Ernie Newman: Don't fret, our broadband policy is sound

Relax, says TUANZ chief executive Ernie Newman. NZ's broadband policy is solid. Photo / Supplied

Opinion

Brian Fallow can relax - New Zealand's ultra-fast broadband policy is solid, widely acclaimed internationally, and a critical element in our remaining a first world economy into the 21st century.

Copper wire has been the cornerstone of telecommunications since Bell invented the technology for voice conversations.

Never could he have imagined that 140 years on users would expect the same copper to carry vast amounts of data - emails, videos, scientific content, and radiography images. Engineers have done a wonderful job in stretching its capability for the early years of the internet era.

But copper has done its dash. It can't cope any longer with the relentless increases in bandwidth new applications demand.

Enter the picture, fibre optic cable with its almost limitless capacity. A fibre bundle the thickness of a broom handle can carry a voice call by everyone on earth simultaneously.

Fibre can ensure the kind of capacity the citizens of 2020 will need and demand to run services in the fields of education, health, energy conservation, and entertainment.

Are these uses here now? Of course not - first we need the connectivity with sufficient critical mass for them to become viable.

That was exactly the dilemma a century ago with the reticulation of electricity. Uptake was initially slow, but mushroomed dramatically during the 1920s as more appliances and uses were invented and commercialised.

Fortunately the leaders of the day had the vision and foresight to take the leap despite not knowing about the microwave, toaster, computer or electric toothbrush. If New Zealanders had waited until every service was available before reticulating electricity, the country would have been held back for decades.

Broadband has similar characteristics. Tomorrow's families will routinely expect multiple streams of dense content coming into their homes simultaneously. These will include video and other resources from school websites, online medical diagnosis, lifelong education, home security and energy saving systems, and on-demand high-density interactive entertainment.

Businesses will expect productivity-enhancing applications, while government can look forward to major efficiencies in delivery of health and education services.

Such services will encourage more of the brightest and best young New Zealanders to make their lives here rather than migrate.

Fallow quotes liberally from the findings of the Institute for Competition and Regulation. While residing within Victoria University, the institute owes much of its funding and governance to a small cluster of utility companies that are the subject of regulatory controls because of their significant market power.

In 2006 the institute argued stridently against unbundling Telecom's local loop. Fortunately for New Zealanders its conclusions were rejected by other reputable economists, both overseas and local. Rejected too, by Parliament, which went on to unbundle and thus remove Telecom's monopoly to the benefit of other telecommunications suppliers and consumers.

That does not mean there is necessarily anything wrong with the institute's mathematics - just that it fails to run a sanity check across its conclusions. Its work on ultra-fast broadband suffers from a similar weakness.

Economic tools like cost benefit analysis should be used in conjunction with vision and foresight, not as a substitute for them. If cost benefit had been the key determinant, the world might have waited far too long to reticulate electricity, while much exploration and innovation might never have taken place.

As Arthur Grimes has acknowledged in respect of the Motu research referenced in the article, research that is conducted too early for meaningful conclusions to be drawn about the productivity impact should be interpreted with care. Cost benefit analysis is a very blunt instrument where wide ranging strategic projects are involved, he cautioned.

From my observations, New Zealand's ultra-fast broadband project is recognised globally as world-class. The Government should just get on with the job; future generations will thank it copiously.

* Ernie Newman is chief executive of the Telecommunications Users Association (TUANZ).