I retired from personal blogging in July 2008 but you can find me over at blog.xero.com
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The New Zealand Institute released it’s broadband solution paper this morning.
A recommended pathway to fibre for New Zealand
I’ve been involved a lot on this over the last year and I find it exciting and satisfying that the research has been done, arguments have been debated and that a visionary solution that really can transform New Zealand has been put forward.
The FibeCo solution is very logical and I think takes into account the concerns of the many stakeholders around this issue. Some very smart people took the time to really think about this.
I like that it balances private and public sector needs. It builds on what we learned as a country in the 70’s, 80’s and 90’s. It is a savvy financial solution.
This has been a frustrating debate. There is so much vested interest and so much micro comment that does not look at the big picture issues.
But I also feel a sadness that this visionary plan, that leverages our competitive advantages of size to get organized, has little chance of actually happening.
Already the knocking machine has started as vested interests blur the issues. It is so hard to move from our flawed status quo.
But most importantly implementing a plan like this takes leadership, vision and balls.
As a country we haven’t displayed many of those qualities recently.
blog
Yes, what this country needs is more government involvement. Everyone is just waiting to download porn in 1s instead of 30 min. Or if it isn’t porn, to watch TV One in HD.
Rod, forcing people to handover money they wouldn’t have done otherwise, will do absolutely nothing for NZ. There are no competitive advantages of ultra high speed internet. And everyone who wants high speed, can get it.
Absolutely love the statement:
“..most importantly implementing a plan like this takes leadership, vision and balls. As a country we haven’t displayed many of those qualities recently.”
Pretty much sums up the state of affairs.
If any party takes this head-on in the upcoming election, I’ll be backing them.
Berend wrote “There are no competitive advantages of ultra high speed internet”
I have seen many similar comments recently and heard the same from some at the broadband investment forum meeting. It seems to me that such statements carry with them an implicit focus on the “now” rather than the future, which is fine - its just that IMHO view they should not be used as arguments against investment/change aimed at future horizons. Given that FTTP or any form of faster access in the last mile is not something that can be effected overnight, the argument that we don’t need faster/better access “now” in all facets of our lives does not really persuade me - I’m more interested in making sure that the functionality etc that will inevitably roll out and become indispensible for those in parts of the World that have taken the hard decisions, should be available to us.
Hi Rod,
In the proposal, it says that competition will be left to service providers but it then goes on to say that government comms spending will anchor Fibre Co.
How does this work?
How can a service provider compete for government comms spending?
How does Fibre Co operate service if it is just a passive infrastructure owner?
There is a response from the Libertarianz to the NZ Institute’s Recommendation shown in the following link:
Vultures circling over “fibre future”
There is absolutely no doubt in my mind that FTTH will become essential in the 21st century. Some of the applications that I’ve seen coming down the pipeline whilst working in the UK will require significant amounts of bandwidth.
XRay manipulations, body modelling, holographic TV are all applications that will become available in the next 10 years and all of these require substantial download and upload bandwidth (this point is often neglected) for these applications to work well.
NZ will do well to keep ahead of the curve for a change rather than behind the eight ball which it seems to fall into the habit of.
What is most important is to get in early, NZ has some very innovative software companies and if we can get them some decent bandwidth to play with we should be able to come up with some magic.
Good luck Rod
Rod, the document is certainly going to stimulate discussion which is its aim.
I would like to see how some of the figures have been arrived at and calculated.
i.e. economic benefits $2.7-4.4 billion, FTTP - need for this (its available now if your are prepared to pay for it)
The statement “Telecom is the only investor likely to make significant investment in fibre” - not sure this is 100.00% accurate as Vector have put a lot of money into fibre and I thought Telstra have as well.
Some of the comparisons with overseas locations (Amsterdam) don’t translate to NZ very well as don’t have the high density premises that Europe and Asia have.
Still all power to the NZ Institute if this makes it happen.
I agree fibre is the only way to go. There is interesting comment on http://www.diversity.net.nz on the recent Telecom announcements and mirrors recent discussions I have had with Orcon. It you get marginal ADSL access now (due to distance from the exchange), rolling out ADSL 2 will probably not help much unless Telecom installs more roadside cabinets. Don’t know how long this will take.
“Yes, what this country needs is more government involvement. Everyone is just waiting to download porn in 1s instead of 30 min. Or if it isn’t porn, to watch TV One in HD.
Rod, forcing people to handover money they wouldn’t have done otherwise, will do absolutely nothing for NZ. There are no competitive advantages of ultra high speed internet. And everyone who wants high speed, can get it.”
This is a very insular and ignorant view on the situation. While I detest bureaucracy and unneccesary government spedning, I think government spending is probably necessary here to improve infrastructure. There’s more to the internet than porn, believe it or not. Aside from your sarcasm and snide comments, why do you think we don’t need this? You might be happy with 10mbps in 4 years but I certainly will not.
NZ Institute’s paper is definitely the most logical solution that I have seen yet.
Rod
A vision is a great thing to have - businesses without vision generally do not prosper and I suppose the same could be said about countries. So, don’t get me wrong - I love vision. We call it a BHAG at Vodafone. Ours is to be the leading telecommunications company in New Zealand. We have had previous ones like being the leading mobile company in New Zealand and reaching ambitious revenue targets.
The thing is, a vision has to be realisable, or even better - just little beyond what people think is realisable today. That’s the “hairy” bit. It has to excite and inspire and not scare people into inaction.
So, there are lots of visions New Zealand could have. e.g.:
(1) Fast speed high ways to all homes and businesses
(2) Free health care for all
(3) Free tertiary education
(4) Government funded superannuation at rates that reflect people’s previous earnings
I could go on - but you get my point. We all live with:
(1) Minimal motorways in NZ, unsealed roads
(2) Private health care (if we can afford it) and charges for GP visits
(3) Saving for our children or student debt
(4) Saving for our own retirement and a minimal state pension
For me, the fibre vision is very worthy but is a bit like the road analogy above. The country can not afford to pay for high speed roads to all homes and businesses and, just as importantly, not everyone would need it.
So, we have to be pragmatic. We don’t need a fibre vision - we need a broadband vision which connects the people of this country to each other and to the outside world. There are lots of worthy steps on the way and, who knows, in the future we might become so successful as a country that FTTH becomes affordable.
Let’s work out the steps.
The NZI paper dismisses other technologies and that would appear to be a great shame. Our view is that wireless has a major role to play, particularly in rural areas. The technology is in place today to deliver as good an experience as I get over my Telecom service (resold through Vodafone!)in Auckland’s central suburbs. Wireless speeds are doubling very soon and we have Telecom and NZ Comms entering the fray with similar technologies.
So where does the NZI proposal leave this investment? Should we pour more in or not?
Also, what happens to those who have already made risk investments in fibre? Do they have to sell their assets into fibreco. I wonder what FX and Vector will think about that? How will the valuation be done? Based on the future low risk monopoly investment discount rates or the historic high risk competitive discount rates?
The NZI also trivialises the back haul issues which still exist in NZ. The Vector-Vodafone deal is no evidence of an efficient market. It is evidence of a failure in the market. We want dark fibre but can’t obtain it. Vector are largely over-building fibre belonging to other players.
Lastly, I am pretty worried about the “cost plus” based approach. New Zealanders will be paying for that either through their subscriptions or through the government investment. It will take a very sophisticated approach to marry the needs of private investors in fibreco and the government’s policy objectives of affordable telecommunications services for all.
Bring on the debate. But let’s not call people who disagree with us the “knocking machine”.
Cheers
Tom Chignell
GM Corporate Affairs
Vodafone NZ Limited
Hi Tom, good points. Appreciate you taking the time to comment.
@Simon:
None of those services requires broadband delivery to the home. Even 3D TV would be better served as delivered in a broadcast network, not a singlecast IP network.
That isn’t to say that there aren’t services that wouldn’t benefit from faster broadband to the home, just that those aren’t it.
Here’s a couple….
1) Video on Demand - The long tail of TV. YouTube in HD. Don’t buy a DVD anymore, stream it from an online library. We can already do radio on demand using the internet, this just follows on from that.
2) S3 storage. Need extra disk space while you edit the vacation videos? Rent it off of Amazon. Same for off-site backups of your home data.
3) That computer game running a little slow? Rent additional CPU off of Amazon’s EC2. Want to setup a public server for that game, but don’t have a spare system? Same thing.
The services are about shoving your data out into the cloud. As Linus Torvalds says, “Only wimps use tape backup: _real_ men just upload their important stuff on ftp, and let the rest of the world mirror it ;)”
Hi Rod,
I’ve read the doc too. Here is some constructive feedback
1) this is very similar to the original telecom proposal. That was knocked back mainly (imho) due to the lack of political mileage. If you want to give this legs (and i really believe you do!), need to find the political mileage…
2) the pricing of $50 seems high, and is averaged… The classical monopolies price discriminate. Get loads of volume of low priced users, and over price business or the rich for instance, netting out at a reasonable return. I’d also ask why if it was possible to get $50 per user out of everyone why Telecom isn’t doing…
3) i’d say service providers would have an issue with this. Take TSO for instance, telecom would be obliged to provide residential phone services to a new development (at a cost), and then buy this service from Fibre co
I’ve been amused by the way that the media have leapt upon NZI’s discussion documents as if they are gospel set in stone. There ARE some compelling social and economic reasons to roll out broadband, some of which have yet to be aired. There is also some downside, not the least of which is the opportunity cost of investing the money elsewhere.
That’s why government should now fund a full independent economic analysis.
http://geniusnet.blogtown.co.nz/2008/03/31/broadbandwagon-where-to-next/
There is a little curiousity about the NZI analysis. Typically the case for public investment in networks is made on the basis that there are some benefits that can’t be captured unless most are on board. But if you go back and look at the source of the benefits being claimed by NZI that make up the $2.7-4.4 billion per year (see http://www.nzinstitute.org/Images/uploads/Broadband%20aspiration%20Sept%202007.pdf) most are able to be captured with much lower than the 75% penertration they are justifying the need for public investment off. I do think a bit of hard nosed analysis of marginal cost of provision versus marginal benefit is warranted. The issue underlying this is that there is a risk of over investment (i.e. wasted investment aka lower productivity) that can arise because alternative investment or new technologies could meet the need for those where the value proposition isn’t that clear cut. There may be a public particiaption/inclusion arguement being run, but as yet I haven’t seen it in the NZI stuff.
It isn’t by accident that some people have gravel roads, or 75% of us don’t have railway stations and airports outside our front doors, or for that matter bus stops.
cheers
Simon
Here is the David Skilling video which explains things quite well.
http://tvnz.co.nz/view/page/410965/414443?video_id=1678765
Tom:
“… Our view is that wireless has a major role to play, particularly in rural areas…
So where does the NZI proposal leave this investment? Should we pour more in or not?
Also, what happens to those who have already made risk investments in fibre? Do they have to sell their assets into fibreco. I wonder what FX and Vector will think about that? How will the valuation be done? Based on the future low risk monopoly investment discount rates or the historic high risk competitive discount rates?
The NZI also trivialises the back haul issues which still exist in NZ. The Vector-Vodafone deal is no evidence of an efficient market. It is evidence of a failure in the market. We want dark fibre but can’t obtain it. Vector are largely over-building fibre belonging to other players.”
I agree wireless is a sensible solution in rural areas. It’s not really affected by whether we decide fibre is the way to go in cities however. This is not an issue of equality, there is none at the moment, and there wont be any in the future. So whether broadband in the rural areas gets funding or not is still an issue that can be addressed and doesn’t need to sink a perfectly good plan for getting into urban areas.
Long term, wireless is not a solution for delivering the speeds needed, it can’t deliver them now, and it will never be able to keep up with fibre. It is really good for being mobile though, and that’s great, stick to using it for that, or in third world countries with no fixed line assets (and just getting 100 K for some voice is a huge step up for what they can do), or areas where upgrading fixed lines to fibre will just never (no matter want) make sense.
I agree in part with your backhaul statements, local (citywide) backhaul is what Vector offer, and this is something that FibreCo should be able to do by default. When you put that much fibre in the ground, the links between the suburbs is nothing on top, and you’d be a fool (i.e. whoever set up FibreCo) to say, “no, I dont care that they’re all linked now by your fibre anyway, you can’t give cheap economical back haul.”
Most architecture overseas for this kind of thing tend towards open access networks, so all Layer 2 services including back haul to central POPs (head ends, COs, whatever you prefer to call them), where the different service providers can telehouse equipment and connect their services. This is sensible for a few reasons, a couple of obvious ones being 1) no duplication of electronics in the field, 2) cut customers over between service providers with a software change, rather than a dreadfully expensive truck roll (big one), 3) reducing the amount of space needed in cabinets or in neighbourhood pops, in turn reducing the expenses of building and running them (cooling, power, maintenance, etc).
I’d suggest that for bigger business customers many Telco’s would still like to terminate them on their own kit to guaruntee services and such. Which is easy to do in this regard still, you can link diverse fibre paths for those customers up through the FibreCo network to the central POPs. It costs a little more, but these customers are paying for that set up at the moment anyway (and it’d be cheaper with FibreCo plant in the ground that what we have now). Also that would be how you’d scale those customers beyond the cost effective limit of the electronics in your access network. E.g. at the moment you’d be able to offer Gigabit connections, but 10 Gigabit for the you’d terminate all the way back to the POP. In 5 years you’ll be offering 10 Gigabit, and those hungry customers wanting 100 Gigabit will be terminating back to the POP.
NZI don’t appear to have proposed this with FibreCo, but it’s a natural step. Heck, if the Govt went with a plan like FibreCo, companies like CityLink could possibly just step in to be this middle man. Provided all the different service providers didn’t have a not invented here attitude.
Regarding those that have already made the investments. FX is ok, they’re long haul, very little in local cities. Telecom and Telstra? Well sorry, you should’ve made better use of it, instead of keeping your networks closed up. CityLink and Vector will be justifiably upset though. This is why I prefer a public/private partnership, because that way CityLink could easily bid for and become the FibreCo of Wellington, Vector likewise for Auckland. Also it gets around the issue of Government simply not being good at this stuff (look at Transpower or BCL).
I had suggested the idea once of just providing a subsidy per home connected to whoever does the connecting (provided they meant certain network design requirements and operated to a chater/regulation). That way the fastest man wins, and most likely the fastest men are going to be the Vectors and CityLinks who could start tomorrow if they had the financing. But that’s probably ridiculously wild west.
Tom said…
Our view is that wireless has a major role to play, particularly in rural areas.
I agree here, but wireless will never ever match the capability of fibre optic communication-based systems for high speed/high volume transmission. The reason is the Physics of the transmission medium. The fibre medium can be engineered and controlled of how a signal propagates thru it, thus overcoming major problems as signal attenuation, signal noise contamination (both extrinsic & intrinsic such as shot-noise), signal dispersion, signal delay, signal polarisation mode and so forth.
The Physics just described are the main hurdles in designing a hyperspeed broadband system. Also these physical characteristics are very hard or indeed impossible to overcome in wireless technology. See, no one is going to depressurize the atmosphere (medium for wireless) in order to reduce the signal loss by attenuation. In comparison to fibre, one can design the fibre (both material-wise & geometrical-wise) to reduce the attenuation into a minimal level. Other limitations mentioned above can also be manipulated in a fibre system and thus enhancing the signal transmission.
Perhaps that the only wireless type of transmission that can possibly beat the superiority of fibre optic system is one that is based on neutrino particle, which stops at nothing, even they can traverse the earth’s mass (whole diameter) from one side to the other unstopped. There are about 50 trillion cosmic neutrinos that pass through the human body every second, but they don’t do any damage since they are neutral particles (un-charged), ie, they don’t interact with body tissue. In fact they don’t interact with anything, and this explains of why they’re so hard to detect, because they just go right thru detectors without being captured.
Such a neutrino based communication system if it is ever to be possibly developed (only theoretical at the moment because neutrino is very hard to detect), then one does not need satellites for relaying signal to the destination since once can just aim the beam roughly to where London is (pointing it to the ground rather than to the sky), then send the beam, where it could travel unopposed thru the earth’s mass and emerged out on the other side (from the ground), presumably the target destination is London (line of sight transmission - straight line). This is all just theoretical dreaming, however these ideas have been proposed by the Physics community. Neutrino doesn’t suffer the problems that limits current electromagnetic-based wireless systems, such as the dispersion for example. It seems that someone has a patent for neutrino-based communication system, even though the technology doesn’t exist yet. There are lots of different types of technologies that were just dreams about 50 years ago but now have been physically realised today, so one cannot possibly ruled it it out that it is possible to develop such technology in the future, but may be not in our lifetime.
Anyway, I think that David Skilling has made the right noise, in that fibre is the future, but I doubt if his advocating for a state monopoly fibre company, is the right way. It is Ok for people to let the state be a monopoly in any business sector, however they’re quite furious if the monopoly is a private enterprise. I mean, it is not Ok for Telecom to be a monopoly, but it is Ok for a FibreCo (state-backed) to be a monopoly. I can’t see how FibreCo is going to keep upgrading the network, because there is no competition at all to its monopoly. I see that David Skilling has somehow think that once you install fibre, then this fibre is all you need where it can solve all the broadband problems. No, this is a misconception. You will still need to install new fibre cables once and a while, since the transmission speed of fibre does improve all the time. But will FibreCo be keen to do this over time? I seriously doubt it, since Skilling is proposing to get investors to be involved in FibreCo and the potential for regular upgrading the network is very expensive, and this is unlikely to get good returns for investors, so FibreCo will exactly do what Telecom is doing. They will be less incentive to invest more or upgrade the network regularly.
Falafulu, “I can’t see how FibreCo is going to keep upgrading the network…”
This might be why having say 5-10 different regional network companies set up is a better idea. Smaller outfits tend to be more creative and understand the local needs better. If they’re partly local government owned (e.g. like the lines companies used to be), then the competition comes from the local governments. If Auckland did a major upgrade that beat out Wellington, Wellington would soon want to follow, etc.
Another thought comes to me about the FibreCo model, and this may be a big one:
It promotes cherry picking to some degree. Because they don’t provide the Layer 2 connectivity between the customer and the provider, the service providers have to locate cabinets in the field, or switches in the neighbourhood exchanges. They’re only going to install these in the most economical areas first that will have the most uptake. Naturally the Govt would probably force Telecom to provide all areas, but you wouldn’t necessarily get the benefits you’re after because you don’t really have competition.
Wheras, if the Layer 2 connection between the customer and the service providers is part of the FibreCo system, the service providers don’t care where the customer is, they locate in a few points, e.g. 2 POPS would cover Wellington City, and the customer is brought to them from anywhere in the FibreCo access network.
At the complete other end of the connectivity labyrinth, good to see the announcements of increased capacity for the Southern Cross cable and now an MoU between Kordia and Pipe for a new cable between NZ and Australia, tacking onto Pipe’s existing developments from Australia onwards.
See http://www.kordiasolutions.com/node/1203
http://www.nzinstitute.org/Images/uploads/Delivering_on_the_broadband_aspiration.pdf
It’s a joke isn’t it?
We just spent the last 20 years creating a deregulated market place.
The paper doesn’t seem to address technical technology issues, so I guess there’s little point asking questions about what technology would be used and how it would be proposed that it’s managed.
Monopoly in telecommunications = Good Where?
I read rant after rant about how bad the SCX monopoly is now that the network is paid off.
The only hole I’ll pick in the paper is the 67% uptake rate… see: http://www.budde.com.au/presentations/content/An%20Industry%20Vision%20for%20the%20National%20Broadband%20Network%20Plan%20-%20Supplement%20v5.0.pdf page: 62+
I like this article: http://ftthnews.titan.net.au/2008/03/pegasus-to-be-fast-town-really.html
“Investigations however have shown that the services delivered are only 10/2Mbps, slightly faster than the current ADSL1 based services offered by Telecom.”
What’s the point of FTTH if providers are going to hold it to ADSL speeds?
Personally I love my Telstra Clear HFC service… I guess it’s so good because I’m the only person on the node - no one else in Mairehau, Chc, wants data!
Why force public money into data when homes don’t have computers? Has anyone looked at the census data to see how many computers we have in homes?
I will agree we do need some regulation, or at least enforcement of current legislation.
8mbit connections should run at 8mbit. If providers are allowed to promote “as fast as your line will go” then the provider must deliver that speed.
But there’s not much hope of that with a Commerce Commission that doesn’t understand that a mbit is a unit of measure no matter the media used to deliver it.
If I buy a letre of milk in a bottle it should be the same volume as a letre of milk in a card board box.
The CC tell me that I can’t expect 400KBytes/s from ADSL (even though I had an 800+KByte line sync) just because I can get 400Kbytes/s from Telstra Cable (yes, I ran a parallel test from a web site using two connections at the same time).
The CC sent me a letter telling me that HFC is simply better technology so runs faster.
Cheers Don
Rod, interesting news item in April copy of PCPro magazine from UK. Here is the online link which does not give as much detail as print article but does give the general idea.
http://www.pcpro.co.uk/news/159045/sewer-firm-brings-100mbsec-broadband-to-britain.html?searchString=h2o
The company, H2O are looking to feed 100megabit fibre cables through sewers. They have fibre builds in Bournemouth, Dundee and Northampton (none of these are known as high tech centers).
I have always said that the problem is the pipes in the ground not the fibre. I guess you could do the same with water pipes although they are probably much smaller.
They think each town or city will cost GBP10 to 30 million depending on the size.
I know someone who wanted to do this in Auckland city and the council did not want to know.