Even before ICT Minister David Cunliffe’s announcement of the regulatory package, including local loop unbundling, Telecom had started to scale back on investments in broadband for the rural sector, according to Simon Moutter, chief operating officer of Telecom.
The Commerce Commission’s decision on unconstrained UBS was a “big intervention” that has made Telecom cut back on new backhaul capacity, particularly in the rural areas or where Telecom has a DSLAM which is getting full, said Moutter at a Computer Society breakfast last week, just hours before Cunliffe’s announcement.
“We have also put the brakes on new DSLAMs in rural New Zealand and provincial towns, and new DSLAMs which increase rural coverage,” he says. “We can’t make a good enough business case to invest.”
In some areas Telecom is reducing backhaul, making it insufficient to support 3.5Mbit/s plans.
“A lot of rural and regional area backhaul is 2Mbit/s on copper, so it means that the 3.5Mbit/s-speed plans, clearly, if you are on the end of a lower speed backhaul, cannot work at that speed. But there is not much of a case [for us] to increase the level of that backhaul.”
“We warned of this,” Moutter says. “We were very clear through all of last year, through the commission’s determination process, that if they made some of the decisions they were proposing to, it would impact our investment decisions.”
The commission’s determination says that it was expected that the decision would cause less investment and availability of broadband in rural areas, according to Moutter.
“But [the commission] said that would not matter, because [broadband] would be provided by other providers with satellite and wireless. The problem is that the market doesn’t want those services, and doesn’t want to pay for them.”
But Ihug is already looking into the costs surrounding unbundling rural lines with a view to offering farmers services.
Chief executive Mark Rushworth says farmers pay, on average, a lot more than urban users for their phone services for one simple reason: limited local calling.
“Farmers have no toll free calling area. We would look at offering voice service as well as broadband to the rural sector.” Rushworth says while Ihug’s initial investment would indeed be in central Auckland, there is plenty of opportunity in the rest of the country.
David Cunliffe also doubts there will be limited interest in providing service to rural New Zealand, but says the new regime will act as a backstop to rural needs if required.
“Farmers are crying out for faster broadband access. Fonterra would love to see farmers able to conduct real time milk analysis.”
Cunliffe says government will encourage investment beyond the copper loop as well. “There’s IP Star satellite and we hope to see plenty of wireless expansion in provincial New Zealand.”