Rightly or wrongly, the decision will shape New Zealand's telecommunications market for the next decade at least and, according to a Ministry of Economic Development draft report, that future looks rosy.
The report proposes a fibre-based future for almost all of New Zealand. Forget 256kbit/s; this is serious stuff. By the end of the decade the report proposes -- with the help of some government investment, public education and more private infrastructure building -- that the average home should have 50Mbit/s services, among other things.
It's a bold proposal that should be taken seriously by those in charge, as it would actually deliver on those Knowledge Economy promises we've been hearing about.
The report says our current levels of broadband use are alarming.
"While internet-grade broadband is widely available in New Zealand, its uptake to date has been uncharacteristically low, with only 2.5 subscribers per 100 population, compared with the OECD average of 6".
What's worse is that Telecom has rolled out DSL to a greater extent than many other countries -- it covers over 90% already with more exchanges being added all the time. So why the low uptake rate? It's simple: lack of choice. One size does not fit all when it comes to broadband -- different users have different requirements, yet Telecom offers lesser services today than when it launched broadband five years ago. Then we had full speed JetStream; today we also have a 256kbit/s symmetrical service and a 256kbit/s downstream, 128kbit/s upstream connection, and that's it. If anything, this means the entry level speed has fallen in the last five years. Worse than that, this isn't just Telecom's idea -- the telecommunications commissioner has mandated it. A wholesale regime based on one product is not a wholesale regime, whichever way you cut it, especially when you consider that in New Zealand wholesale is really resale with a good marketing campaign. To increase the number of broadband users we need to increase the range of choice and drive down the price. A 256kbit/s service is fine if there are other options in the pot as well, and there just aren't.
In addition, Telecom seems to be splitting the market into two segments, home user and big business. But what about the small businesses that most of us work for? Where are the service options for them? They're stuck, as any serious user is, with the same old full-speed JetStream and its lousy traffic limits, something Telecom neglected to mention when touting the OECD broadband report last week. The report says only Telecom and Telstra in Australia have such low bandwidth limits and slow speeds for that price. It's not a good look, is it?
Which leaves us with unbundling. The second MED report also says that unbundling is perhaps the only way to build those important user numbers up to a level where there is enough demand to fulfil the need for these kinds of services. Intermodal competition, competition between networks, is good but costly, says the report, and you have to wonder whether it's worth it in a country like New Zealand with so few people spread over such a broad area. The report suggests instead that facilities-based competition, ie unbundling and sharing transmission sites, "may be the most efficient (or perhaps the only) way to achieve competition, given New Zealand’s small, thinly dispersed population and rugged terrain".