Excellent progress has certainly been made with the rollout of the UFB network in New Zealand, but at the same time it is essentially unused. Nor are there indications that there will be any significant use of this infrastructure among consumers for several years to come.
The consumer broadband infrastructure is an FttN network with the same old copper-based last-mile linking it to people’s homes. This not only fails to deliver the benefits of FttH, but because of the delay in rolling out FttH New Zealand remains stuck with a dysfunctional copper network regulatory regime (see below) that significantly hampers innovation.
While it is commendable that schools and hospitals are increasingly being connected directly to the UFB, the real social and economic benefits will be realised when these institutions can use their capabilities to deliver innovative services to people in their homes – be it self-education facilities, aged-care monitoring, tele-medicine or e-commerce. The UFB will lift all of these services to a totally new level that will make their delivery secure, reliable and of a requisite quality – something that is hard to do over the current infrastructure.
In order to address the underlying economic and social complexities that all developed economies are facing – the need for new jobs, the need to be globally competitive, addressing the ballooning healthcare costs, changing the medieval education system, etc – it is essential that services, applications and interactions be brought to the people, rather than bringing people to government institutions, retirement villages, hospitals, etc.
These innovations cannot happen unless the digital infrastructure is linked to people’s homes. So far, the government has failed completely in getting this message across to the populace – there has been no campaign to promote the many social and economic benefits which the UFB is set to deliver to New Zealand.
So much for a significant taxpayer-funded infrastructure project.
A key element to this is affordability. From Day One of the UFB announcement BuddeComm has expressed concerns about the lack of affordability, as the government did not address this issue. Entry level FttH access needs to be priced at around $30 to attract 80%-90% penetration.
Based on an entry level price for the UFB of around $75, with more competitively priced DSL services at significantly lower price levels, we predict a very slow and lengthy uptake period – and we believe that even then (beyond let’s say 2016) it will not reach much more than 30%-40% penetration.
At the same time in Australia, with an entry level price of around A$29 a month, penetration in some of the first national broadband network (NBN) release sites is now (already within a 12-24 month period) climbing above 60%.
It will be interesting to see what the political consequences will be for New Zealand, with UFB penetration levels still well below 5%. One can argue that the aim is first to deliver to businesses, schools and hospitals, but we would expect that even the usually very patient and amenable New Zealanders will start asking questions about the promises made by their government in relation to the UFB. It looks as though the great work done by those rolling out the UFB will be undone by the regulatory conditions that are preventing any serious consumer take up of the service.
However, in the absence of any significant consumer progress in relation to the UFB a far more pressing short-term issue is the regulatory regime for the existing copper-based network. Chorus has reneged on the structural separation legislation that prescribes a cost-plus wholesale pricing structure rather than the current retail-plus model – all as per the determination of the regulator.
To everybody’s surprise the government has rejected the determination and agreed with Chorus. This is now throwing telecommunications regulation into disarray, with considerable uncertainty for everyone involved until the government clarifies its position, or starts a whole new round of telecom policies’ review.
For more details on the UFB see New Zealand – Ultra-Fast Broadband Network – Overview and Analysis
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