I retired from personal blogging in July 2008.
But you can find me over at http://blog.xero.com.
(From Simon) An academic in Australia goes a big step further …
OPINION
Australia needs fibre to the home
By Dr Nicholas Beaumont
June 13, 2007.Australia faces an important decision: should we build a national optical fibre network?
There are four questions:
*Is the demand real or just blue sky?
*Should we choose fibre to the node (FTTN) or fibre to the home (FTTH)?
*Who should control the network?
*How much will it cost, who will pay for it, and what should users pay?The demand is probably real.
The Internet has been more quickly accepted than any other technology. There is huge demand for technology that enhances personal contact (the mobile phone and SMS). Emails have been augmented by instant messaging, photos and videos (youtube.com), videophone telephony will become the norm. The Internet is a universal encyclopaedia and convenient way of transacting.
Business is moving advertising, transactions and relationships from paper to the Internet. E-education and e-health (eg monitoring people in their own homes, instead of their occupying expensive hospital beds) are emerging applications. Telephony should be moved from Telstra’s copper network to optical fibre, saving appreciable network maintenance costs.
Tomorrow’s child may enjoy a birthday party in a room of which one wall shows life-sized three-dimensional images of besotted grandparents projected from another hemisphere. In 2015, households will use the Internet to tune in to any one of the world’s thousands of television stations and wonder at a world in which most people could receive only four channels.
We should choose FTTH. The FTTN model requires Telstra’s copper to join homes to the node. Aside from technical limitations, this would give Telstra an effective monopoly. Prices would remind remain high and innovative uses would be stifled.
A national network should be treated as infrastructure and controlled by a body different from, and independent of entrepreneurs using the network to provide products (phones, PDAs, home security systems, software) services (VOIP, downloading films, Internet access, TV, multi-person games, video conferencing, , e-education etc).
The cost of a national FTTH network might approximate $A20 billion. The Government should pay for it and charge little or nothing for its use. In particular, national phone calls should be free. Public utility will be maximised if (as is the case for education and to some extent for roads and health) we pay for it through taxes rather than for use. Put this figure in perspective by noting that in FY2005-6 Telstra’s ordinary operations reaped $25 billion or about $1,200 from every man woman and child in Australia. Every year the Federal Government alone allocates about $3-4 billion to roads.
A FTTH network would cost serious money to build, little to manage and almost nothing to use. Social and business utility will be maximised if every residents’ and business premise was connected. There should be a modest connection fees and a modest annual fee covering maintenance and administration.
Consider the social benefit of elderly and immobile people being able to telephone their friends, participate in chat groups, see real-time images of their grandchildren, and access education and health services for free. Society as a whole would be poorer if less well off households were excluded.
- Dr Nicholas Beaumont, Department of Management, Faculty of Business and Economics, Monash University
I think this is ‘a bridge too far’ and free is not necessary as business and consumers are, I believe, happy to pay for the Internet. But we want tomorrows Internet, not yesterdays. We know that all developed countries are looking at this issue and my fear is that we get left behind. Wouldn’t it be great to lead the world in this technical and social policy, exploiting our small size to get coordinated.
I presented with David Skilling in Napier last week. It was disturbing that by any measure New Zealand is disengaging from the Global Economy. A key statistic was the amount of Foreign Direct Investment from New Zealand which really nailed our inward focus.
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Watch this space. Australia (lagging slightly behind the rest of the world) will invest in FTTH eventually. Then in ten years New Zealand (lagging far behind everyone) will go, “Oh, why didn’t we do that.”
By then it’ll be some other Government’s problem.
We have the perfect opportunity right now to leapfrog investment in copper/DSL and build FTTH. I did the maths three years ago, it’ll cost $4 billion. Why can’t the Government find a $1 billion contribution to that from somewhere, spread over 5 years it’s a pittance. There just isn’t the interest in making New Zealand world leading, and ISPs and competing Telco’s are too interested in the short term boost from LLU investment to campaign for the massive long term benefit from redirecting that investment into fibre. It is good to see Wellington City finally coming onboard, but they don’t have much to spend, nor do most New Zealand cities. The interesting thing is that looking at the maths, a $1 billion subsidy fund from the Government would make it more than feasible for local bodies to fund the construction with an ROI (when I calculated it) around the 10-15% mark based on a 50% uptake. This was three years ago.
In all seriousness, what can we do about this? Should we start an advocacy group?
That’s alright, you’ve got almost nine years of wonderful labour policies to thank for the current state of our disengagement from the global economy. Anti-smacking legislation all the way…
Oh and Rod, your comments the other day about Immigration being a poor excuse for the raise in property ownership are a bit far off the mark.
After working for Immigration for over 4 years as an enterprise architect, I can certainly tell you that the current labour government policy and targets around immigration are a massive factor around house ownership, especially as they have specifically been targeting people that can easily come to NZ and buy houses quickly. In my book it’s a big factor amongst many things the current government has completed missed when it comes the state of affairs with housing.
My vote is for FTTH - and maybe it’s time to dust off the old analogy of the “information highway”. What is the kind of infrastructure investment that is going to enable New Zealand to succeed in the coming decades? If we’re going to have a network that facilitates a full speed engagement with the global economy, then let’s have a superhighway to the door, not some winding network of small streets leading to clogged up on-ramps.
So the question is does NZ need FTTH. Or put in a local context, does Wellington (city, region) need FTTH? We would all (most or many) would argue it’s just like water gas electricity roads; its needed, its a must do, today please. I get the economic transformation arguements and this is a must have infrastrtucture for a modern city/region.
For Wellington City (according to my back-of-the-envelope calcs) approx $180m is needed to push fibre (underground) in to the 65,000 Wgtn city homes (no services, just fibre infrastructure). Thats approx $2,800 per house as a one-off cost (and the $ change if you don’t share this cost amongst 100% of properties). Along the way, schools, suburban based businesses. etc get fibre based connectivity. You need to add some annual OPEX costs, etc.
So if there are approx 1 million homes in NZ, then that says approx $3billion is needed. (how many houses in urban NZ??)
So, how does this Wgtn community undertake such a substantive investment. Rollout of FTTH with 50% take-up or 100% takeup costs much the same. Is it user pays or is in a “utility” service that all need to pay for? So $180million over 20yrs (at 10%) is approx $325pa ($27/mth) per house based on 100% uptake.
Maybe this is a Cablecar Challenge opportunity…
Well there are some large pension funds out there poking around to which maybe such an investment would be attractive. It would be great to have central Government on side though, imagine redirecting 1c of the new 10c regional petrol tax into this for example. But I’m not sure how realistic getting government onside is. Neil/others maybe if you want to discuss further, even about just setting up an NGI NZ like campaign for FTTH NZ, get prominant business-persons onside etc, to raise awareness (maybe Rod can help there?), get in touch: kris [at] punk.co.nz
Gidday Neil, I’m sure your figures are in the right ballpark, given your industry knowledge. Are you advocating a household levy to facilitate a connection programme? Furthermore has anyone taken the time to survey residents to ascertain the likely level of uptake?
More importantly what motivates consumers to hook up to “real” broadband in the first place? Could we demonstrate the potential by creating a showcase of clever applications that users can test drive? Trawl for ideas then plug in a fat cable to a couple of the museums downtown and let visitors test drive some cool stuff.
As I have posted elsewhere, I don’t think a strong enough economic case has yet been made for universal, publicly funded broadband. So we need to find a commercial imperative.
But we’ve had this conversation before… ;-)
Oh well, no interest in “getting coordinated” then. I was please to find out my calculations are reinforced by Neil’s back of envelope calcs though. :)
Paul, you’re right, there is no clear “killer app” that we can be point to and say everyone needs FTTH for. There is a chicken and egg situation though, people arguably wont waste time inventing such applications when there is no way to deliver them, and it is impossible to predict what it may end up being used for beyond the obvious applications we already know about. When they wired homes for electricity no one thought it had any use other than lighting, and look what that led to, now we’ve appliances coming out our ears. We wouldn’t have been economically better off sticking with lamps. Look what telephones did to peoples productivity and time when homes were wired for that. We wouldn’t have been economically better off continuing to run down the road to find out people weren’t there, etc. Did anyone here even imagine that we’d be using the Web as we are now back in 1995? Things move at an incredible pace and it is time to build the next infrastructure.
What do we already know it can be used for, the usual list you’ve probably seen, but I look at it and think about each of those things and fail to see how they don’t make good economic sense. By having the opportunity to do these things before every other country already has, NZ will be at the top of the pack and NZ companies will be the ones developing these applications which can be sold overseas when other countries do their roll outs.
Entertainment
* The Triple Play - Voice, Video, Internet
* Video gaming — hey why not a good local game industry supported by locals, Iceland created one of the biggest online games in the world, location isn’t a factor.
Tele-presense
* Some of the stuff people are working on in this area is incredible
* Distance learning – fully interactive — better education is good economic sense
* Telecommuting – working from home at the same speed as being at work on the LAN
* Boring old video conferencing
Telemedicine
* Doctors consultations remotely
* Remote surgery
* Sharing extremely large files, operators in Auckland can analyse medical imaging taken in Napier, or wherever — doctors don’t need to wait for days to get copies of the images from hospitals…
Community/Social
* School and community services
* City applications such as voting, traffic monitoring, security monitoring
Business/Professional
* Blazing fast Internet
* Business-to-business connections that don’t break your bank
* Telecommuting – staff at home, parental leave, injury leave, etc. — If anyone thinks this is a fad then they should check again because some large companies are really getting into it
* Uploading and downloading of extremely large files — think creative industry
* Great for collaborative networks — Why can’t I set up a lan between my garage and the garages of the 6 other guys I’m doing a startup with, and why shouldn’t it be cheap and easy
* Real competition between service providers! (ooh scary)
And, critically the capacity to deliver whatever any entrepreneurial company might think of! I’m holding out for the internet to do my dishes for me.