Kiwiblog

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.

Bill Ralston writes in the HOS:

Communications Minister David Cunliffe had an instant knee-jerk lame response to Key, claiming the plan lacked detail and credibility and “smacks of opportunism”. As most politicians are opportunists (and Cunliffe is certainly no exception) his cries that the scheme would reinforce Telecom’s monopoly position lacked credibility.

I am one of those who regard Cunliffe as generally having done a very good job in the portfolio. But his response to the plan has almost universally been seen as unwise, and making it harder for Labour to come out with its own response.

Quite how he arrived at the conclusion Telecom would be the big beneficiary of the plan is beyond me as Key had said in the speech that one of the principles guiding his government’s investment would be that there would be open access to the fibre network and none of the current players would be able to line their pockets at the public’s expense.

Indeed, they were critical principles.

New Zealand First blindly followed the anti-Telecom line and Act retreated into some doctrinal babble about how governments should not spend money.

Peter Dunne justifiably spat the dummy at the critics’ “Think Small” approach, saying “Surely the point is that widespread, superfast broadband is a good thing for the New Zealand economy and the only question is how do we get there?”

He went on to wish, without much hope: “It’d be excellent if politicians spent more time working out the answer to that question and not simply whacking each other over the head and feeling they’ve accomplished something”. Fat chance.

It is election year. One party could announce it had found a cure for cancer and the rest of the parties would argue against it.

Oh yes, John Key would then be accused of ignoring AIDS

Peter Dunne makes a useful contribution to the political debate on broadband:

“Everyone agrees that’s a good idea, but all we’ve heard so far is the Minister of Communications carping that National is being opportunistic and handing too much monopoly power to Telecom; New Zealand First is similarly outraged that Telecom is getting too much money; and ACT has delivered the standard libertarian rant that hates the Government collecting or spending any money at all.

“Surely the point is that widespread, superfast broadband is a good thing for the New Zealand economy and the only question is: how do we get there?

“It’d be excellent if politicians spent more time working out the answer to that question and not simply whacking each other over the head and feeling they’ve accomplished something.

“If direct government investment like Mr Key proposes is not the answer, then I’d like to hear two things from the critics – first, what is the alternative, and second, why has it not happened to date,” said Mr Dunne.

A useful challenge.

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

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

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

Mike at Morphyoss says:

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

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

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

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

Business NZ says

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

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

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

The EPMU is also reasonably supportive:

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

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

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

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

Jordan Carter is also pleased:

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

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

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

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

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

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

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

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

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

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

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

It is ambitious.

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

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

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

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

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

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

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

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

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

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

UPDATE: The Standard has also come out against it.

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

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

Lots of stories on this, so just a bit from each. First Mike Houlahan writes the main story for the Herald:

National’s ambitious billion-dollar-plus plan to bring faster internet access to three-quarters of New Zealand homes and companies has been hailed by business and internet groups.

But the Government says it is extravagant and opportunistic.

The partisan side of me is delighted to have Labour saying it won’t match the commitment. The non-partisan side hopes that they will make a similar commitment before the election.

Peter Griffin blogs:

A year has obviously changed a lot. The broadband debate has stepped up a notch and National’s play here with a sizeable amount of funding shows how seriously it now considers broadband to improving our productivity and growing the economy.

“National’s medium to long-term vision is for a fibre connection to almost every home, supported by satellite and mobile solutions where it makes sense,” says Key.

Paula Oliver looks at the politics of it:

The broadband announcement is all about Key showing he has a wider plan – outside that old chestnut of tax cuts – to lift New Zealand’s future economic performance, productivity and wages. …

In New Zealand, the political positions are reversed, with Key on Rudd’s side of the argument and Labour sounding more like Howard. …

Communications Minister David Cunliffe says the Rudd/Key idea would put Telecom back into a monopoly position and pour taxpayer money into the pockets of that company’s shareholders.

But it was difficult yesterday to find too many people close to the issue willing to rip into Key’s move.

To avoid Key wrestling the issue away from Labour and in public minds making it his own, Labour needs to reveal – and soon – more of its big plan for broadband.

National is very aware of the need not to have a vertically integrated monopoly over fibre instead of copper. One of the key principles that industry people have noted is that any such network will need to be open access.

Jon Hoyle in the Dominion Post reviews the announcement also:

Business New Zealand chief executive Phil O’Reilly said such a network would especially help small to medium exporters gain a cost-effective global presence.

It would also be a plus for multi-national companies considering setting up in New Zealand, and a reason for those already here to invest further. But even with the right regulatory settings, it would be hard to get the private sector to invest several billion dollars, Mr O’Reilly said.

Tuanz, an advocacy group for business telecommunications customers, said the policy would receive strong support from its members. .

Tuanz chief executive Ernie Newman said the Labour-led Government’s strategy had been too short-sighted and National’s policy could prove cost-effective in the long run.

Finally Vernon Small also covers it in the Dom Post:

Mr Key said yesterday that the “fibre to the home” funding, spread over six years, would lift productivity and wages, and help deliver a “step-change” for the economy.

A week after ruling out asset sales under National in its next term, he said a National government would keep a stake in the joint venture, which would require up to $3.5 billion of private sector money.

It would not replace other planned investment, would increase broadband services and must not “line the pockets of incumbents”. …

The Government is likely to announce its own broadband investment plan in the May 22 Budget.

Telecom welcomed Mr Key’s plan, saying it saw a big role for public-private partnerships and that it would work with whoever was in government.

It is good to see Telecom supportive in principle. If fibre is laid down to 75% of homes, then the demand for both domestic and international backhaul will be massive, and there will be significant opportunities for bandwidth and service providers to offer competing products over the fibre network.

Obviously the details of how investment in and construction of the fibre network would occur will be a major issue. There is one proposal on the table at the moment from David Skilling for a Fibre Co, which would have government, local government, telco and other private capital shareholding. I personally regard that as a workable model, but not necessarily the best model. The challenge will be to see if people can put up superior models.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Bernard Hickey supports the plan and says:

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

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

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

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

Rod Drury has also blogged in support of it:

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

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

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