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Better broadband is great – but who's paying?

GUEST OPINION

The economic and political arguments for better broadband infrastructure and investment can be boiled down to an over-simplified, but probably justifiable, mantra:

Better broadband leads to better communities, better productivity, and a better economy.

Better broadband equals better everything – we’re told.

As the CEO of a quarter billion dollar a year telco, I’m not one to argue with this. We want better, faster, cheaper broadband for all.

Rural communities in particular need infrastructure investment so they aren’t left behind.

The pace of change is phenomenal and the risk of a rural/urban digital divide very real.

This country can ill afford to not pay attention to rural connectivity, and substantial investment is both needed and warranted.

But I think it’s time we considered how better broadband is funded.

The Copper Tax issue has been discussed plenty, but in summary, Kiwi copper users and taxpayers are paying for a fibre rollout that will cover 75% of the population when it’s finished in five years’ time.

Parts of the country that can’t connect to fibre will be covered by the Rural Broadband Initiative (RBI).

Just this week, ICT Minister Amy Adams promised to top up the six-year, $300 million RBI with $100 million more in contestable funding.

It’s an admirable initiative. Rural NZ needs good broadband, and the benefits to the country from investing in good connectivity will likely be seen several times over.

But the increased budget won’t be funded by government coffers. It’s coming from the Telecommunications Development Levy.

The $50m p.a Levy is in turn funded by Telcos, proportionate to revenue. And who pays for that? You guessed it – you do, the consumer. It’s tacked onto your broadband bill each month.

The news that the Levy was to be extended came as a surprise to us. Under the Act that set it up, the TDL was set to wind down, but just weeks before an election it’s now promised it will be extended so that rural NZ gets some better broadband.

Politically it might make sense.

But let’s not forget that the RBI is being built by two of the country’s two biggest and most profitable Telcos – Chorus and Vodafone.

The Levy is essentially a tax on urban broadband users so that Chorus and Vodafone can build towers and infrastructure in the country’s heartland.

Chorus and Vodafone get to own the RBI infrastructure they build – and don’t have to pay any money back.

I question whether that’s the right funding model.

It’s certainly something that should be discussed before it’s promised.

Mark Callander is CEO of CallPlus Group, which operates CallPlus, Slingshot, Orcon and Flip.

More by Mark Callander

Comments and questions
6

It's like a scene out of "House of Cards". The govt takes money off all NZ Households, gives it to Telespark and Vodafone to improve rural broadband, and then takes credit for this subtle form of theft.

It's like communicties being forced to pay for air fields back in the 1930s when we were all perfectly satisfied with regional and long distance passenger rail services. There are always good reasons to avoid paying for infrastructure, and some of the companies in the business now may not even last until the broadband roll out is complete.

The RBI could be funded without penalizing the people. Check out innovative recommendations from the Council On Foreign Relations
http://www.foreignaffairs.com/articles/141847/mark-blyth-and-eric-lonergan/print-less-but-transfer-more

There are many owner operated rural wireless networks around NZ offering far better products and pricing than RBI. Sadly the govt has done nothing to help them and in fact made it very hard for them to get off the ground. In some cases the govt halved much of the wireless frequencies they could use.
So the Govt wants to give the big fat greedy large telcos more money to expand whilst making fat profits.
Nothing new there.

I am one of the mugs paying the copper tax with rubbish broadband (7Mdps), too far from a box for VDSL and with no immediate plans for fibre to the gate. A fibre ghetto UFB calls it. Right in the middle of Auckland (slightly West of centre). And very unhappy about it.
Bring on uncapped 4G plans and I can forget about copper forever…..

I'm sorry, I don't think Chorus and most profitable currently goes hand and hand right now. In a few years yes. Oh and sorry I'm sure I read Chorus has to pay back the money The taxpayers are putting into UFB and don't all Let's have to put a pile of their own money in. Via copper tax or power company tax or ratepayers tax? If you want to write stuff like this report all the info. Not just suits your own profit margins. This is why I will and everyone in my family will never give CP group a cent.