CFH letter of intent is no contract: WorldxChange

'If they just hurry up and announce who has won it they can probably move onto the next step,' says Paul Clarkin

Last week Crown Fibre Holdings issued a release stating 13 service providers have signed a letter of intent to sell the new Ultra Fast Broadband service to customers.

But what exactly is a letter of intent?

Computerworld asked CFH for a copy but it refused and instead sent the following description by email: “This means potential Retail Service Providers have agreed to negotiate in good faith to access UFB wholesale services and package them for sale to retail customers at the indicative prices provided by CFH.”

So Computerworld contacted WorldxChange founder Paul Clarkin whose company is one of the 13 providers.

He says its contents are confidential, but that it is not a contract to provide services. It couldn’t be because Clarkin says, there are too many unknowns about the UFB.

“Provided all the commercial contracts stack up, the access and the backhaul and OSS and BSS and all the other stuff. The CPE, the deployment models, pretty much everything they haven’t done; provided that’s all sorted out and it’s still commercially attractive for us, then yeah, we’ll be there.”

He says that until WorldxChange know what the backhaul and hand-over costs are going to be, he can’t make any comment as to whether wholesale prices – announced in the first LFC deals – will be attractive enough for his company to deploy services.

“If they just hurry up and announce who has won it they can probably move onto the next step, which is trying to convince guys like us that the model is, in a real-world, viable. If you can’t make money out of it, then we’re not interested in doing it. It is a simple fact of life.”

WorldxChange’s FTTH service

Clarkin believes WorldxChange is the most experienced ISP in the country when it comes to deploying residential services over a fibre connection. It has worked with Chorus for four years deploying fibre-based services in more than 40 subdivisions nationwide.

Its two FTTH plans are:

  • $45 a month for a VoIP phone services and an internet connection that will operate two-three times faster than DSL during peak periods.

  • $99 a month for a VoIP line and internet service with 30Mbps down and 6Mbps up. That pays for the access service, and customers buy data at $1.50 a GB and pay for the calls they make.

He says there is an extra layer of complexity when deploying over fibre because the customer has two ‘boxes’ in their house as opposed to one. “Whereas with DSL services the physical copper line will terminate inside our residential gateway, the fibre terminates inside the infrastructure company, whether it be Chorus or LFC, into their box and then we put a cable between their box and ours.”

Clarkin says the company has also developed ways of providing battery back up in the case of an emergency. While WorldxChange has been able to provide a residential fibre service it has been in greenfield sites — brand new houses that have structured cabling.

But Clarkin says deploying Ethernet in a house that was built 30-40 years ago is a more complex challenge.

UFB won’t work without Telecom

“My own personal view is that if Telecom does not win it, [UFB] is going to be an absolute cock up,” Clarkin says.

“It will make a hell of difference if Telecom wins the rest of the areas as far as implementation phase, because you just have to connect to one system and you’ve got 80 percent of the country. If you’ve got different LFCs in each region, they’re all going to implement the same standards — in theory — but at different times.”

Business case for FTTH is difficult

He says copper is still viable and customers just don’t have a reason to switch to fibre. “Schools, hospitals, there’s no argument there [for fibre services]. It’s when you start coming down to a family residence that only wants to [spend] $40 to $50 a month for decent broadband speeds, it’s harder to achieve those prices in a fibre world, than it is with copper.”

“It goes back to ‘what is the problem you are going to solve?’. You can go and build this network, spend $1.5 billion but if you can’t convince any service provider or incentivise them enough to convince his customers to move to fibre – what’s the point?"

In the press release issued by CFH announcing the signatories to the letter of intent CFH CEO Graham Mitchell wrote: “We’ve worked hard to make wholesale services affordable and we’re delighted that this has been acknowledged in the strong interest received from so many retail service providers.”

TUANZ CEO Paul Brislen is also quoted in the release: “It’ll be great to see some retail prices out there so our users can plan their future telecommunications spend.”

Yet, according to Clarkin at WorldxChange, TUANZ members would be advised to hang fire on the calculations.

“I am unable to provide you retail prices over the UFB because I do not have enough input to calculate what my pricing is. If I had information so I could go to market tomorrow then I would have signed a different document. I would have signed a contract.”

Thirteen providers that signed CFH letter of intent

• CallPlus (Slingshot)

• FX Networks

• Kordia

• MaxNet

• Orcon

• Rural Link (Hamilton)

• TrustPower Kinect (Tauranga)

• Uber Group (Whangarei)

• Velocity Networks (Hamilton)

• Vodafone

• Woosh

• WorldxChange

• XfNet (Whangarei)

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Tags Crown Fibre HoldingsUFBWorldxChangepaul clarkin

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