A little knowledge is a dangerous thing

October 31st, 2012 at 9:00 am by David Farrar

Stuff reports:

The Commerce Commission has unconditionally approved Vodafone’s purchase of TelstraClear, a decision the Green Party says will reduce options and push up prices.

Co-leader Russel Norman noted the terms of the $840m takeover included a clause that would prevent Telstra re-entering the New Zealand market for an undisclosed period.

“Make no mistake – Vodafone’s move is about eliminating competition,” he said.

“We’ve seen it in the banking sector, the insurance sector, and now it’s happening in the telco sector. Vodafone’s takeover of TelstraClear will inevitably lead to higher prices for end-users, businesses, and government.

“It’s not in the long-term interests of the New Zealand economy for our primary competition regulator to be eliminating competition in the telecommunications industry.”

Oh Good God, now Russel wants to be the Commerce Commission also. Let politicians decide on the basis of a five minute chat to their staff, rather than you know months and months of legal and economic analysis.

However, the commission said it did not find any significant business overlap between Vodafone and TelstraClear in the provision of either mobile phone services or fixed line services to large businesses.

Exactly. It would be vastly different if it was a Telecom and Vodafone merger. That would be bad for consumers. But many in the industry think that the TelstraClear acquisition by Vodafone will actually enhance competition as it means there will be a fully fledged competitor to Telecom. Individually neither TC nor Vodafone could effectively compete with Telecom in all aspects. Together, they can.

With David Parker having declared that Ministers (not shareholders) should determine who can buy F&P shares, and Russel Norman declaring who can buy TelstraClear, it is becoming clear that in a future Labour-Green Government the way to get sales approved will be to cosy up to Ministers.

Vodafone buys TelstraClear

July 12th, 2012 at 12:14 pm by David Farrar

Vodafone has purchased TelstraClear for NZ$840m. This means that many of our original ISPs such as Clear.net and Ihug are now Vodafone.

It’s a sensible move for Vodafone, as the two companies complement each other and means they can go head to head with Telecom in landlines, mobile, broadband Internet and ultra-fast broadband.

What I will be looking for is whether Telstra, once the sale is approved, then makes a take over bid for Telecom, or at least a significant stake.

Will Vodafone buy TelstraClear

June 6th, 2012 at 12:00 pm by David Farrar

Stuff reports:

Telstra has confirmed it was in talks to sell its New Zealand subsidiary to Britain’s Vodafone. …

Deutsche Bank analyst Geoff Zame said the fact Telstra had issued a statement to the markets indicated there was something tangible and promising to the discussions.

The idea of combining the businesses was not a surprise and ”quite logical”, but the way they might be combined was a surprise, he said.

”Most of the rumours tended to be that Vodafone was for sale.” British analyst Ovum had believed TelstraClear might be a possible buyer of Vodafone New Zealand.

A takeover of TelstraClear by Vodafone would probably be negative for Telecom as Vodafone might be willing to invest more money in TelstraClear than Telstra,  Zame said.

Telecommunications Users Association chief executive Paul Brislen said that ”without a mobile division to call its own” TelstraClear was going to struggle in New Zealand. ”Either Telstra needs to put up and invest, or it’s time to call it a day and by the sounds of it, having looked at Vodafone New Zealand and not wanting to pay the asking price, it would seem a reverse offer is on the table.”

The potential deal probably makes sense for both Telstra and Vodafone. TelstraClear has never performed well in New Zealand, and with no mobile presence or fibre involvement has a fairly bleak future.

What assets they do have though, complement Vodafone’s current assets quite well. One industry expert said that he thinks that what Vodafone really wants is the spectrum owned by TelstraClear, which makes sense.

Obviously any deal would need to be approved by the Commerce Commission, but on the surface I don’t think it would put Vodafone into a dominant position – they are losing mobile share to 2 degrees quite rapidly.

Fibre to the Home proposal finalised

September 16th, 2009 at 2:28 pm by David Farrar

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.

TelstraClear kill off s92A Code

March 12th, 2009 at 9:53 am by David Farrar

TelstraClear have killed off the TCF Code of Practice designed to try and get workable process around the deeply flawed s92A. They have said they will veto the code at the TCF Board. TCF rules allow any board member to veto.

I was initially pissed off at TelstraClear, because all the hundreds of hours of work put into the code are now wasted. But upon reflection, I think they have have done the right thing by stepping back and saying this law is just so bad, we can;t make it workable through a code. Their submission explains:

TelstraClear considers that there is a fundamental problem with the TCF being a party to any code of this nature, which is that the code would be based on flawed legislation.

In TetstraClear’s view, any industry code would simply be an attempt to tidy up poorly drafted legislation. TelstraClear does not consider this to be the responsibility of the TCF. Indeed the best outcome would be if s92A was repealed. Failing that, it should be amended to address the above concerns:

So there will be no TCF code. The other ISPs can continue work on the code as an unofficial grouping, but it would be madness to have s92A come into force with no code in place.

The submission on the code are very interesting, and I hope MPs look at some of them. Take this submission from the leading IT jurist in NZ – Judge David Harvey. Judge Harvey is also the former Chair of the Copyright Tribunal so about as authoritiative as you can get on this area:

This section is poorly drafted and makes a number of unsupported assumptions, but in essence it suggests that an Internet service provider must develop a policy to cancel an existing contract as a result of copyright infringement.

The reality of the matter is that the cancellation or termination of the contract arises at the behest, not of the Internet service provider, but of copyright owners. Without significant justification in normal circumstances this could amount to an interference with economic relations and raises significant issues about the sanctity of contract.

Judge Harvey further concludes:

section 92A is unnecessary and gives rise to a situation where a person may be deprived of rights under a contract without proper legal process.

Does the Government really want to persist with s92A bearing in mond those comments, and that there will now be no TCF code?

If it had been Parliament’s intention to provide for a process whereby contract termination should take place, Parliament should have provided such process by legislation after proper consultation with all interested parties.

This is basically TCL’s point. You can’t ask private players to determine these rights when the law is so silent on details.

The Australian ISP Association has commented:

As mentioned above, we are aware that a concerted worldwide effort has been made by rights holders in the music and film industries over the past two years to lobby for the introduction of a ‘notice and disconnect’ scheme along the lines of that proposed in the Code. In spite of that, no ‘notice and disconnect’ scheme has been implemented anywhere in the world.

Yay, we could be first. In fact that is why the US groups are pushing so hard – they want us to be an international template.

In all jurisdictions (except France) where the introduction of ‘notice and disconnect’ schemes have been considered and consulted on by Governments, there is now a general move away from any scheme which requires ISPs to terminate internet accounts, on the basis of an allegation of infringement from rights holders.

The whole world except Judith Tizard has realised what a bad idea this is.

Auckland University says:

The main problem is in Section 92A of the Copyright Act which we believe should be removed from the Act or, if it is to remain in some form, then substantially redrafted with input from stakeholders as would have happened during a select committee process.

The Auckland District Law Society:

Section 92A represents a mechanism whereby the copyright holder, an unrelated third party, can interfere with the contractual rights between an ISP and a customer, where the customer is identified as a repeat copyright infringer. Under common law, that could, without significant justification, amount to the tort of interference with contractual relations.

This law is just as flawed as the Electoral Finance Act. When the former Chair of the Copyright Tribunal, the Auckland District Law Society and the country’s largest university says the law needs to repealed or amended, it is time to do so.

National did the right thing by delaying the introduction until a code could be completed. But we now know that unless the law is amended, a code is not going to happen, so time to introduce a bill amending or repealing the clause.

UPDATE: Also worth reading the submission from the Society of Authors. They are as pro-copyright as anyone, yet they say:

The NZ Society of Authors is concerned about the introduction of the proposed s92A of the Copyright Act 1994. Whilst we strongly support the need for measures to control repeat copyright infringement we feel that this clause is not ideal – it has been hastily written and we recommend the need for further discussion.

We feel that should Section 92A be implemented, it is imperative that the Code of Practice be effective and respectful of the rights to freedom of expression.

Radio NZ has said no disconnection should occur without a court order unless there is an independent body established by the Government to rule on any disputes.

And Internet giant Google has also made a submission:

Section 92A puts users’ procedural and fundamental rights at risk, by threatening to terminate users’ Internet access based on mere allegations and reverse the burden of proof onto a user to establish there was no infringement. …

Copyright law is often complex and context sensitive, and only a court is qualified to adjudicate allegations of copyright infringement. Indeed, in Google’s experience, there are serious issues regarding the improper use and inaccuracy of copyright notices by rights holders. In this context, the responsibility should not fall to ISPs to determine cases of infringement.

It is very relevant that Google has testified that many rightholders notices are inaccurate and indeed improper.

The three telcos say industry does not need $1.5 billion on offer

February 21st, 2009 at 9:31 am by David Farrar

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.

Warp-speed Internet

March 31st, 2008 at 9:12 am by David Farrar

Telstra-Clear has launched a warp-speed Internet offering – 25 Mb/s download, 2 Mb/s upload and a monthly 120 GB cap.

The cost is $230 a month which rules it out for most people, but it is good to have the option there, and over time prices should drop.

Vodafone has also announced they will allow customers to go on VDSL2, as well as ADSL2+. VDSL2 can do speeds of up to 50 Mb/s down and 30 Mb/s up – but only if within 1 km of a exchange.

The pricing is not specified, but the story says “VDSL2 connections could be bought by anyone who wants to pay for it”. Does that mean you pay one off for the connection or a higher monthly fee?