Telco group looks for industry improvement

TIG CEO warns the cost of international capacity can only be driven down so much

The Telecommunications Industry Group (TIG) is pursuing goals of industry improvement and the promotion of communications technology to business, seeking areas where operators can work together to reduce costs and improve efficiency.

CEO Rob Spray, speaking before CallPlus announced its withdrawal from the body, says increasingly technology is not the key differentiator between providers, rather the products they sell, service and billing and how the product is scaled are coming to the fore.

TIG, he says, is about what businesses and citizens can do with broadband to make investment a success and make sure New Zealand gets great value from fibre and other investments.

Spray says New Zealand is a country of small businesses and it is a challenge for telcos to create products, the right price and package, that work for that sector. The smaller telcos are taking the lead in doing that, he says.

The current work of TIG is half to evolve the industry to ensure it meets the needs of the market better and the other half is to push industry change, so the relationship between providers is not so adversarial.

“It should still be ‘daggers drawn’ when competing for customers, though,” he says.

Behind that there will always be a bit of tension, but some really pragmatic business decisions need to be made because New Zealand is too small to waste capital.

Spray says investment demands will continue to raise the question of when telcos will work together on one wireless network, rather than the three that operate nationwide right now.

That has real interest to “NZ Inc” he says, but is problematical from a telco perspective. One driver could be the migration to 4G services. Fast data via technologies such as Long Term Evolution (LTE) will require 30 percent more base stations, he says.

TIG has lodged a submission on the National Infrastructure Plan, arguing that the business case for multiple networks in New Zealand doesn’t exist and that a single network is likely to be the best outcome.

The current colocation system, where providers share cell sites, is also challenged. Spray says the average site height in New Zealand is 14 metres, 10 metres lower than in Europe. When a site is shared, “no one wants to be at 10 metres”, he says. On the other hand, local communities don’t want prominent antennas.

“We need to look at how we change that and change it at a low cost,” he says. “It is a discussion that has to take place and not with 35 councils.”

Spray says there is clear differentiation between TIG and the Telecommunications Carriers’ Forum. The TCF is about agreeing on codes and standards and is generally a forum for regulatory heads, while TIG is a forum of provider CEOs. For that reason they have quite different boards, he says.

Spray says he welcomes moves to lay a new Pacific or Tasman cable and sees it as inevitable.

“Bring it on. Investment is good,” he says.

Further, he says, New Zealand needs to have a firm plan in place by 2020 as the Southern Cross Cable’s end-of-life is 2025 and it takes five years to lay a new cable, including securing consents.

“Someone needs to step up with $1 billion,” he says.

Given that need to raise cash, anyone going to market for capital can’t push too hard on claims of reduced pricing, he adds.

“You can only drive the price down so much. To make $1 billion fly you need an embedded base of money. Someone has to put up 40 percent. Banks will take a risk, but not 90 percent.”

He say that investment can be either in cash or in commitment to buy services, as Kordia is trying to do with its Tasman cable plan.

Spray also says the Pacific Fibre plan may require insurance and other forms of backup arrangement, as it is only planning a single cable rather than a figure eight loop as in Southern Cross.

“That affects pricing,” he says.

Rural broadband is especially challenging, Spray says. Adoption of broadband even when its available in rural areas is “abysmal” he says. Sixty percent of New Zealand farms still use paper for accounting, for instance, he says, quoting farm accounting software provider CRS as a source.

While there are some, such as Silver Fern Farms and early adopters, trying to introduce new ways, he predicts the rural sector will convert very slowly.

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