Broadband debate at dial-up speed

Steven Joyce. Photo / Paul Estcourt

Industry conferences are usually a chance for senior executives to showcase their company's business strategy and catch up with their counterparts from other organisations.

But rather than being a forum for strategising and networking, this week's 10th annual Telecommunications & ICT Summit, held in Auckland, appeared to be more of an opportunity for telco leaders to snipe at competitors and vent their frustrations at the Government and its industry regulators.

Admittedly, there is a lot for businesses working in the telecommunications and ICT (information and communications technology) sector to be frustrated about.

And the conference's first speaker, Communications and IT Minister Steven Joyce, brought little in the way of good news to quell his audience's sense of frustration when he took the stage on Tuesday.

Joyce reiterated the Government's commitment to its pre-election promise to spend up to $1.5 billion over 10 years on an ultra-fast fibre-optic broadband network reaching three-quarters of the country's homes. But he also had to admit plans to finalise details of the "Broadband Investment Initiative" (BII) were already running two months behind.

The Government has canvassed the industry's view on its fibre proposal - receiving 104 submissions - and expects the private sector to at least match its $1.5 billion investment.

The submissions process had highlighted "the complexity of the challenge and the interlocking set of issues that need to be incorporated into the plan," Joyce said.

"We are certainly moving ahead and while I initially indicated mid-June for some announcements, given the volume and complexity of issues, I have decided to take a couple of months longer. My view is that it is better to take the time to get it right."

No matter how long the Government takes to tweak its strategy it will not be right in the eyes of some major telco players.

Telecom and Vodafone used the BII consultation process to put forward alternatives to the planned investment strategy. And TelstraClear chief executive Allan Freeth reiterated in his speech to the conference on Tuesday his company's view that the Government's spending initiative would actually discourage the private sector from investing in broadband infrastructure.

But speaking at the conference yesterday, Telecommunications Users Association (Tuanz) chief executive Ernie Newman chastised the telcos for their negative approach to the BII, telling them: "put your positive caps on".

"Remember the message you are getting from the general public.

"John Key appropriated $1.5 billion of their money to make this investment, won in a landslide, and practically nobody is objecting to their money being used for that purpose. Nobody, that is, except some of you, who in a delicious irony are poised to be the greatest beneficiaries."

Newman said Tuanz's members, who include major business users of telecommunications services, were also enthusiastic about the Government initiative.

"Although your customers - my members - have sent loud and sustained signals that they want much more of your products, and much faster so they can lead better and richer lives, many of you really don't believe them. You don't believe in your hearts that this technology is life-changing."

He said although traditional telcos might baulk at the long pay-back time of up to 15 years for an investment in fibre-optics, if they did not jump on the opportunity to co-invest with the Government, other organisations such as lines companies would be happy to step in.

"Many alternative investors who understand and embrace long-term intergenerational investment are here at this conference. They're keeping an eye on you. I can't tell you exactly who, but one clue might be the word 'electricity' on some of the name badges."

But the telcos' pessimism towards the business case of a shared Government/private sector fibre-to-the-home (FTTH) development, and Joyce's cautious approach to finalising the strategy, was echoed this month by technology research firm Ovum.

Ovum's Australian-based research director, David Kennedy, said after studying Government-initiated and taxpayer-backed FTTH plans in Singapore, Australia and New Zealand, his conclusion was: "There is real uncertainty about the viability of national-scale FTTH networks in environments such as Australia and New Zealand".

He said in a densely populated city-state such as Singapore an FTTH network could be build relatively cheaply.

"In contrast, Australia and New Zealand are characterised by sprawling, low-density suburbs. To make matters worse, both Governments envisage public contribution in the form of commercial investments, not the grants being offered in Singapore.

"As a result, 'commercial returns' to public investment in FTTH networks will not be possible. If they were possible, then private capital would already be building this network."

Meanwhile, another point of discussion at the Auckland conference was the pricing set by the Commerce Commission last week for competing telcos wanting to install their own broadband equipment in Telecom's roadside cabinets.

Vodafone and Orcon are among those to argue the rates have been set so high they will stymie broadband competition in the ultra-fast broadband market for several years.

Orcon chief executive Scott Bartlett sent an open letter to the commission this week asking it to review its decision.

"It could be 10 years before the Government's broadband-to-the-home plans become reality," he wrote. "In the meantime, should your decision stand, the majority of New Zealanders will be subject to second-class broadband from a monopoly provider."