Kiwiblog

A few years ago the SOE Kordia purchased the ISP Orcon. I wasn’t sure it was a great idea for a government owned enterprise to be purchasing private companies in an incredibly competitive market. However SOEs are meant to make decisions for commercial reasons, and presumably Kordia saw it as adding value to their business.

Yesterday Kordia sold Orcon. Just as their purchase as a matter for the board, so was the sale. Neither require or gain shareholder approval. Ministers would have been informed, but are not needed to consent.

But Clare Curran has put out a release suggesting that Orcon is a strategic asset and that somehow it is all the Government’s fault. Very bizarre. Her release says:

The sale of the state-owned Telco Orcon is shrouded in mystery and appears to be yet another example of short-term thinking by this Government, says Labour’s Communications and IT spokesperson Clare Curran.

It worries me when MPs do not realise that there is in fact no Government decision involved. Does Labour think Ministers should run SOEs directly and decide for them what assets they purchase or sell? Why have boards of directors?

Ministers would be consulted on decisions like this, but are not the decision makers.

“The bottom line is the Government should have decided whether Orcon is now a strategic asset and if it is an important means to drive uptake of ultrafast broadband.

The suggestion that Orcon is a strategic asset is staggering, and shows that I think some in Labour regard everything as a strategic asset. Orcon has around 5% market share and if Labour think you can consider Orcon as a strategic asset, then I can only assume they believe the Government should purchase Chorus, Telecom, Vodafone, 2 Degrees, Inspire Net and well just about every company in New Zealand.

Then on this new definition of strategic asset, they should buy both Foodstuffs and Progressive because what is more strategic than food? But wait if a 5% market share is also now strategic, they better buy up the 4 squares also!

Now you might say Labour have not said Orcon is a strategic asset, just that it might be. Well I think such distinctions are meaningless when a company is so clearly a million miles away from being a strategic asset.

If I was attacking the decision to sell Orcon, I’d focus on whether Kordia has actually made a profit or a loss on the purchase. Did Kordia lose taxpayer money by buying an ISP?

The Government announced:

The Government announced today that New Zealand will complete the switch to digital television by 2013.

‘’Our election promise was to achieve digital switchover (DSO) by 2015 at the latest. With 70 percent of New Zealand households already watching digital television, we are in a good position to set a date for DSO,” says Broadcasting Minister Jonathan Coleman.

‘’In achieving DSO by the end of 2013, all of New Zealand will receive the benefit of enhanced reception, better picture quality and more channels. There will be a substantial wider economic benefit generated by the use of freed up spectrum for new technology.

It is the spectrum that is freed up, which has exciting possibilities.

Digital switchover will be phased starting with Hawke’s Bay and the West Coast in September 2012. The rest of the country will switch over in three stages with an end date of November 2013.

I got a new TV a couple of years ago that is digital, so no problems with me. Plus I do all my viewing through My Sky anyway.

Labour are supportive:

Am at NZ Computer Society 50th anniversary conf in Rotorua and about to speak, but want to say that it’s the right decision. Am a bit suprised. it loooked as though the government was going to delay til 2015.

Wonder why they changed their minds. The mobile companies investing in 4G will be pleased.  And it means that we wont lag in the next generation of ultra-fast broadband over mobile.

The “loser” is Kordia, who provide the current transmissions. But they are well on their way with developing other business models.

The National Government has just purchased a web hosting company. Yes us lucky taxpayers now have own own state owned web hosting company.

To be fair to the Gvoernment, they did not buy it directly. They own Kordia and Kordia owns Orcon and Orcon purchased iServe.

But the end result is the same – iserve goes from beign in the private sector to the state sector. It has been nationalised.

I have huge problems with Government owned companies acquiring other companies that operate in a competitive. It sees an expansion of the state in the economy. It also can get an unfair advantage to state owned companies with an implicit Government guarantee and access to capital.

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.

Myanmar’s Government is rapidly rising up the evil stakes with its response to the cyclone. It was bad enough that it is blocking much aid from coming in, but now it seems it is stealing any good food which gets through, and letting its citizens dine out on rotten food.

Even reasonably repressive regimes such as Iran put aside politics when faced with a national disaster. I recall Iran allowing US search and rescue teams in after one bad earthquake.

It is Myanmar incidentally which has a NZ SOE – Kordia, helping the Government build cellphone towers. Surely this latest incident suggests it is time to put Myanmar on the blacklist.

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.