Freeth says councils over their heads in broadband

Consultancy Ovum backs TelstraClear CEO, saying local government networks are unrealistic

A telecommunications market specialist from international consultancy Ovum has partially supported controversial comments by TelstraClear CEO Allan Freeth, who says local authorities are being unrealistic about their capability to build and support broadband networks.

Freeth told a Wellington Chamber of Commerce meeting this month that laying an extensive fibre network, as Wellington City Council plans to do, is not as straightforward as it might seem.

“People think you build the network and that’s it,” he said. “These networks are very sophisticated, large-scale computer networks with all the problems of software.”

Maintaining and upgrading TelstraClear’s network costs $100 million to $150 million a year, Freeth said. He added that TelstraClear is concerned about the “headlong rush” into broadband network investment by some city councils.

Specialists and enthusiasts in InternetNZ and other online debating forums have been quick to leap on Freeth’s comments as having an obvious motive; his company has a broadband cable network and DSL service of its own in Wellington and Christchurch and may simply be trying to discourage competition.

But Melbourne-based Ovum consultant Leith Campbell says “broadly speaking [Freeth’s] right. There is a considerable ongoing operational cost to these networks. You’ve got to be prepared for troubleshooting and repair and ongoing maintenance.”

Such activity can cost up to 10% of the initial deployment expenditure per year, Campbell says. An operator is also expected to have to provide, or arrange with third parties, the services that sell the network.

“If it’s just about providing high-speed internet access, that can be done fairly easily,” he says, but in order to ensure the scheme gains the maximum number of users and so recoups investment, the local authority will find itself having to arrange content such as video material, and features such as security alarms and emergency services.

Such services cannot be as insulated from the laying of the fibre and passed completely over to third parties as is often suggested. If a network operator or its service partner undertakes to provide a “lifeline” telephone service, for example — one that will continue to function in an emergency when mains power is out and other disruptions occurring — then that degree of reliability depends on the bottom layer, the integrity of the network infrastructure, Campbell says.

The councils’ involvement has encouraged online debaters to push the analogy between networks and roads. Optimists point out local government is responsible for maintaining the roads in its area in good order and there is no reason why they can’t do the same with broadband networks, leaving the services supplied (the roading analogy being buses and delivery vehicles) to an independent company.

Critics retort that there are significant differences. A network has to have complete integrity. A road can be broken or rough at several points and still eminently usable in others.

The Australian Federal government is spending up to $A1 billion (NZ$1.15 billion) deploying a nationwide fibre network, and has awarded the contract to a SingTel consortium, but Telstra is launching legal action disputing the fairness of the process.

“Best estimates are that it’ll take eight months to come up with a [confirmed] winner,” Campbell says. “Telstra says they could start now, but even if they could, we’re looking at four to five years even to roll out fibre to all the suburbs.”

The Australian government plan is based on fibre-to-the-node; the fibre will lead only to a roadside cabinet and other media such as copper or wireless will be used to take it the last hundred metres or so to the home or business premises.

“My argument is that you need fibre-to-the-home if you want home users to get the access speed that many workplaces get,” Campbell says. That, he adds, will be the touchstone; users will want at home the same bandwidth as they can get in the office. The need for entertainment at home will push the requirement up further.

“Even if you just want to provide the twelve most popular TV channels, you’re already talking about 150 Mbit/s, and that’s beyond VDSL,” he says.

At the Chamber of Commerce event, Freeth also questioned the assumption that broadband will be an immediate fillip to the economy.

“High-speed connectivity will allow us to do many things but installing a broadband connection does not make people innovative, it does not in itself throw up new ideas and does not automatically mean more GDP,” he said.

The online-forum optimists question this, arguing that there is a good deal of pent-up demand from people who are ready to start profitable businesses now and waiting only on the availability of sufficient bandwidth.

“There are certainly areas [of the economy] where that applies, such as the production of video content for entertainment and information purposes,” Campbell says.

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