Telco competition, forget the wires

By CHRIS BART0N IT editor

The Far North District Council looks set to achieve something never seen in New Zealand - true telecommunications competition for an entire region.

Sure, we've seen pockets of what this might be like in places such as Lower Hutt where TelstraClear is such a viable alternative that Telecom reduced its line rentals to compete.

There's also competition in segments of the market - such as tolls where the astute consumer can get much better prices on national, international and land-to-mobile calls than Telecom offers.

Thanks to a wealth of fibre in the CBDs of Auckland and Wellington, businesses can also shop around for better prices for telecommunications services.

But what the Far North is proposing is a complete alternative wireless telecommunications service - voice, internet and tolls - for the entire Northland region.

Yes, a new Northland telco, bypassing Telecom. It sounds too good to be true. But judging from the "request for proposal" for base station and customer premises equipment that closes this month, the people behind this bold venture are deadly serious.

They're looking for equipment that operates in the 3.5 gigahertz spectrum and have tested gear from several vendors using a wireless technology going by the complex name of orthogonal frequency division multiplexing. A leading proponent is Israeli company Alvarion (www.alvarion.com).

What's worth noting is the technology is quite different from local wireless network company Walker Wireless whose technology has an equally complex name - time division duplex code-division multiple access. Its leading proponent is IPWireless (www.ipwireless.com).

Neither technologies need line of sight for transmission. But which is best for doing what the Far North proposes is anybody's guess.

This is why Far North Development Trust, an offshoot of the council, has issued the request for proposal.

What they want is equipment that can deliver a minimum connection speed of 512 kilobits per second (Kbps) and up to 2Mbps for schools and enterprises and 256Kbps for farmers and residential users.

It must also have a minimum range of 20km with a maximum of 40km and be capable of providing, among other things, high-speed internet access, local area network extensions via virtual private networking, voice over internet protocol, video conferencing and distance learning.

Bidders are asked to show their capability to make initial delivery in August and provide pricing for volumes of 1000, 5000 and 10,000 customer premises equipment units.

The company conducting the request for proposal and the key party in the consortium that will form a joint venture with council trading company Far North Holdings to run the new Northland telco is C-Squared.

It is headed by Leicester Chatfield and Mike Conner, the founders of Radionet - a once promising wireless communications company now in receivership after a disastrous sale to Wilson Neill which is in liquidation.

But the key reason why this venture may well succeed where others have failed or become bogged down is the memorandum of understanding the council has secured with BCL, TVNZ's transmission arm.

That gives the new telco the all-important "backhaul" capability to take data from customers to an internet provider and feed it back to the internet or the local telecom network for voice calls. It also gives transmission towers throughout the region for the new telco's base station transmitters and receivers.

But some hurdles have to be overcome.

First, BCL will need to extend its digital microwave network to cover all of Northland.

At the moment that capability - which has cost about $40 million to date - goes as far as Whangarei. To cover the rest of Northland will require a significant further investment by BCL which means it will want to be convinced by the Far North's business case. But that might not be too hard.

The council's role, as well as being the driving force behind the venture, is to aggregate demand for the region from business, local authorities, health providers and schools.

Trust chairman Chris Mathews reckons they've already secured about $8 million worth of potential business.

Then there's the question of bandwidth. The proposal needs radio frequency in the 3.5GHz spectrum and the council is clearly hoping that will come free - courtesy of the Government which has set aside two bands for community use in its next spectrum auction beginning in July.

On the face of it, the Far North - being a broadband-impoverished area - would have a good case to meet the Government's criterion of advancing broadband use for all New Zealanders.

It would also have to be a frontrunner in the Government tender for providing broadband access to all schools in the region.

Another key component yet to be settled is the other parties to the consortium. At least one of them has to be an investor with reasonably deep pockets because deployment on this scale - even if much of it is provided by outside companies - will be in the tens of millions.

Plus there's the matter of interconnect agreements with other telcos' networks and the supply of international bandwidth.

There's also the issue of whether wireless technology will work on this scale. While there's plenty of evidence of technology that can deliver voice and data communications through the air, deployment over a region as big as Northland is likely to prove more complex.

But the real test of how serious the Far North venture is will be seen in how quickly Telecom reacts to such a threat. The word around town is it's already deep in negotiations with BCL.

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