Adam Gifford: BCL struggles in fast-moving world

The attack by network company Broadcast Communications (BCL) on Walker Wireless shows it is time to take a hard look at the state-owned enterprise model.

In its own way, the stoush is every bit as serious as the failure in the electricity supply market to deliver enough affordable energy.

If BCL succeeds in its bid to get the High Court to declare illegal the licences that Walker Wireless has to use frequency in the 1098 band, the Government's radiocommunications spectrum policy and its flagship broadband policy will be holed and sinking.

Such a decision will also expose the Government to damages claims of hundreds of millions of dollars from companies which bought spectrum and tried to build businesses on it.

Walker and BCL bought management rights to adjoining spectrum in the last frequency auction, but BCL seems to believe that by registering its licences first (while being made fully aware of what Walker was planning), it can set the rules.

Walker Wireless will argue the law requires co-operation, that BCL is wrong legally and on a technical level, and that the case should be thrown out. BCL says the judicial review is necessary to clarify the law.

The relevant ministers are ducking for cover, claiming it is an "operational matter" which should be left to BCL's state-appointed board.

Their response is understandable. A BCL-Telecom consortium is one of 12 tendering for Government funding for the Provincial Broadband Extension (Probe) project. Ministers may believe criticism of BCL could result in the consortium putting that process in court as well.

Going on the three tenders decided so far, all won by Walker Wireless, it is unlikely BCL will win a region.

The Airspan wireless equipment BCL offers for broadband is expensive, requires line of sight, is not standards-based, the user terminal is fixed to one location, and it is slow.

Combined with Telecom's copper infrastructure, it is offering speeds which could be called broadband only by the most generous observer.

Indeed, regional groups believe the Ministry of Economic Development has dumbed down what it is seeking through Probe to let Telecom stay in the hunt.

But what really makes the BCL-Telecom consortium's offer unpalatable is its unwillingness to accommodate voice over internet protocol. To do so would threaten Telecom's toll revenue.

For the regions, voice is the application which will drive adoption of broadband. Households will do the sums.

Take the existing phone bill, which in rural areas can run to hundreds of dollars a month.

Replace it with a broadband access device, either wireless or fibre, either rented or costing maybe $500 or so.

Get two voice lines and an always-on connection to the internet for less than $100 a month.

Compare that with what BCL and Telecom are offering Fonterra's 17,000 shareholders and suppliers. An Airspan modem for about $1000. A further $500 for someone to come out to the farm, bolt on the aerial, point it in the right direction, and set up your PC.

A monthly service fee of $80, more if you download more than 500MB, as well as the usual $200 or so of toll calls a month - calls are free only to other FonterraNet subscribers.

Broadband is disruptive technology. It challenges the old order, represented by incumbent telephone companies such as Telecom. It does not care what switches, services and products the network vendor is offering.

All it cares about is the address you, the user, want to get your packets of data from. Sooner or later the old order will have to face up to this coming revolution.

BCL, as a national network provider, has an important role to play. A year or so ago it seemed to understand that, when it signed memorandums of understanding with Southland and Northland to work on broadband projects.

The understanding was that BCL would provide a vendor-neutral backbone, so the regional players could access the internet at quickly as possible.



Then BCL revealed a new strategy - to sell wholesale access of broadband to the door. It would choose the pipes and the tap, not just the mains in the street.

It is a high-risk strategy for a taxpayer-funded enterprise. The end-user technology can and will change incredibly fast, and mistakes will cost millions.

BCL has already chosen a technology whose base stations listen halfway across its neighbour's spectrum.

Radio engineers say that problem can be fixed by putting a $1500 cavity filter on each base station, or putting up with the relatively low level noise. Instead, BCL throws about $10,000 a day in lawyer's fees at it.

Since the late 1980s, when broadcasting reforms gave it a corporate structure, BCL has had the potential to be a significant telecommunications company. Instead, it remained a cash cow for its TVNZ parent.

Its latest foray into the courts echoes its battles with TV3, which led to that company having to build its own transmission towers, going bust in the process.

The only bright spot is the appointment of Wayne Brown as BCL's new chairman. With his reputation as a clean-up specialist for state-owned enterprises, that could be a sign the Government does comprehend the mess the company is getting it in.