The government is touting the Ultra Fast Broadband initiative as an open access fibre network, but Kordia says this is not the same thing as pricing equivalence.
Kordia CEO Geoff Hunt says layer one services must be priced lower than layer two, or the UFB is in danger of becoming monopoly controlled. “Without companies such as Kordia investing in lighting layer one, the monopolies at the layer two level will kill the innovation that competition brings,” he claims.
“We think that over the next 20 years that technology, the lighting technology, will change in ways that we have not yet thought of. So it is important that when we build this infrastructure that we make it as future proofed as possible.”
ICT Minister Steven Joyce announced last week that pricing will be set by Crown Fibre Holdings (CFH) following the tender process and that, “there will be limited scope for regulatory intervention to alter those prices while the industry is still immature”.
The 18 companies who responded to the Invitation to Participate are invited to submit revised proposals on the “modified UFB model and regulatory regime”.
But companies that aren’t bidding to partner with the government, but plan to provide layer two services on the new network, are effectively shut out of the process. Hunt and Kordia corporate affairs general manager Susie Stone told Computerworld they have discussed their concerns with CFH, as well as the Ministry of Economic Development and the New Zealand Regional Fibre Group. Stone says she is comfortable with statements made by national bidder Axia NetMedia, but they have not spoken with Telecom on this issue. If she did have a voice in the process, her message would be: “Open access isn’t good enough”.
Meanwhile TUANZ CEO Ernie Newman supports the Minister’s changes. “The decision to require Local Fibre Cos to offer both (layer one and two) is a pragmatic and effective solution. It will allow the buyer, rather than the seller, to choose the service they require,” he says.
“With regard to the planned ‘regulatory holiday’, we accept the reality that the protection of consumers from the concentration of market power has to be traded off against the necessary climate of certainty for investors. We are comfortable with the concept of regulatory forbearance at this stage. However, the devil will be in the detail and we will watch the process carefully as it unfolds.”
Key terms as defined by ICT Minister Steven Joyce
Open access is a key principle underlying the UFB Initiative, and means that ultra-fast broadband must be made available to any service provider that seeks access to it on equal terms. This will in turn enable a vibrant and competitive service provider market. It is critical that the networks built provide the highest levels of interoperability with other networks and are future proofed. Local Fibre Companies (LFCs) will be required to deal with the market in a fair and equitable manner, providing for equality of access and allow consumers to switch easily between providers. Specifically, LFCs will be required to sell services to a “non-discrimination” standard.
Layer 1 services
Services that operate at Layer 1 of the Open Systems Interconnection Model of network architecture. Layer 1 is normally associated with passive fibre optic network infrastructure.
Layer 2 services
Services that operate at Layer 2 of the Open Systems Interconnection Model of network architecture. Layer 2 is normally associated with active fibre optic network infrastructure (the electronics that light fibre).