NZ telcos unite against Gov't FTTH initiative

Stuart Corner
Monday, 23 February 2009 01:20

IT Industry - Market

In a rare show of unity Telecom NZ, TelstraClear and Vodafone have commissioned a joint study that is highly critical of the government's $NZ1.5b plan to deliver fibre to 75 percent of New Zealand within six years. TUANZ has branded the study as "backward-looking, negative and self serving."

The study was commissioned from Castalia, a French company with offices in New Zealand, Australia and elsewhere around the world that gives as its mission "to improve the organisation of business affairs and the delivery of public services by applying intelligence and practical experience."

Castalia's report says that, "For New Zealand consumers to gain substantial benefits from fibre to the home, they must be willing to pay access prices that reflect the cost of rolling out fibre to the home, and in many cases will have to invest in upgrades to their home wiring and equipment...There is considerable uncertainty about how much demand for high speed broadband there will be in the future, and when this will emerge. This uncertainty is behind the current, low, level of investment in fibre to the home."

Castalia contends that: "The Government's initiative to subsidise, or stimulate, the drive for fibre to the home is in itself a clear signal that such a roll-out will not occur on a purely commercial basis for some time to come." And it notes that "The Government is therefore considering a range of interventions to promote greater use of fast broadband."

Castalia concludes that "the speeds required by consumer applications suggests that the costs of a policy which immediately subsidises a widespread." It suggests instead that "Much of the economic benefit attributed to fibre to the premises could be captured through targeted deployment of fibre to businesses, schools, and hospitals rather than through a full deployment of FTTH to retail users."

Castalia calls instead for "a flexible approach to developing a long-term partnership between the industry and the Government, with Government investment targeted to those areas the market will not address. We believe this approach will achieve the desired productivity and social outcomes in the most cost effective manner."

Overall, our analysis suggests that the Government should consider a flexible policy, which progressively draws more and more New Zealanders into fast broadband, and which addresses bottlenecks to productivity improvement in order of 'bang for the buck': pick the low hanging fruit first. This policy may still have a place for subsidising the roll-out of widespread fibre to the home, but such a subsidy is likely to come further down the track."

TUANZ  don't trust telcos to broadband NZ
TUANZ was quick to condemn the report with its CEO, Ernie Newman, saying its proponents had "Failed to understand New Zealanders' vision for leading edge connectivity as a foundation for economic and social transformation, and instead want to settle for an ongoing culture of mediocrity."

According to Newman, "The authors fail to grasp the transformational outcome New Zealanders aspire to from early, ubiquitous access to ultra high speed broadband...Leaving the task to the traditional telecommunications companies as the report suggests means that transformation will not happen. History shows this. They will ration technology and bandwidth to stretch out the life of yesterday's investments and maximise their own returns. "

He called for "strong involvement by the government  [including] public money alongside a diverse range of private sector investors," saying: "It is now well recognised that leaving key national infrastructure entirely to the whims of private sector investors is extremely dangerous due to a misalignment of incentives...The government is on the right track. Absolutely nothing should change as a result of this report."