I retired from personal blogging in July 2008.
But you can find me over at http://blog.xero.com.
Quite interesting being close to National’s broadband announcement and seeing the responses. A good case study on the political process.
Firstly David Cunliffe. I believe DC would have loved to have done this but it got stopped by Cullen and H1 after the Digital Summit, then the health hospital pass.
So he used the old ‘make up something and argue against that’ approach.
National’s plan as presented would inevitably reinforce the position of the incumbent, Telecom, as the dominant fibre provider.National’s plan replaces a narrow-band monopoly in the nineties with a
new broadband monopoly.
Err not sure where that came from, but good politics.
Next was the EPMU. They got right in there with their cause …
“If John Key thinks there is the skilled workforce available to start rolling out a project like this within the next year he may need to think again as there is an international shortage of telecommunications workers and our members are already working huge amounts of overtime simply to keep the network maintained and roll-out Telecom’s modest cabinetisation program.
Very opportunistic, but nice.
NZ First was a classic. Good emotion with headlines of Telecom Deal Outrageous and use of rapacious
And nice suggestion of a conspiracy with …
“If Mr Key has done a deal with Telecom he should come out into the open and explain what is going on. Taxpayers need to know exactly why they should pour $1.5 billion into the most rapacious company New Zealand has ever known,” said Mr Woolerton.
Note the jumping on the ‘beat up Telecom’ bandwagon there. That should get some oldie votes.
And NZ First want to just buy Telecom back anyway.
“Mr Key has acknowledged that telecommunications has been a market failure in New Zealand so perhaps it is time for New Zealand to take back the industry, like it has with Air New Zealand and will do with the railways system.
Must be great to be able to throw out policy when you have little chance of having to actually do it.
This election is going to be fun.
Update at 4:30pm
Dunne goes for the high ground …
Dunne: NZ needs broadband, not bickering
Press Release by United Future at 4:11 pm, 23 Apr 2008
UnitedFuture leader Peter Dunne says the future of New Zealand needs a vastly improved broadband infrastructure, not the current bout of political bickering.
“John Key has proposed a $1.5 billion broadband plan with the declared intention of strengthening the New Zealand economy so that we can compete in a global market,” he said.
“Everyone agrees that’s a good idea, but all we’ve heard so far is the Minister of Communications carping that National is being opportunistic and handing too much monopoly power to Telecom; New Zealand First is similarly outraged that Telecom is getting too much money; and ACT has delivered the standard libertarian rant that hates the Government collecting or spending any money at all.
“Surely the point is that widespread, superfast broadband is a good thing for the New Zealand economy and the only question is: how do we get there?
“It’d be excellent if politicians spent more time working out the answer to that question and not simply whacking each other over the head and feeling they’ve accomplished something.
“If direct government investment like Mr Key proposes is not the answer, then I’d like to hear two things from the critics - first, what is the alternative, and second, why has it not happened to date,” said Mr Dunne.
Very sensible.
blog
Thanks Rod.
As an aside - on this day of another US presidential primary - it’s pleasing to see someone thinking about New Zealand’s own election later this year. I look forward to seeing the disparity between column inches in the NZ Herald devoted to the US and NZ elections…
There seems to be a whole lot of enthusiasm here, but not a lot of follow-up on exactly what is being proposed:
1/ FTTH is uneconomic. The govt taking an equity stake (through a capital injection) in an uneconomic project does not make it any more viable as the government still requires a return on capital investments (unlike grants). If the private sector wont throw away $4.5b on FTTH, they’re not going to throw away $3b.
2/ If the govt is providing capital funding, the only way to make FTTH attractive for private sector investment is to set artificially high access prices in order to ensure the project provides an adequate return, and force customers to take the fibre service (i.e. replace the copper). The ability to set high wholesale prices will be the only aspect that will be attractive to Telecom.
3/ Absolutely no private sector participant will invest in this project if Telecom is not on board. It would be suicide to invest $3-4b and expect to get a return on that investment if they have to compete with Telecom providing xDSL services over assets it already has in the ground.
4/ Accordingly, Telecom holds all the cards. If they don’t participate the project cannot go ahead. If they choose to participate, they have all the negotiating power when having discussions with the government on access pricing. The LLU pricing of ~$19 will be replaced with a wholesale price of $70-100.
This project needs a lot more detail - and it’d be useful if someone could do a bit of analysis on it. The ’solution’ could well be worse than the problem if it completely squashes the chance for competition.
@Alex. Sigh. Did you read the announcement?
1. Of course FTTH is uneconomic in the short term. The public good business case was done by the NZI. I personally think FTTH is 2nd priority.
2. Model is deliberately tbd, which is a huge project they will get into once elected. It is not a simple problem but here is a willingness to work through the many issues. I think that is a sensible approach.
3. Of course Telecom will play some role.
4. The govt has regulation as well as a cheque book and significant other devices. Such as where they spend their money, resource consents, incentives etc.
Alex, I think you missed what Key said - priority is to business, then schools (lots of whom have just got fibre), then health and then home.
If government does it $1.5 billion goes further as they can use all resources owned by us the public. As I mentioned in an earlier comment this could include the sewer pipes. Most of us have these (at least in the North Island (could not help my self, keyboard did it!).
The only 2 resources the public owns that goes to premises is water and sewerage. Water pipes are too small.
If they use pipes like these $1.5 buillion will go along way, 75% Key said over 6 years.
It would be good if Telecom is involved but it will still work without them.
It may be fun to watch for some but to me these types of responses paint a poor picture of the health of our political process. We’re going to vote these people in to represent us in our Parliament and to honour that position.
Crikey! Some hope.
The last 9 years doesn’t exactly fill one with hope that the next 9 will be much better.
The upcoming election promises to be excruciating to watch if this bitching and moaning is anything to go by. In the absence of any proper in depth analysis of policy I guess it will be a simple decision come election day: change in the form of a pragmatic but inexperienced Key or more of the same from a controlling but experienced Clark.
Rod, you missed my point.
You say Telecom will certainly be invovled, but you haven’t said why. Why would they cannibalise their existing revenue (particularly toll revenues) by building FTTH? Why would they overbuild a copper network that can still support much faster speeds over time? Why would they risk their current prime market position in order to enter a partnership with government or any other player?
The $1.5b will hold no attraction to Telecom - it’s a government equity stake, so it’s not free money. Plus, Telecom would have no problem raising the capital for FTTH on the debt market at similar rates to the government. The problem is getting a return on this investment.
The ONLY thing that will encourage Telecom to participate is the prospect of negotiating higher access prices from the government. This scenario has led to a total debacle in Australia with Telstra being able to dictate the terms of the national tender and exactly the same thing will happen here.
My concern is that a National government will be forced to make regulatory concessions (i.e. sky high access prices) to Telecom in order make this work.
Once the network is commoditized then monetization needs to occur at the rich services that run over that network.
The challenge for carriers is of course to make that transition. As retail marketing companies with big balances sheets they are well placed to do that, as of course are nimble solution providers.
The worst possible case for an ISP right now is to be an ADSL reseller and have no infrastructure. Those guys are gone in 5 years.
Service providers need to be agile now and as independent as they can be.
NZ needs a bandwidth futures market.
NZ needs a second international cable. Dunedin missed the opportunity to put $100M into one instead of building a dumb concrete stadium.
The big wins are not in the infrastructure space; they are not even in the ISP space. The big wins are in the software/services/clever idea space and the IP that goes with them.
But getting anything done in election year is incredibly frustrating…
Stu,
what convinces you that these guys will be gone in 5 years? I’d say yes - they will have to change, but I don’t think it’s out of the reach of the more flexible resellers. I would say there will be consolidation, and we may be left with Xtra, TelstraClear, Slingshot, Orcon, Ihug, and possibly a small number of others. However, if we have half a dozen suppliers who utilise a true open-access network, then NZ is in a reasonable position.
Have to agree with Peter Dunne here, Mister Common Sense has done it again.
I do have concerns that $1.5b is just not going to be enough, even with some sort of PPP.
Also I think the timeframes are unachievable.
Someone over at Publicaddress calculated 1.2 million households by 2014 means 1100 per working day for the five years starting in 2009.
Even assuming we’re only talking Fibre to the street and not to the door that’s very ambitious isn’t it ?
Karl,
iHug no longer exists already :-)
You take my point - the smaller resellers will disappear through consolidation - there is no way they can survive when the aggregation numbers change. Trying to sell Internet at $50/month when you can’t oversell at 150:1 any more is impossible.
Stu,
tell me about it. I’ve been working with them on a few issues regarding some of our hosting clients, as their domain name system needs some serious work. Apparently it’s well known it needs work, but there’s no timeframe for when this will happen. We’re currently discussing with a number of clients whether to move them to another domain name registrar because of this.
Here is some more information on H20 in the UK is using sewer pipes for broadband.
“Deploying traditional fibre over a 2km area would take 12 months in planning. We can do it in four (4) hours” - Elfed Thomas, H20
Sewer pipes are the only infrastructure item that we the people own.
Doing it this way would make Nationals $1 billion go a long way.
Some one pick up on this and suggest it to them.
It is good to see the debate move from whether we need ubiquitous faster connectivity to how we are going to get it. It still surprises me to see people arguing that faster connectivity is only necessary for people to surf porn etc. In that light, just as one example of what else can be done, Auck University is trumpeting the advantages they see coming from their new HD video conferencing facilities - see http://www.istart.co.nz/index/HM20/PC0/PV25578/EX210160/CS210627. And, importantly, they were initially sceptical but tested it and found not only that it will be useful now (classical music collaboration is the example given) but also that it will free up staff and students to learn in different ways - ways that have not even been considered to date because they cost too much.