Why? Because if New Zealand wants to rewire its aged telecommunications to a fibre-optic future, the electricity lines companies are the cheapest, most efficient way to do it.
Plenty of power poles and ducting are already going by our homes, already with resource consent, making it much easier to string or trench fibre to our doorsteps. How much cheaper? Without the lines companies, Network Strategies estimates a fibre network will cost $5 billion.

With the lines companies on board, the cost drops to $3 billion – making the Government’s $1.5 billion investment look like a very realistic sum to fulfil its election promise.

A $2 billion difference is far from insignificant. I am of course on the Board of Internet New Zealand, but we were as surprised as anyone I think that the research turned up such a massive price difference.

There are other reasons why this is very good idea. Most of the 27 lines companies in New Zealand are owned by consumer trusts – an ownership structure that tends to be sympathetic to longer payback periods and fits well with local initiatives that recognise the importance of broadband to a region’s economic and social wellbeing. And some, such as Vector and Counties Power, are already providing fibre to homes or businesses.

And even more importantly, lines companies do not tend to be in the business of providing services over their lines – they are an access provide rather than a service provider. This is actually crucial as you then avoid a vertically integrated monopoly, and then multiple service providers can comptere and offer different packages over the fibre.

But there are two problems. The first is what such a network would do to Telecom’s share price. There’s no doubt it would have an unsettling effect. But if the new wires are “open access”, it’s hard to see how Telecom can complain too much.

Open access means companies get equal access to the infrastructure on non-discriminatory terms and conditions, so all comers are offered the same wholesale products or services at the same price and equivalent conditions. In other words, consumers get choice and Telecom competes for business with everyone else, probably getting a whole lot more efficient in the process.

The impact on Telecom is a real issue – not just in terms of share price, but also their fibre to the cabinet plans. Would they continue? Would they sell Chorus if the line companies get the nod to build the fibre to the home network? Could there be a win-win – maybe some partnership with lines companies and Telecom/Chorus? So many issues, which is why a decision should not be rushed.

InternetNZ released today the first ever comprehensive costing of options for achieiving ultra high speed broadband to at least 75% of New Zealanders. This was defined as a minimum 100 Mb/s for residences and 1 Gb/s for businesses.

The report is 150 pages of detailed models and costings. It was done by Network Strategies, who are an independent leading firm of telecommunication economists.

There are lots of technical details on whether one should build just layer zero or layer one infrastructure, whether it should be GPON or Ethernet or even peer to peer. The techos will find that part interesting.

But the real “big news” in the report is that it may be billions of dollars cheaper to build a fibre network through existing utility (electricity lines) companies, than through expanding current telco networks.

The major cost of fibre deployment is the cost of placing it. And lines companies already have networks of ducts plus overhead cables, and very importantly resource consents. If 50% of fibre deployment can be done using existing utility infrastructure (and some estimate as much as 70% could be done this way), then the total cost is projected to reduce from $5 billion to $3 billion and the cost to the Government from almost $4 billion to under $2 billion.

Now this is only one report, but hopefully a useful contributor to the debate over how to best achieve the Government’s goal of ultra high-speed broadband to 75% of NZ. But one reason I am quite enthusiatic about the path it suggests, is because it makes vertically integrated monopolies far less likely. You see none of the electricity lines companies offer telco services (such as Internet access, TV, phone). They would operate any fibre network on open access principles to all telco providers at a standard wholesale cost (estimated to be around $40/month). In one sense very similar to how Citylink have operated – they just provide the fibre, and let ISPs offer the services over it.

This actually has the potential to reverse much of the regulation in the telco sector. If there is infrastructure competition or separation, then you probably don’t need Telecom (for example) to be giving competitors access to its networks. Regulation is what I call a necessary evil. If one can get the infrastructure setup in a way so there is less regulation, that is a good thing.

There are literally dozens of big questions facing the industry and the Government, in working out a way foward. This report does not seek to answer them – it is a first step. Issues such as national vs regional, ownership, existing investment plans, the role of Chorus, RMA issues, funding, are all very significant ones.

It is going to be a very exciting time over the next few months, as the Government’s plans get finalised. Some people are sceptics, but I think there will be significant economic and environmental benefits to NZ if we get a fibre network in place ahead of most other countries.

Paul Winton writes on broadband plans:

In early 2008 both Labour and National admitted that, for communications, ‘the market’ just wasn’t going to get us there. In March, National trumped Labour by announcing an ambitious $1.5 billion investment into fibre-to-the-premise broadband to 75 per cent of premises over the next six years. About a month later, Labour announced a smaller investment of $325 million into broadband infrastructure.

Neither plan is perfect. Relative to National, Labour’s plan lacks scale and clarity of outcomes. Conversely, the National plan could significantly change the landscape if designed well, but equally, if done poorly could scare away investment.

Which is why presumably National has said it will get expert advice on the best way to implement a fibre to the home network.

Telecom’s slow rollout using copper technology is perfectly reasonable for them. They’re going as fast as shareholders will allow them to and there’s no reason for them to accelerate it.

Sadly for New Zealand, if we continue to roll out fibre at this rate we won’t get the sort of capabilities our close Asian neighbours like South Korea have until about 2040. Many in New Zealand think a thirty-year lag is a bit much to swallow.

There is no doubt we will end up with fibre to the home for most of NZ. The question is by when. Do we want to be one of the last OECD countries to have widespread fibre, or one of the first? Will there be economic and environmental benefits from early deployment? I think so obviously.

So what happens first under, say, a National-led government?

The first thing is to get people around the table. Those people would probably be Telecom, perhaps a consortium of lines companies and a group from overseas. There will need to be some form of RFP process, development of a long-term regulatory framework, and finally a clear assessment of what the government dollar is investing in and what returns it will get.

If designed well, with the good of the country in mind, the National programme will launch New Zealand to the front of the pack globally and create a competitive, world-class communications sector.

If done poorly we will continue to lag behind our peers and suffer the consequences of living in a nation with communications asthma.

Not much there I disagree with.

NBR have an NZPA story on National’s policy programme. Details are:

• Tax policy to be released in first week of the campaign – is locked in and takes account of worsening economy
• KiwiSaver policy and Working for Families policies to be released
• These would be minor changes to current settings only
• Planning for a 8 November election
• Would introduce an RMA Amendment Bill within 100 days of office
• Aims to make the Emissions Trading Scheme a priority and pass legislation within nine months of office
• Stressed no change to the $1.5 billion fibre to the home broadband infrastructure proposal

All sounds good.

The Dom Post reports that Southern Cross Cable Network says there is little rationale for Kordia to put in place its own international cable.

I disagree. I think competition for international bandwidth is highly desirable and am pleased Kordia are doing so – with Government backing. I do have a minor concern about Kordia’s ownership of Orcon as a vertically integrated state owned ISP may have some unfair advantages, but they can be managed.

Even with Kordia’s new cable, I think we will in the future have a shortage of international bandwidth. That is because rollout of fibre to the home will see bandwidth demands increase 100 fold. Let me use an example Ericsson used in a recent fibre to the home presentation.

Let us say at present you have 5Mb/s speed, and a contention ratio of 50:1. As very few users are using their full speed at any point in time, one can have a high contention ratio as e-mail and web browsing takes up little bandwidth.

Now let us say with fibre to the home you are connecting at 50 Mb/s. That means 10 times the bandwidth needed. But the sort of activities you do on the Internet will change – you may be video conferencing much of the day, and watching Hi Def TV in the evening. So the contention ratio might have to change to be 5:1 not 50:1.

So in a neighbourhood of say 1,000 residents the backhaul bandwidth previously needed was 100 Mb/s. Within a decade it will be 10 GB/s.

The Dom Post reports:

Technology analyst, author and former AT&T executive David Isenberg says New Zealand needs to forget about tinkering with Telecom’s relatively low-speed copper network and build a high-speed open-access fibre network, one not controlled by telecomms firms.

Where networks were owned by the companies and not open to all service providers, the common message from companies was that bandwidth was scarce and consumers had to pay high prices.

Having a service provider own the network is comparable to having a car manufacturer own the roading network.

Holding up a length of fibre-optic cable, he said if the world’s 6.5 billion people picked up a phone simultaneously, all of the conversations would take up only 88 per cent of the cable’s capacity.

Yes, the capacity for fibre is quite amazing. Few technologies are future proofed, but this as close as it gets.

Mr Isenberg said a full fibre network would also ensure New Zealand maintained a high level of global communications should borders be closed because of a global crisis such as a pandemic, or when oil reserves finally declined to the point where New Zealand was again dependent on shipping as its main international transport.

Our long-term future is as what David Skilling calls a “weightless economy”.

Financing such a network connecting all homes and business, according to his “back of the envelope” calculations, would call for about $4.2 billion, and a new subsea cable with 1000 times the current capacity of the Southern Cross cable, roughly $2 billion.

The result would be fibre-delivered TV and telephone services and 100 Mbps symmetrical broadband that would allow high-quality teleconferencing, which needs about 20 Mbps.

“There’s no reason New Zealand can’t build this network in five years. Japan did it. Amsterdam did it,” he said.

Nice to have an international expert confirm that the estimated cost and time-frame that National is talking about is within the right ballpark.

Have just had my office connected up via Xtreme to Citylink’s fibre network.

I figured I would do a speed test and see how much better it is than my normal DSL connections which rarely get more than 3 MB/s.

Well the download speed clocked in at 20 Mb/s. Now the test server was also on Citylink so I thought it might be unfair. So I then used the Consumer Speed Test. And that clocked in at 27 Mb/s.  Nice, nice, nice.

Am spending all day at TUANZ’s Telecommunications Day 2008. Heard from all the Telco CEOs in the morning and now the Minister is speaking.

He said the aspiration is to have Fibre to the Home within a decade, which means by 2018. That means both major parties are saying they want fibre to the home with National targeting 2014 and Labour 2018. I personally am not too worried about the time-frames (2014 is very ambitious) so long as there is a co-ordinated plan with open access policies.

There was no funding announcement today, as many expected. But he did say a package will be announced in the near future. There will be great interest in that package – both the funding but also the policy. He was very critical of National’s proposal, so again the details of the Government’s proposals will be interesting.

The NZ Herald editorial is supportive:

That is capable of delivering only what comparable countries now have, not reaping the benefits of a truly high-speed network. The latter point is important. New Zealand is competing to not only attract but to retain businesses, especially exporters seeking a cost-effective global presence. Matching overseas cities’ infrastructure is pivotal to success. That would not be achieved, in terms of broadband speed or pace of implementation, under Telecom’s present “next generation” network programme. Going straight to fibre seems logical.

Fibre to the cabinet is a good intermediate step but there is no doubt that fibre to the premises is teh inevitable future, and the investment is not about making something happen which never would have happened, but making it happen more quickly, so that we get more benefits from it. Global competition is all about comparative advantage. Being last with communications infrastructure is not an advantage.

National’s advantage over the Labour Party in this area is likely to be shortlived. Given the work done by the Government, it seems certain to announce something similar, probably in the Budget. Nonetheless, National leader John Key has produced a proposal that adds substance to his frequent talk of Government leadership to lift economic performance and productivity.

I hope Labour do set a similar target.