Broadband path to future

New Zealand will be heading into the wilderness of the third world unless it invests in broadband telephone services, says ERNIE NEWMAN, chief executive of TUANZ.

"The regulatory environment makes the Czech Republic a more attractive place than New Zealand to invest in broadband telephone services."

When James Earl, the director of Covad - one of North America's foremost providers of broadband telephone services to homes and businesses - makes such a statement we should take notice.

That's assuming we are serious about New Zealand having a place in the knowledge economy.

Mr Earl passed on the grim message to a Telecommunication Users Association (TUANZ) audience in Auckland last week, and repeated it in private to Government officials and politicians.

At issue is the report of the ministerial inquiry into telecommunications, which has stopped short of recommending a process known as "local loop unbundling." Although users have generally given a nod of approval to most of the inquiry's recommendations - including the establishment of an independent commissioner for the industry - the lack of a recommendation on the local loop is a grave concern.

So why is broadband crucial to the user and the economy?


Simply put, broadband means a vastly bigger "pipe" to carry your telephone signal to and from the internet. Downloading world-wide web (www) sites on standard phone lines can be painfully slow, leading to cynical acronyms such as "world's worst wait!"

In metropolitan areas the problem can be frustrating enough, but in provincial and rural areas, where the line to the exchange is much longer, internet use may become impossible.

This problem will get worse as site owners make the assumption that most of their visitors are on broadband and upgrade sites accordingly.

Broadband solves the problem by providing vastly higher speeds. New-generation modems in two parts - one inside your home, the other at the nearest telephone exchange - are the key. They use technology known as digital subscriber line (DSL).

There are two kinds of DSL technology. ADSL, which has been around for a decade, is asymmetrical - it offers high speed from the internet site to your computer, but only low speed from the computer back to the internet.

More advanced forms such as SDSL are symmetrical; so you can send signals back to the internet as fast as it can send to you.

This distinction is important. If you are a farmer in rural New Zealand wanting only to pay a few bills over the internet, or to access market information or tractor prices from Europe, ADSL will do the trick quite adequately.

But if you are a software manufacturer in Auckland wanting to send regular software updates to clients in the Northern Hemisphere - and, believe me, there are many like this - then the size of the "outward" pipe is just as crucial as the inward.

Similarly, if you connect from home to your office over an ADSL line, you may notice that a large file such as PowerPoint will download from the office network to the home quickly but take much longer to send back upstream for the same reason.

The outward pipe is also crucial for potential users of video conferencing - for instance, provincial schools and medical centres.

Here lies the dilemma. It follows that in the near future, many users in metropolitan and rural New Zealand will need SDSL or equivalent services.

At present Telecom offers ADSL at a reasonably affordable price for homes and businesses but only over a relatively small part of the country. However, services offering broadband in both directions are confined to limited areas near CBDs - at prices way out of the reach of either households or most businesses.

What's the solution?


The pair of twisted copper wires which links your telephone to the nearest exchange is perfectly capable of delivering symmetrical broadband services at affordable prices.

Specialist companies around the world - in Australia, the US and across Europe - are attaching the new-generation modems to existing carriers' copper pairs. The broadband signal operates at different frequencies from the voice traffic and the two signals coexist happily.

Despite the forecasts made by operators of cable, satellite and wireless networks, these specialist DSL operators are demonstrating with their chequebooks that the old copper pair has a huge life in front of it yet.

Interestingly, around the world there are almost no examples of existing telephone companies offering SDSL - perhaps because of a desire not to cannibalise existing business, or not to undermine existing equipment, the cost of which has still to be amortised.

So the task has fallen to these specialist operators, using the telcos' lines.

That is where local loop unbundling comes in. Governments have realised that ubiquitous access to broadband is essential in the internet age. Established telcos have good reasons to slow down the process, but the new operators can succeed only if they can get access to the telcos' lines.

Hence the move to unbundle - in other words, regulate to force existing carriers such as Telecom to make their lines available to specialist DSL providers at cost plus a fair profit margin.

So why is the Government holding back?


Purists - and existing telcos - argue that unbundling the local loop tramples over the telcos' property rights. Yet a balance needs to be found between their property rights and the rights of the users to benefit from the huge advances in technology which surround us. Isn't that the basic purpose of competition law?

The US, Australia and practically all of Europe have regulated to enforce local loop unbundling. Dozens of entrepreneurial companies are entering the market and providing the service to the world's consumers - like the man from Covad who was here as part of a mission to decide where to go next.

Sadly, he won't be back to New Zealand in the short term, nor will many similar Australian operators, because our inquiry has not recommended unbundling of the "last mile" of copper to homes. More likely his company will invest in the Czech Republic, which will unbundle as it becomes part of the European Union.

Ironically, several years ago New Zealand signed a World Trade Organisation agreement on local loop unbundling, but we have not yet complied.

If we embrace the internet to the maximum, it can transform New Zealand's economy.

Our highly educated people, time zone and the chance to overcome the distance barrier give us unparalleled potential.

There is still time. The Government must show its commitment to New Zealand businesses by going further than the ministerial inquiry recommendations - moving immediately to full unbundling.

We must find a way around the property rights issue. Too much is at stake to allow any one company to stand in the way.