All about Telecom

November 12th, 2010 at 2:00 pm by David Farrar

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

First they have a new data roaming deal.

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

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

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

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

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

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

Secondly Stuff reports on the UFB tender:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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Fibre to the Door

April 12th, 2010 at 4:30 pm by David Farrar

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

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

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

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

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Drool drool

January 30th, 2010 at 1:03 pm by David Farrar

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.

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Vector and co

April 29th, 2009 at 9:24 am by David Farrar

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.
This is also very exciting, and shows good leadership. Potentially lines companies have the ability to do some areas a lot cheaper than telcos.
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.
That covers a fair bit of NZ!
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Wellington Power lines sold to Chinese

July 16th, 2008 at 8:45 am by David Farrar

NZPA has reported:

New Zealand’s overseas investment watchdog has approved a Chinese conglomerate’s bid to buy Vector’s Wellington power lines network.

Vector sought approval earlier this year for the $785 million deal to sell 100 percent of the shares of Vector Wellington Electricity Network Limited to Hong Kong-based Cheung Kong Infrastructure Holdings (CKI) and Hongkong Electric Holdings Limited (HKE).

Now I don’t care at all who owns my power lines, but isn’t it ironic that the Government moved heaven and earth to stop a Canadian pension fund having a minority voting stake in Auckland Airport, yet has absolutely no problems with a Chinese business owning 100% of Wellington’s power lines?

Didn’t Helen Clark say ownership of such assets would be a defining issue for the election?

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NZ Herald on Vector sale

April 30th, 2008 at 8:37 am by David Farrar

It is good to see the media focusing on the hypocrisy in the Government over Auckland Airport and Wellington’s electricity network. In the former example they moved heaven and earth to stop the private owners selling a minority stake to a Canadian pension fund. And for the latter they say there is no issue at all, despite it being 100% sale of a crucial monopoly.

So the NZ Herald editorial is welcome.

It is hard to find in these decisions any consistent policy that might guide foreign investors. The sensitivity of Auckland Airport had nothing do with its land, abutting Manukau Harbour, and it is hard to believe the Government’s comfort with the Vector sale has anything whatsoever to do with the land under the power lines.

It’s ridicolous. Is Dr Cullen really saying that all the hysteria he whipped up about asset sales (overlooking Winston sold it in 1998) was about the land under the airport, and not the airport itself? Yeah, right.

But for reasons that remain unexplained, Labour does not regard an urban electricity network as “strategic infrastructure”.

If that phrase has any meaning it must apply to power lines. A line network cannot be practically duplicated for the sake of competition. It is the classic natural monopoly. If line networks are not kept in public ownership they require careful regulation, as Telecom has shown, to prevent them gouging consumers or denying access to competing traffic.

Now again, so there is no confusion, I have no problem with the sale of the power lines. They will be subject to price regulation as most monopoly assets are. My problem is the hypocrisy.

Vector, as it happens, is a quasi-public entity, owned by a trust elected by Auckland consumers, whom it rewards at the expense of its consumers elsewhere. Wellington’s network has not been sold from this form of ownership wholly into the hands of a private company. It is a privatisation in anyone’s language. Yet the Government was more concerned about the partial sale of an airport in which two Auckland councils would have retained significant stakes. It will defy investors’ understanding.

This is a good point. This sale is far more of a privatisation than Auckland Airport was which was private fund managers selling to other fund managers. Vector is a public trust selling to a private entity.

The Government has steadfastly declined to publish a list of assets it regards as “strategic” because it has no consistent definition in mind. The public and potential investors are left to conclude that a property becomes “strategic” simply when it suits politicians to regard it so. At least that means that assets as vital as power lines can attract foreign investment when their luck is in. But this country’s process of approval should be better than a lottery.

Even Labour Party President Mike WIlliams has agreed that here should be a list of these so called strategic assets.

What this means is that each time Labour in the campaign tries to whip up populist sentiment on the basis of its actions in “protecting” Auckland Airport, their bubble will get pricked by reminders of the Wellington power lines, and Helen Clark’s lofty pronouncement that “asset sales will be a defining issue” looks as hollow as “carbon neutrality”, “closing the gaps” and “top half of the OECD”.

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Hypocrisy vs Stupidity

April 29th, 2008 at 6:32 am by David Farrar

Bernard Hickey reacts to news that a Hong Kong company is buying the Wellington electricity network by blogging that the Government has a choice between hypocrisy or stupidity.

The government now has to choose between blocking the deal, which would be stupid and dangerous, or approving the deal, which would expose the government’s recent comments on foreign ownership of strategic assets as politically motivated and opportunistic hypocrisy. I suspect it will choose hypocrisy and hope no one notices.

Indeed, they appear to be doing so. They have this magical invisible list of strategic assets which they won’t let anyone else see. And whether or not an asset is strategic or not seems to be pure political whim.

But let us look at the difference between Auckland Airport and the Wellington power lines:

  1. Electricity is arguably the most vital utility
  2. Every Wellingtonians uses electricity everyday, while relatively few Aucklanders use the airport every day
  3. While inconvenient there are other airports Aucklanders could use, while Wellingtonians have no other option for getting electricity to their homes.
  4. There are alternatives to air travel such as car, bus, train and boat. There is no real alternative to electricity

So how on Earth you must wonder does a Government deem a Canadian pension fund buying a 24.9% voting stake in Auckland Airport an evil evil takeover which must be stopped at all cost, yet having the richest man in Hong Kong buy 100% of Wellington’s electricity network not even worth a pause for consideration?

Is this the same Prime Minister who declared at her Congress that asset sales were a defining issue? WHat has happened to the lofty rhetoric in just two weeks?

Now please don’t think I against the sale. I think foreign investment is good and necessary in New Zealand. Without it we would be a lot poorer than we are. I would not stop either deal. But the Government’s hypocrisy is massive.

Bernard looks at the issue further:

Just a few weeks ago two junior ministers in the government decided to block a deal to sell a significant stake in Auckland Airport to a Canadian pension fund. They did so after Finance Minister Michael Cullen shifted the goalposts near the end of the bidding process by saying the Overseas Investment Office should consider blocking foreign acquisitions of strategic assets on sensitive land. This cost Auckland Airport shareholders dearly and damaged New Zealand’s reputation as a reliable place for foreign fund managers to invest. It was a blatantly opportunistic, political decision with little rhyme or reason apart from it helped Labour in the polls, marginally.

So the question now is: Do Michael Cullen and Helen Clark believe that Wellington’s power network is a strategic asset on sensitive land?

The availability of power to the nation’s capital sounds strategic. Would the Beehive work without power? What about the Ministries of Defence, Foreign Affairs, Agriculture (Biosecurity), Education and Health? Sounds important and strategic to me. What about the Reserve Bank of New Zealand and Treasury? Don’t they manage our financial system and wouldn’t they be our crisis managers in a financial crisis? Then there’s a mere trifle of around a tenth of the population needing that network to keep working and living.

Bernard also points out the proposed buyer has connections to the Chinese military, and there have been official warnings in the US about him. So the question again is:

But will our government judge a man who was considered by the US government to be a security threat as safer than bunch of Canadian pension fund managers to run a network supplying power to the heart of the nation? Looks like they will. …

This just shows the naked hypocrisy of the Auckland Airport decision. If Auckland Airport is a strategic asset on sensitive land then surely Vector’s Wellington power network is too. If so, the government should reject this latest deal.

Having said that, I think the government should choose hypocrisy over stupidity. We need the money and we can’t afford to damage our reputation as a safe place for international investment any more than it already has been.

I agree hypocrisy is preferable over stupidity in this case, but people should be in doubt the total lack of consistency in the two cases, and that Auckland Airport was merely about polls, not what is good for New Zealand or even a honest belief for or against foreign investment. I can respect people who honestly believe foreign investment is bad. The trouble with Helen and Michael is they know it is good (otherwise would block this deal), but when down in the polls revert to xenophobia to ramp up hysteria against foreigners investing in NZ.

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Vector not strategic?

April 17th, 2008 at 3:59 pm by David Farrar

The Dom Post reports that the Government is not likely to block the sale of Wellington’s electricity network to a foreign party.

So the Government hysterically whips up opposition to a Canadian pension fund having a 25% voting stake in Auckland Airport, but has no problems with a Chinese, Hong Kong or Australian company buying 100% of Wellington’s power network.

Confused? Surely this is a Government of principle, and having proclaimed strategic asset sales to foreigners is bad, will not allow an asset as strategic as a power network to be sold?

I mean an airport is surely less strategic. Not all Aucklanders use Auckland Airport, there are substitutes to air travel, and competing airports can be built – as Waitakere Council wish to do.

But the power network in Wellington is used by 100% of Wellingtonians. No one goes without electricity. There is no way that someone could come along and put in a whole new set of power lines to every home. And there is no real alternative to electricity, as there is to air travel.

So why is the Government so inconsistent? I thought asset sales were the defining issue for this year? Why is the Government allowing this strategic asset to be flogged off?

Personally I would not be stopping private owners of either asset from selling them to other private owners. But as the Government has made asset sales a defining issue, their response is awaited.

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