UFB connection deal not enough, say industry bodies

TUANZ and InternetNZ says end of 2015 deadline for free connections is too early

Provision of free residential connections to the Ultra Fast Broadband network removes one hurdle, say TUANZ and InternetNZ CEOs, but there are other barriers in the way of fibre broadband take-up.

“It’s very good to see this resolved,” says TUANZ CEO Paul Brislen “because it’s been hanging over the industry and customers for months.” The biggest caveat, however, is that the deal currently only runs till the end of 2015, he says. The majority of connections are likely to take place after that date.

“It’s good that we’ve got a resolution for the early part of the programme, but we need to see that extended to the second half.”

That means finding roughly another $30 million to subsidise free connection for the estimated 60 percent of connections that will come in after 2015, he says.

Government needs to encourage UFB take-up, says Brislen, and adding in a cost for connection after 2015 will be an “unacceptable” burden on the users and significantly slow growth in customer numbers.

Another obstacle, he says, may arise from the way Chorus is signalling a rise in the price of the copper network links that the vast majority of customers will still rely on for some years yet. “Chorus says we’ve got to increase the price of copper broadband to drive people onto fibre.” He cites Chorus CEO Mark Ratcliffe’s statement at the annual general meeting yesterday, that its major investors “are clear that reducing the price of copper services will inevitably slow the uptake of fibre.”

In Brislen’s view raising the price of copper broadband is exactly the wrong thing to do. If customers are encouraged onto copper broadband, he says, they will get a taste for broadband access and be more likely to move onto fibre for a further speed boost when it arrives in their street. Furthermore, with reasonably priced copper broadband “my ISP will by then have developed or got access to applications and services that I will value.”

“I don’t see copper as an impediment to fibre uptake at all – far from it,” he says. Copper unbundling has been a major generator of competition in the market “and we’re finally seeing some drive from the ISPs to invest. If we turn that on its ear now by putting up the price of copper wholesale lines, we’re going to crush the emerging competitive market. And most of us will have no alternative; we’ll be stuck on copper, paying a higher price.”

InternetNZ CEO Vikram Kumar also sees the current 2015 deadline for potential removal of free connection as too early. The applications seen by government as most desirable – in health and education services – need a critical mass of users, he says. Fibre use will grow according to the classic ‘S curve’ – flat at first then entering a period of rapid growth. There is a danger that the beginning of that first rise will not be before 2015, Kumar says. “Chorus will almost certainly have to extend [free connection] out to 2019 or at least till the end of the build.”

The fibre installation process at individual premises could also do with speeding up, Kumar says, and communication with retail service providers and customers is in need of considerable improvement. “For some reason, Chorus is unable to provide reliable concrete information; they keep changing deadlines and timeframes, and people are signing up with no idea when they’re going to get service. There’s a big gap between customers talking to RSPs and RSPs to Chorus and a lot is being lost in translation. To be honest, it’s a bit of a mess at the moment.”

As regards the balance between copper and fibre pricing, “the issue is that the government doesn’t have a policy on infrastructure competition between copper and fibre,” Kumar says. “If they come up with a policy and communicate it to the Telecommunications Commissioner, he can take that into account. At present the conversation is between Chorus and the Commissioner. The conversation between government and the Commissioner is missing.”

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