ComCom raises concerns over cost of UFB installations

Vodafone says less than half of its customers are standard UFB connections

The cost of connecting to the Ultra Fast Broadband network could inhibit uptake, the Commerce Commission has warned in its final report into the demand side of high speed broadband networks.

In the report it notes a submission from Vodafone in which it claimed less than half of customers in its trial of UFB services have been “standard connections”. If a connection is non-standard this may mean the user will have to pay.

Chorus – which won around 70 percent of the UFB build – is contracted to pay for the first 15 metres of the fibre connection between the kerb and the house. The other partners Enable, Northpower and Ultra Fast Fibre are contracted to pay for the first 30 metres. Chorus, is currently running a “free trial” with Retail Service Providers until December.

“If the number of non standard connections is as high as Vodafone suggests, the impact will be substantial,” the Commission reports says. “If residential customers with non-standard connections and business customers have to bear the connection cost, the uptake of high speed broadband services might be hindered, especially as there is a perception that residential connections will be free.”

The report also notes that Telecom has previously claimed that the cost to consumers of replacing their customer premise equipment could cost $811 million or an average of $500 per user and that 1.6 to 1.7 million customers may incur costs in the move to an IP environment.

At a select committee hearing yesterday ICT Minister Amy Adams said the number of household UFB connections to date is 1012.

The Commission also tackles the cost of bandwidth. The Commission report mentions a submission from Pacific Fibre – the company which intends to launch a second international cable – highlighted a figure from Australian firm Market Clarity, which claims New Zealanders paid 5.8 times more per GB in 2011 than Australians.

The Commission notes that the cost of international connectivity has “fallen dramatically” over the last few years; however there is uncertainty about whether Pacific Fibre or other players will be successful in launching a cable. “If more competition in the international capacity market does not eventuate, further cost reductions may be unlikely,” the report says.

With regards to datacaps – often blamed, in part, on the high cost of international capacity – the Commission notes that they have increased significantly in recent months. For example, Telecom has doubled its data cap allowance on most of its plans twice in the past six months - a plan that offered 10GB data allowance in September 2011, now has a 40GB data allowance, the report says.

“If these trends continue, data caps should not inhibit the take-up of high speed broadband services.”

Meanwhile, on the topic of video content, the Commission has not altered the neutral stance it adopted when the draft report was released in May.

“The entry of Quickflix is an early indication that a greater range of video services may be emerging in New Zealand. Parties will be watching closely the evolution of the video content sector over the next few months and its impact on consumers’ uptake of high speed broadband,” the report says.

Many had seen the Commission’s review of demand-drivers as an opportunity to tackle Sky TV’s dominance; however the Commission has launched a separate investigation into the contracts between Sky TV and ISPs.

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