Chris Quin's final task as acting Telecom CEO will be to present the company's 2011/12 full year results on Friday. The following Monday he returns as head of Gen-i, reporting to new CEO Simon Moutter. In part one of our Q and A with Chris Quin he talks to Sarah Putt about the telco’s Ultra Fast Broadband plans and his own future.
Telecom is spending $20 million on getting ready for UFB, so what can we expect?
In the business market we’re out there with fibre products and have been for a while and have something like 4000 fibre connections. Only a small number of those are built on UFB inputs because UFB has only been available in the last few months.
I think a lot of the conversation about fibre is about residential and consumer. We’ll have our robust, fit for purpose; strong market offering out by early next year and that will be about the time five percent of homes have been passed by fibre. The debate will continue as to how many homes will actually take it into their home and the costs and all those things, the industry and Crown Fibre Holdings (CFH) will talk about that.
Do you want to comment on what will drive uptake?
There are issues that CFH and others need to respond to in terms of installation costs and things and the industry are talking those through and we’re engaged. The distance from the road to home issue for example [Chorus is only contracted to pay for the first 15 metres, unlike the Local Fibre Cos who have to pay for 30 metres].
What’s Telecom’s position on that?
We acknowledge that it’s real, that it’s an issue that will need to get resolved somehow in order to get uptake. Because if the cost is prohibitive for people to install, that’s going to be a problem.
Do you think Chorus is going to cave in on this?
I don’t know.
They said they’ll have a decision on this in September.
So we need to wait for that. I don’t have an opinion on who should; I just recognise it’s an issue.
Should CFH have negotiated a better contract with Chorus, and not allowed this to happen?
I think it’s clear that in considering the proposition of fibre to the home that this is an issue that needs clarity, but I don’t have a view on where it’s solved from.
So we come back to where we have UFB products. We have them in the corporate and government market now and we have education and consumer products coming early part of next year. Whilst it’s not first in market we know we are held to a different standard, we’re a national organisation; we’ve got to be able to scale to thousands. So the way we build our services needs to reflect that, and that’s the $20 million investment.
I want to talk about schools. I’m hearing from a lot of schools that it’s really expensive to connect, what kind of offering are you going to give schools?
We have offerings coming, we’ve got an interim UFB product for schools launching later this year. We’re working with the Ministry of Education on the Network for Learning RFP and opportunity. Telecom’s part of the RBI rollout, and we’ve got this Amazing Ideas search competition going on. Because one of the issues is the price of fibre and having fibre available, the second issue is what are we going to use it for once we’ve got it? And that’s why we’re running this Amazing Ideas search competition with schools – all schools are able to enter and come up with their amazing idea for what they would use fibre for in education.
How many schools are going to win in that?
So what about the rest of them?
We’ve got ten schools that are getting prizes and then we will launch our UFB products for all schools later in the year.
Data caps is going to be a big issue with fibre connections, downloading video etc. Telecom seems to me to be in a very good position with datacaps. In that you own 50 percent of the only international cable that we’ve got, and you’ve got a national backhaul network. The only thing you haven’t got is the last mile anymore. It puts you in a better position on datacaps then the other ISPs, don’t you think?
I’m not sure how big an issue datacaps is now. Customers who are now getting 60GB or 100GB, we’re seeing 500GB and terabyte plans come into the market at not ridiculous pricing.
What’s not ridiculous pricing?
It varies between various offers. I’d need to check the latest offers because it moves quite often and residential is not my area of expertise but datacaps, when it was one and 2GBs and five and 10GBs that was an issue. Now that you’re talking 40, 60, 100GBs I think this is way less an issue than it used to be. I’m not hearing from customers so much anymore that data caps is a big driver.
But don’t you agree that it puts Telecom in a much better position then all the other ISPs having that 50 percent in that international cable.
We’re a 50 percent shareholder in a cable that gets five percent of its revenue out of New Zealand, 95 percent is from every other country in the world. That’s actually in some ways a good export story, because a New Zealand company has invested in getting the return over the years, and investing that back in New Zealand.
But we’re a customer of Southern Cross, same as every other ISP and they don’t give us a better price than other ISPs. So we’re all able to buy based on your volume and demand and period of commitment and all those things.Southern Cross has been a part of conversation of late. There was a great article written in the Dominion Post by Reg Hammond. A great perspective from another side. We are a customer of these things, we pay the same prices in NZ that Australia pays with three cables.
Australian ISPs get cheaper prices because they’ve got more customers. They get bulk discounts, that’s what Reg Hammond said in that article.
In any commercial enterprise there is usually the ‘if you buy more you get a better price’, that’s a pretty common pricing model. However we pay the same rates for international connectivity that the Australian market pays with three competitors. So the point is that NZ gets the benefit of competition without having to have another one built, because it’s a global market not a domestic market.
The other thing is that people keep talking about a single cable to the world and the risk. It’s a diverse loop and the topography is well known. Competition will keep driving and if there is a case for it someone will stand it up and invest in it and go for it and if there isn’t, then they won’t.
Competition – Vodafone and TelstraClear, there’s a combo, how is Telecom going to compete if the sale goes ahead?
They were both strong competitors before; they potentially can be a strong competitor if they get it together and bring a different set of offers to market. That still needs to be approved and we know how hard it is to integrate organisations like that, it can take a bit time. In the end we know what customers want from us, we shouldn’t get distracted. If we sit around and go 'how are we going to compete with them', we miss the point.
The big question about fibre is that people are going 'I want it' and you go 'for what?' Moving to that next question is vital.
We think in business it will be driven by three things – video, mobility and collaboration.
Annual results on Friday, what are we going to see?
You’re going to see results; I’m not going to tell you.
You’ve been acting CEO for the last three months, so is it a positive story?
I’m not going to tell you ahead of Friday, I can’t. I think we’ll be clear about how we’re progressing, we’ll be clear about the competitive market we’ve been in and how we’re going in that. We will be clear about the CDMA shut down and what it makes all our mobile numbers look like. Simon (Moutter) will be there of course.
Disappointed that you didn’t get the CEO role?
Of course, but I said that at the time. I’d love to have led it, Simon will be great.
You’re going back to Gen-i but that’s almost like a step backwards. You took a tilt at the top job, where do you see your career going? Simon Moutter left and came back, is that what you have to do?
I don’t know if it’s what I have to do. Right now the best job in the country for me is Gen-i, so I’m going to do that and it won’t be the same as three months ago because the guys have done a great job in the meantime. You look at it and say ‘of jobs in NZ is that a great job to have?’ Of course it is.
So an overseas posting maybe?
I’m not doing anything but going back to Gen-i.
Part two of our Q and A with Chris Quin can be read here.