I retired from personal blogging in July 2008.
But you can find me over at http://blog.xero.com.
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National’s Broadband planJust back from hearing John Key deliver his broadband investment speech at the Wellington Chamber of Commerce event.
2008: Achieving a Step Change - Better Broadband for New Zealand
“- If dial up could deliver Trade Me, who knows what might be delivered by fibre to the home.”
Some thoughts
- It was the first major policy announcement from National, and probably a good choice of policy areas to start with.
- It was great so see some vision and leadership.
- It didn’t lock in a particular model - which at this stage is a good idea.
- I like the approach of being clear about a number of principles that will guide process towards a solution.
- The approach acknowledges the need to work with the private sector.
- National, and especially Maurice, must have listened and been working hard in the background since the digital summit. Great to see they listened.
- Kudos to the hard work the New Zealand Institute did on quantifying the public benefit
As I’ve mentioned before I think our industry can have some pride at moving this from a technical issue, to a business issue, to government policy. To have politicians come to terms with the complexity of our industry, the commercial sensitivities but fully understand the importance is a good win.
This is good stuff and vital to NZ. Most reasonable people would agree. Looking forward to hearing what you guys think.
Let rip.
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.
The New Zealand Institute released for discussion this morning their next report on Broadband in New Zealand.
ASSESSING NEW ZEALAND’S CURRENT ROADBAND PATH: THE NEED FOR CHANGE (pdf)
NZI has consulted widely in this report and I’ve certainly appreciated having a lot of time with Paul and David. I really appreciate that NZI are taking such a lead in working through the issues in this difficult area.
This paper is part of a modified program of work NZI are doing to surface the issues and unemotionally do the background research required to put forward credible solutions. This particular paper is very important because it asserts that the program of work the Government is doing will not get us to where we need to be.
It’s all building up for the next exciting chapter which will put focus on some suggested solutions. Of course I have an opinion on that.
Rod Drury is founder and CEO of Xero, NZX listed Software as a Service (SaaS) online accounting solution for Small Businesses.
Rod is also a Director of the New Zealand Stock Exchange.
In 2009 Rod won a Flying Kiwi Award and was admitted to the New Zealand HiTech Hall of Fame.
In July 2008 Rod was conferred the status of Honorary Fellow of the New Zealand Computer Society (HFNZCS), the highest status that can be bestowed on an individual in the ICT profession, for his achievements, advocacy and active mentoring of others in the industry.
Rod won a World Class New Zealand award in 2008 and was NZ Hi-Tech Entrepreneur of the Year in 2006 and again in 2007. Rod won the Absolutely Creatively Wellington Award in 2007.
Rod has ‘paid it forward’ with angel investments in a number of startups including award winning business planning software PlanHQ and WhatsInPlay.
Rod was founder and CEO of AfterMail which was acquired by Quest Software in January 2006 and subsequently won Best Exchange Product at TechEd 2006 in Boston.
Rod co-founded USA based Context Connect Incorporated which provides directory solutions for mobile devices. Rod has international patents in the directories area.
Prior to this Rod was Chief Technology Officer of Advantage Group (now Provenco) where he spent significant time in the USA working with leading international technology companies.
In 1995 Rod established Glazier Systems, one of New Zealand’s leading software development and consulting companies. Glazier Systems was acquired by Advantage Group in 1999 and continues today as Intergen.
In the late 80s to early 90s Rod worked primarily for Ernst & Young/Arthur Young, as well as spending several years working on telecommunication billing systems both in New Zealand and the United States.
Through his career Rod has maintained a close relationship with Microsoft and was selected as New Zealand’s first representative on the Microsoft MSDN Regional Director program, holding the role from 1997 to 2000. Rod achieved Microsoft MVP status for his work in the early days of Active Server Pages.
Rod was an Independent Director of TradeMe - New Zealand’s most successful eCommerce Internet site- when it was sold to listed Australian media giant Fairfax. Rod continues on the TradeMe Advisory Board. Rod joined NZ Trade & Enterprise Beachheads Programme Advisory Board in August 2006 and is a member of the New Zealand Institute of Directors.
Rod has a Bachelor of Commerce and Administration (BCA) from Victoria University of Wellington majoring in Accounting and sits on the Commerce Facility Advisory Board.
Prior to having three children, Rod enjoyed windsurfing, surfing, mountain biking and snowboarding.
Contact: rod @ drury.net.nz
Patent Summary
- 6731927 - System and method for context association (May 2004)
- 7340048 - System and method for directory services and e-commerce across multi-provider networks (Mar 2008) US,EU,GB,NZ
Looking back at the broadband debate over the last year it’s amazing how we as an industry moved broadband from a technical issue to a business issue and now to a political one.
For me it started back at Foo Camp in February where a bunch of tech, political and media people got together. Following Foo, stimulated by meeting a bunch of people with big ideas I published a document entitled Securing Our Digital Trade Routes. It raised the option of state ownership of our national communications infrastructure. I was totally surprised by how far that went.
Two weeks ago it came together at the Digital Strategy 2.0 Summit. A lot of the ideas we as an industry have been pushing this year came out in David Cunliffe’s speech and Pete Hodgson a few days later. Broadband is the number 1 initiative in Governments economic development program.
The government is now talking how important international connections are and raised the possibility of debt funding.
Looking back, my state ownership model was useful as a discussion starter but my thinking has certainly evolved since February this year.
First a couple of building blocks …
The New Zealand Institute did the important work of developing the business case for Broadband. It made it quantitatively clear that there is a compelling business case for world class links within New Zealand and connecting New Zealand to the world.
Am I a socialist or a capitalist? Left or Right. This was a struggle. I like money. I think the environment is important. I believe we should have free health care and education. I think we need to grow the pie before slicing it up. I prefer small government, low tax. I think saving should be compulsory. Exporting is good. Thinking globally is better. The ‘Buy NZ Made’ campaign is dumb. I like Cunliffe, I like Key, I like Russell Brown. Maybe the term Digital Socialist is the best for me.
Did the market fail in the Telecommunications industry? No the market is always working – but the free market will give you certain characteristics that may not balance out other objectives. So I’m reconciled that the government can regulate to set market conditions.
Operational Separation and Structural Separation I’ve never felt comfortable with. It seems to artificially fight the market.
I caught up with a very smart guy called Shaan Stevens this year and he influenced my thinking more than anyone else. We had a good debate on my state ownership ideas. Shaan got me thinking about how matching the investment models might make the market work and provide the characteristics we need as a country.
I’ve been calling this Funding Separation. It goes like this.
- There is a public benefit of having best of breed broadband connections between New Zealand and the rest of the world. No one company can monetize that. Certainly not a public company like Telecom who exist to earn a return for investors.
- The Internet provides an opportunity to nullify the tyranny of distance between ourselves and international markets - to leverage our real competitive advantage: the close networks that form in a small country.
- To exploit the power of the Internet we need to connect ourselves digitally to the rest of the world and treat the Internet as an abundant resource where we don’t even think about cost. We need to build businesses on top of networks. We need to remove the network as a barrier - physically and costwise.
- Therefore what we need is an open access network that operates on a cost recovery basis between New Zealand cities and the rest of the world. (Incidentally I think the role of central Government is to connect the cities. Local bodies should pick it up from there). People expect to pay for the Internet. Cost plus is better than free.
- The cost of that network is probably between $2-3bn dollars. On a debt funded basis it would cost less than $300m per year to fund that. I am sure that even just the Government spend much more than that per year on the Internet.
- The Government could regulate that the infrastructure layer of this network can only be funded by debt and returns a maximum rate of return of say 8%. It could also commit that all Government traffic goes over this network. This is the Funding Separation bit.
- With the recent financial meltdown there is a flight to quality and strong demand for these types of investment products that return a safe long term return. Left just here the market may work to solve the problem. Telecom could also provide this network if they desired.
- With Kiwi-saver coming on stream there is a lack of large onshore investments the government could make. They could be a foundation investor.
So lets look at who’s impacted:
- New Zealand Business. Low cost connection to global markets. Winners.
- New Zealand Citizens. Boom times, we earn more, pay more tax ($’s not %), have better schools and hospitals. Winners.
- Telecom. Can play at both layers but no longer have to invest at the base network so can inject new services into the network as fast as they can market them. Winners.
- Government. Hasn’t spent any cash, has lowered their costs, have transformed the economy. Winners.
- Southern Cross owners. You’ve held our country to ransom for years you pricks and get what you deserve. Probably just make normal money now. Less winners than before but well positioned in their retail businesses so not losers.
There you go. Problem solved. Now lets fix the environment.
The New Zealand Institute has just published a draft of their latest report.
Defining a broadband aspiration:
How much does broadband matter and what does New Zealand need (pdf)
As mentioned I’ve been involved with this and believe it is an important document for a number of reasons.
- It readily determines national economic benefits of over $2.7b annually
- For the first time that I’ve heard, it makes the point that high speed access - to connect New Zealand to the rest of the world from key locations - is more important than broad penetration across the whole country.
- It points out there is a significant cost of inaction
Congratulations to the New Zealand Institute team on pulling this together and doing the heavy lifting required to move the debate forward.
My own thoughts have evolved publishing my paper ‘Securing our Digital Trade Routes‘ in February. My purpose was to start a discussion on whether there was a business case for the people of NZ owning the base infrastructure - because no company could build a business case to do it.
As I’ve learned more and listened to the debate, my position has evolved to break the argument into two steps.
- I believe that Infrastructure investment is a completely different business model to retail telecommunications services. Ideally the market itself would separate. Infrastructure investment should provide a safe and low yielding return - this type of investment product is even more so in demand as the ‘flight to quality’ occurs following the fallout of the finance companies. Retail telecommunications suit share market funding where companies can quickly raise funds and compete with innovative services and marketing. I truly believe that everyone wins under this separation, especially the existing carriers.
- Once separated, the decision of whether the state should invest at the infrastructure level becomes less emotional. I believe they should invest for a number of reasons.
- It is a good safe investment
- There is a lack of significant sized local investments they could make with the significant kiwi saver money that is accumulating
- A broadband infrastructure investment has substantial national economic benefits in addition to the return on capital
- It can drive the Internet in New Zealand to a cost plus, rather than revenue maximizing, model
The timing of this report is excellent considering the upcoming Digital Strategy 2.0 conference in late November.
David Cunliffe has a press conference at 9:00 on separation. Be interesting to see which way it will go.
The NZ Institute have just announced a project they have been working on for a while (and I’ve been involved with) around a broadband strategy for New Zealand.
This is an important bit of work as it develops the business case for broadband. This has been a gap in the debate and I’m very grateful that David and his team have taken this on.
Background to the project is downloadable here as a pdf.
A broadband strategy for New Zealand.
(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.
Well, this is getting interesting.
Hon David Cunliffe
Minister of Communications
National leader John Key’s stumbling into the broadband investment issue
risks putting the price up, says Communications Minister David Cunliffe.“Of course New Zealand needs better broadband,” Mr Cunliffe said. “The
Labour-led government is delivering that after a decade of neglect in the
1990s by National when Maurice Williamson, their invisible spokesman, was
minister.“But John Key suggesting now that he would commit taxpayers to funding the
National-caused investment gap could be a costly blunder.“Telecommunications companies collectively make hundreds of millions of
dollars profit every year from New Zealand consumers. If the companies think
taxpayers via the government will do their investment for them, why would
they spend their own money?”Mr Cunliffe was criticising suggestions Mr Key made on Radio New Zealand’s
Checkpoint programme last night that National would use taxpayers’ money to
fund broadband infrastructure.“There is solid evidence of underinvestment in broadband infrastructure,” Mr
Cunliffe said. “Recently Telecom said at least $1.5 billion needed to be
invested by it and other industry players. That may be conservative.“Today, one company’s mainly overseas shareholders are learning of a $1.1
billion windfall. At the same time, National wants taxpayers to pick up the
tab for the next generation of New Zealand’s networks. It is a good thing
John Key does not have the public chequebook.“The industry is at a critical junction with local loop unbundling on a fast
track and the issue of operational/structural separation open for public
comment. A true leader would not blunder in at such a time. National would
be well advised to put its brain into gear before running off at the mouth
with taxpayers’ money.“Clearly, this is more evidence of John Key’s PR advice to try to mimic
Labour in areas of the government’s strengths. While flattering, the public
will not buy ‘Labour lite’ when it already has the real thing. It is also
fiscally irresponsible, like National pursuing tax cuts for the rich while
every week promising to spend more money in the face of an economy that is
already running hot.“It is ironic that National is becoming a born-again nationaliser after
decades of neglecting the country’s infrastructure, but it has no
credibility. It is the Labour-led government that is delivering on sound
policies.”
What Key said …
Transcript
Checkpoint Radio New Zealand NationalMay 3 2007, 5.33pm
PRESENTER: The National Party has signalled its interest in the idea of
government investment in the country’s sluggish broadband infrastructure.
Party leader, John Key hinted his party is exploring the idea, he was
speaking at an economic development conference in Christchurch. The
government said only yesterday that it currently had no plans to become an
investor in the country’s telecommunications infrastructure. Our economics
correspondent, Corin Dann was in Christchurch and filed this report.REPORTER (CORIN DANN): The idea that a modernised, super-fast broadband
network could be viewed by governments in the same light as infrastructure
like roads, has been growing in currency both here and abroad.The economic think tank, the New Zealand Institute touched on it in a recent
policy paper, while the Australian Labour Party has proposed spending
billions on a new broadband network if private enterprise also contributes.In Christchurch today, John Key told the Economic Development Association
conference that the issue of investment in broadband is something his party
has been discussing internally and views as important to the country’s
development.HON JOHN KEY (NATIONAL LEADER): It’s great, there’s no good to you if you
can’t get broadband connection and half of New Zealand can’t get it in any
decent form. So we’ve got to roll things like broadband out and that’s what
countries like Ireland have done. You can argue all the EU subsidies in the
world but in the end, they picked up money and spent it in places that would
grow their economy. So, yeah, we’re certainly going to make sure we control
government expenditure but, as equally important will be make (sic) sure
that our spending is in areas that will unlock that supply side of the
equation.REPORTER: When pressed after the speech for more details, Mr Key stressed
the party’s policy work on broadband investment was at a very early stage.
However he says nothing has been ruled in or out.KEY: I mean if in the end we thought that was the right outcome that’s a
possibility, but at this stage, you know, we’re working through that but
what we do know is that the internet is the single most successful device to
bring New Zealand to the rest of the world and it’s very difficult to do
that, particularly from the regions where there’s not good broadband
capability and, we just have to advance that process more quickly (sic).
I’m a bit puzzled by David C’s approach here. Trying to paint this as a big Government spend is erroneous and exposing. It’s self fundable. This issue is the investment profile for infrastructure at a country level is different from a publicly listed company.
Telecom Chairman Wayne Boyd is hammering this today …
“What investment is going to occur and who is going to fund it has been noticeably absent from the debate. Where is the robust discussion about the consequences of what is proposed?”
The NZ Institutes latest paper that talks about the weightless economy was released today. Really ties into the themes we’ve been talking about over the last month.
So Far Yet So Close: Connecting New Zealand to the global economy
It’s a good read covering broader issues such as shipping and air links. Was on Radio Live with David Skilling commenting at lunch time today. It’s pretty neat to see the discussion being picked up.
Rod Drury is founder and CEO of Xero, a Software as a Service (SaaS) online accounting solution for Small Businesses. Xero listed on the New Zealand Stock Exchange in June 2007.
Rod won a World Class New Zealand award in 2008 and was NZ Hi-Tech Entrepreneur of the Year in 2006 and again in 2007. Rod won the Absolutely Creatively Wellington Award in 2007.
Rod is an experienced entrepreneur and early stage investor passionate about software development and building value.
Angel investments include PlanHQ and a number of number of SaaS startup’s in technology build.
Rod was founder and CEO of AfterMail which was acquired by Quest Software in January 2006 and subsequently won Best Exchange Product at TechEd 2006 in Boston.
Rod co-founded USA based Context Connect Incorporated which provides Directory solutions for mobile devices. Rod has international patents in the Directories area.
Prior to this Rod was CTO of Advantage Group where he spent significant time in the USA working with leading international technology companies.
In 1995 Rod established Glazier Systems, one of New Zealand’s leading software development and consulting companies. Glazier Systems was acquired by Advantage Group in 1999 and continues today as Intergen.
In the late 80’s to early 90’s Rod worked primarily for Ernst & Young/Arthur Young, as well as spending several years working on telecommunication billing systems both in New Zealand and the USA.
Through his career Rod has maintained a close relationship with Microsoft and was selected as New Zealand’s first representative on the Microsoft MSDN Regional Director program, holding the role from 1997 to 2000. Rod achieved Microsoft MVP status for his work in the early days of Active Server Pages.
Rod was an Independent Director of TradeMe, New Zealand’s most successful eCommerce Internet site when it was recently sold to Australian Public Listed Company Fairfax. Rod continues on the TradeMe Advisory Board. Rod joined NZ Trade & Enterprise Beachheads Program Advisory Board in August 2006 and is a member of the New Zealand Institute of Directors.
Rod has a Bachelor of Commerce and Administration (BCA) from Victoria University of Wellington majoring in Accounting.
Prior to children, Rod enjoyed windsurfing, surfing, mountain biking and snowboarding. He still enjoys living in Wellington, New Zealand.
Contact:
Rod Drury
Wellington
New Zealand
rod@drury.net.nz
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