Big on concept but silent on cost

By CHRIS BARTON

Bravo to the Government for coming up with such a cunning broadband building plan. A plan so cunning we don't know how much it will cost.

Phase one says all schools must have access to high-speed internet, most of them by the end of next year. Why? To let them participate in the information age, to swim in the pool of knowledge the net contains, and to use the medium for distance learning via two-way video links. Hard to argue with such laudable aims.

Phase two - where it gets slightly cunning - is to ask telcos and other organisations to tender for the network building work region by region. They will be managed by an independent project manager.

Tenderers will put forward schemes for fast access to schools in the region at speeds of around 512 kilobits a second - about the minimum you need for good videoconferencing. They will also have to show what broadband penetration their scheme will provide to others - business, consumers and community organisations - in the region. Just providing a fat pipe to a school isn't enough. Other considerations will be the cost per user and how quickly the service can be deployed.

Phase three is for tenderers to tell the Government how much money they want. Cunningly, the Government isn't saying how much it is prepared to give, but says it has a sum somewhere between $20 million and $99 million over three years tucked away in the education and economic development contingency budgets.

Is the Government being wily or deceptive? A $99 million plan would go a long way towards making ubiquitous broadband a reality, whereas $20 million - probably the real number - isn't going to go far.

Why isn't the Government saying? Because it wants to keep the tenderers honest. Sly.

For some of the 15 to 20 regions the Government expects to hand out cash subsidies. But for others it will underwrite the risk. Which is what the Community Trust of Otago did when it signed with Telecom to bring high-speed internet to broadband-impoverished places in the south. A similar initiative is under way in Taranaki.

Both regions have underwritten Telecom's risk - of around $400,000 - for making about 15 exchanges in each region broadband-capable. The underwriters get some of their money back if Telecom gets enough customers. So why not follow that approach for the entire country? The problem is Telecom's fast internet technology works only if you are within 6km of an exchange. Which means some schools miss out with a Telecom-only solution.

In theory that leaves room for competitors. It also means Telecom will have to come up with a supplement to its Jetstream technology to supply those beyond its 6km reach.

TelstraClear is one which could provide competition. Its Australian parent has experience providing broadband to the Outback using two-way satellite technology, plus the clout to get good prices for international bandwidth. But TelstraClear also has a major problem - getting a wholesale agreement to use Telecom's broadband services. That is now in the hands of Douglas Webb, the new telecommunications commissioner.

Another potential competitor is BCL, the transmission arm of TVNZ. It has much of the core "backhaul" broadband infrastructure and the clout to buy bulk bandwidth. What it lacks is an infrastructure to get to businesses, homes and schools. But it is working with other parties on a Far North fixed wireless broadband project to provide a bypass to Telecom's wires. But crossing that so-called "last mile" is easier said than done. Then there is the problem that if BCL is successful in any of the tenders, the Government will be accused of bias towards one of its own departments.

Walker Wireless is another party which will want to tender. It has spent $20 million trying to make wireless technologies deliver fast internet services and it has just raised another $20 million to keep trying. There are signs its latest effort using technology from Californian-based IP Wireless is getting close.

But as with all fixed wireless broadband technologies, much has been promised and little delivered.

Electricity line companies may also tender by offering technology that delivers fast internet via power lines. But like fixed wireless, power line communication has yet to prove itself commercially viable.

So while the Government should be applauded for its plan to build a broadband nation, regulatory and technological barriers to competition remain. It is hoping most of its "tens of millions" will be spent by the end of the next financial year. That should be a catalyst for interested parties, business and community groups to get together as consortiums to bid.

But for truly contestable tenders to occur, the commissioner will have to quickly set wholesale pricing of Telecom's broadband services. And alternative broadband technologies will have to rapidly show they work.

Then there is the big question of uptake. Despite having about 70 per cent of its exchanges broadband- enabled, only 2.5 per cent of Telecom's residential and 10 per cent of its small-to-medium business customers have opted for its Jetstream services. Which begs a bigger question.

If they build it, will they necessarily come?

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