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We need to have a talk about broadband: We’re doing it wrong

At the Consumer Electronics Show (CES) over the last week we saw the emergence of the first cheap ultra high definition or "4K" televisions ($1000 a piece). These are the new breed of HD with about four times the resolution of your current HD. You also need between ten and fifteen times more broadband to drive downloads. A standard HD movie today is up to 10GB and 4K will push that to well over 100GB.

New OECD figures for broadband usage have come out recently and its fair to say that New Zealand is not getting it right.

The good news is that we’ve moved up slightly in terms of penetration. The bad news is that the penetration level is still relatively low. We grew by less than 3% over the past twelve months.

Our download average speed is 25% less than the average and puts us near the bottom of the league in 22nd place. It is still appalling slow and with the wave of content and enhanced data that is coming, its not going to be enough.

In terms of fibre connections, we are fourth from the bottom with barely 1% of our broadband connections falling into this category, by comparison, Japan sits at a whopping 68.5%.

Watch for this stat in the next week as the government reacts to the negative publicity around lack of growth. You’ll see them saying that we are fifth fastest growing fibre country. Of course, when you match that against the stat above, less than 1% of fibre penetration, you can understand why.

When it comes to pricing, it is my opinion, that we continue to be price gouged by all broadband providers and this is reflected in the fact that out of all OECD nations we are one of the only three that still have broadband data caps and we are the seventh most expensive overall.

All of that translates to slow adoption of broadband, very low fibre penetration, slow download speeds, onerous data caps, and a very high price for that poor service.

Couple that with the fact that data for (Cloud) is expect to increase sevenfold in the next twenty-four months, home usage is expect to double year on year, and high content (4K), has arrived and we have a traffic jam of epic proportions about to occur, right when we are on the edge of great growth of ICT as an export item.

We need to do something about this, and quickly. Because what we are doing now is inadequate, and wrong. We’re leading ourselves into a fail situation.

Part of the problem is that we’ve thrown, psychologically at least, all our eggs into the Chorus basket. Putting aside last year’s tribulations and tantrums on their part, its my opinion that the fiddling around by government in this market and their close “relationship” (autocratic friendship) is causing half the problems. The other half of the problem, that we don’t want to accept yet, is that maybe it is the right thing to let it “go nuclear” as Chris Keall has suggested:

“One option, from Chorus standpoint, is to reduce copper broadband levels to its the minimum contacturally-required speed – which is actually a super-sluggish, barely-usuable 32Kbit/s (that is, the sort of bandwidth you got in the dial-up era). 

ISPs would have to pay extra for decent copper broadband speed – and in turn would pass that cost on to customers. This “nuclear option” is a back-door way for Chorus to immediately reverse the Commerce Commission-mandated 18% wholesale price cut when it kicks in December.”

Let’s face it, the last couple of years have seen a very low installation rate (at this rate it will take generations before we see full fibre deployment), a fight over who is going to pay for the connection from street to house (still unresolved), and a very very slow uptake rate.

Now, after being smacked last year for potential overpricing, Chorus threw its toys out of the cot and behaved very badly for what is meant to be a professional, listed, core business of New Zealand Inc.

No bouquets from Telecom and Vodafone, who own 79% of the market between them, with both of them yet to state whether they will pass on savings to consumers from the Commerce Commission report. Why would they? We’re already seventh most expensive in the OECD, these guys are using wheelbarrows to transfer the money into their coffers.

So what to do? Shall we call in the Government CIO to fix it? Oh dear god please no. Until central government wakes up to the fact that that function needs to be split into its own department (GICT), they are just going to be chasing their tails. Creating a Government ICT department would be a good start for a range of issues.

The Chorus, Telecom, and Vodafone business models are the problem, and the good news is that they aren’t sustainable. The question is, will they collapse and allow new business ventures delivering broadband to come through before we hit Auckland and Wellington like broadband traffic jams?

The old business model of selling a service at an over-inflated price, crushing your costs (and staff) down as low as possible, selling off and owning and few assets, taking that huge profit and lining several layers of management pockets with “bonuses” and throwing the shareholders the rest are over. Chorus, Telecom, and Vodafone know this, but right now, they are mainlining the profit and effectively dominate the entire market. Can they get out of their addiction before it kills them? Who can say.

What if Chorus adopted a different business model? Something like this:

  • Give the middle finger to the entire UFB project and put it into contract mode. Deliver what they have too, but make it a subsidiary department or business unit and just trickle feed it. It’s a mess, it makes no economic sense to keep investing in a risky project this size. It proves a point and it may force a change in government approach.
  • Focus on building end point solutions for fibre backhaul. For example, wireless is already outstripping fibre speed. When you look at the suburbs around Wellington and Christchurch in particular, dropping end point high speed wireless into the middle of a suburb working with local Councils makes huge sense.
  • Get rid of the old Telecom ethos that they’ve inherited. The same processes, systems, and potentially people will be leading them to recreate the old Telecom model. Even if they do, they can’t win that fight. Telecom has moved on from it and will dominate them.
  • For god’s sake get some innovation going. There are a bunch of technologies out there that could supplement fibre, in fact, fibre is just one of a range of broadband and backbone technologies. Smart grid, wireless, fast copper, and other technologies are already ahead of UFB. Start thinking about how to use and sell them.
  • Diversify.
  • Smash the company into a group of companies, cells if you like, allow each to succeed or fail on their own merits with their own ethos and their own ideas and innovation. Companies that are successful today are small not monolithic creatures with the inability to change and adapt quickly. Small companies can change overnight, the monoliths need governance structures, project offices, architects, three layers of management, red tape for the sake of it, and can take years to deliver the most simple products.
  • Get closer to local Councils. A lot of them are starting to understand that broadband is critical to the community and are ready to work with telcos in a new way.

The point is, that unless Chorus changes its business model completely, it might as well take the nuclear option and shut down because it will never compete with Telecom and Vodafone on their playing field. It needs to get government’s hands off the back of its neck as well, somehow.

Overseas models are showing that broadband is basically being treated as a human right, will be free, and is open to some interesting innovation.

Google has started down the fibre path as an example, offering a free, basic, broadband connection in some U.S. cities with layered content.

So for a $300 connection fe, you get free broadband, no cap, with a 5Mb download and 1Mb upload. Enough for a lot of people.

For $70 a month, you get a 1GB download and upload speed with no data cap.

For $120 a month, you get 1GB download, upload, and 150HD television channels, and still no data cap.

Now, I pay $100 a month for Vodafone cable, which gives me 130Mbit/s down, 10Mbit/s up, and 150GB cap. If I add Sky TV to that, say another $100, I’m paying $200 for broadband and TV, that against Google Fibre, is twice as expensive and about 10% of the service.

Whatever the answer is, its change, and its not just simple change, its radical change. This current business model that supports large, unwieldy, slow to adapt telco’s is going to leave New Zealand in a technical backwater with traffic jams of note. Already we see the advertised rate of broadband against the actual rate tested slipping. I.e. It’s starting to get congested.

Secondly, the government needs to treat broadband as a) the same as national roads of significance and b) understand that its not just about UFB. Basically, they need to understand that the service is the same as all forms of transport and roading, and that UFB will only answer some of that need.

Lastly, someone needs to break the monopoly on the international cable. It’s just money for jam at the moment and its holding us back.

Otherwise we’ll all need to move to Japan.

Ian Apperley is an independent cloud computing consultant. He posts at WHATISITWELLINGTON.

More by Ian Apperley

Comments and questions
35

Ian
Are you smiling because you have just seen another Gisborne Gold arrive.

I do love a good Gisborne Gold my friend. Up in Feb around Waitangi.

As far as Northpower Limited is concerned, the UFB project is going very well.

Our fibre network build is over 95% complete and we expect to complete it ahead of schedule – meaning more than 19,000 Whangarei premises will have access to a world-class UFB fibre network by May.

Uptake is coming along fine. Response from businesses is excellent and uptake from residential premises is growing steadily.

A stage that was completed ten months ago already has 32% of possible priority customers connected.

Our first residential build area has 15% uptake in residential premises and 37% on priority customers - and we are yet to fully promote our fibre network.

Regarding the suggestion that wireless is already outstripping fibre speed - that is factually incorrect. Fibre is many times faster and far more reliable that wireless.

Our network is capable of delivering gigabit-type services already and our principal GPON equipment provider, Calix, is already doing this with companies such as CenturyLink in the USA.

Google isn't providing anything for free; fibre, Android, all seems free but it is all about collecting search & usage data

Do you have to pay for it? No. It's free. You will see adds on the internet regardless of whether yoy use any google services, the difference being they will be tailored to your interests

It's not free, it's just doesn't cost money. You pay for it with your eyeballs (you are not the user, you're the product)

Sorry, but you are wrong. Advertisers pay google for your eyeballs. You always have a choice not to use google!

1. UFB uptake rates would improve if Chorus started to roll out UFB in the suburbs that can afford it (e.g., Mission Bay) and not in those that cannot (e.g. Otara). But the would require the political interference in the roll out to stop.

2. Let Chorus establish a retail arm and sell its UFB over fibre direct to customers. Let the copper and the fibre networks go head to head in competition with each for the broadband market, thereby reducing the overall cost of broadband to New Zealanders. The increased revenue from retail sales will also help Chorus with its current and future revenue shortfall. Competition between the two networks will also drive the take up of new technology innovations and improvements that effect each network.

I think you'll find that Chorus did start in the rich suburbs (Ponsonby, Grey Lyn, Mission Bay) and that aside from a token gesture in South Auckland that's the way they will continue.

And the idea that Chorus needs a retail arm - ah, no. That's how we got into this mess in the first place. Competing with your customers is no way to run a business.

Excellent commentary.

Sadly, I think there's no hope of Chorus changing even a little. Spend a couple minutes talking to any of their senior managers or board members and you'll understand why.

And don't look for help from government - any government. Government IT is an oxymoron. Bureaucrats will never get IT - beyond them. Any chance that an elected political will get it? Yeah, right.

I don't believe it's correct to say wireless is outstripping fibre optic in terms of speed, or capacity.

4G is pretty fast but I agree. I dont see how it could compete with fibre in terms of speed when every house in the area is streaming a sunday night movie in 4k at the same time. Fibre will allow us to do that.

I'm sorry, but your stats are from an erroneous OECD report that measures using irrelevant data;

OECD download speeds is based on advertised speed, usually 24Mb/s for ADSL which is impossible to get, hence the meaningless data. No-one has done a comparison of the speeds our NZ homes are capable of getting suitable for a 4K comparison.
TheOECD for its own purposes reports VDSL as fibre (FTTN) for european states, our VDSL is considered copper
These are 2012 stats, i.e. very old
Both Orcon & Slingshot offer uncapped services and have since before this survey, they just don't survey well.
NZ Speeds are well in excess of the States where you saw the 4K units.

BTW the largest UFB fibre suppliers are neither Vodafone nor Telecom, that honour must belong to either Snap or Orcon, which have been selling fibre for more then 12 months and are well on the S curve.

I believe your concept of radical change is already happening, but you are not aware of it. Letting the market decide will ultimately lead it where it needs to go.

well said John!

This sort of uninformed article is exactly the sort of thing that harms NZ investment from overseas.

Dear Ian Apperley,
You have no idea what you are talking about. Kindly refrain from commenting until you learn even some basic stats about the internet in NZ.

We'll said, what kind of alternate universe do you live in?

This article and dozens of others expressing a range of opinions on IT will have the same effect on inbound foreign investment - zero.

Kindly refrain from commenting until you learn some basics about foreign investment and investors.

this specific article might not have an impact, but if NZ gets an unjustifed reputation for having '3rd world internet' because of this sort of blatently false diatribe, then business looking to set up things like data centres, or set up development offices, over here may well overlook NZ as a viable place to do business.

Its the 'Great New Zealand Knocking Machine' at work again. When one measures the relevant data controlling for all of the relevant factors shown by empirical analysis to increase internet access, use and derivation of economic benefits(GDP per capita, average population numbers, population density, economic makeup (i,e, dominance of primary i, physical remoteness) not to mention the quality of the infrastructure on offer) punches well above its OECD ranking weight. This has been true for at least the last 15 years.

Broadband growth is slow because connections have been sold to almost all households that will buy. Fibre will not increase broadband penetration as it is predicated upon copper (and cable) households switching to fibre. The real story to watch is Austra;lia's rapif rise to the top of mobile data rankings (NZ not bad either) - the main reason being that the government there promised to compensate Telstra and Optus for forcing them to close down their copper and cable networks and the consequence has been a massive investment in LTE. Bringing on real competition between fixed and wireless infrastructures . In NZ, Chorus has been forced to bear most of the downside costs,and there has been no special 'boost' for wireless. This is the space that is worth watching in the coming months.

There is a stream of anon comments on here that are basically playing the man, and not the ball.

When you get the balls, oh ho ho brothers, to use your real name and actually have an opinion that hasn't fallen out of your backside, then great.

Hi there anon,

Until you are willing to use your actual name, how about keeping your ill informed dumb arse comments to yourself.

Cheers

Prove me wrong.

Your comment proves you've no interest in exploring the subject, only attacking the man.

Play the ball and have some courage by posting your fukk name.

Good comments.

couple o' things. The OECD data is new, if you look at the link you'll see the dates.(by each spreadsheet).

I completely agree with you on letting market decide.

Cheers

I'm sitting here on hold to telecom broadband help desk, so far I've been on hold 22 minutes and have yet to talk to anyone. My new vdsl connection fluctuates from download speeds of 25mbs to 1.2mbs on a regular basis. upload is consistent at 9mbs.
Apple tv is unusable with 2hr download times and we have already moved most of our online sales people offshore as we cant get a reliable internet connection to do demoes with.
This problem will quickly become a major issue its good that you keep raising it. I just got through after 25 minutes. surprise surprise they cant find the problem yes again.

That's probably Chorus VDSL and Chorus copper you are complaining about mate...

Speaking from experience, a drop in speed that dramatic sounds less to be network related and that you'll probably find the problem of fluctuating DSL speeds is closer to home than you think...

sadly there is no regulation (only recommendations) for the way premise internal wiring is done. I couldnt tell you how many times I have found cowboy/DIY type wiring has been done both in residential premises and commercial properties (not that i am complaining as alot of NZ premise wiring is rubbish from home/commercial developers cutting corners, means more work for me fixing it up so im happy).

i would recommend noting down the times you notice the drop in broadband speeds over the next week or two then asking telecom to look at the diagnostic history on your DSL line to check for resyncs or packet loss during the times noted. Next would be to ask for them to put a monitor on your connection to see if they can capture the incident happening. lastly i would ask for them to send out a tech to do a test at the boundary of the premises cable terminal (pillar or pitt).

if you notice the speeds dropping at the same time/frequency on a daily basis then there is also the possibility you have a line grapping device that is impacting your broadband speeds.

its easy to immediately point fingers, but just remember that the internal wiring is the responsibility of the user/owner.

Good luck mate!

I strongly disagree with a lot of this article...but still find this the most refreshing contribution on this topic for some time.

The chorus situation is turgid.

We need to stimulate debate on this...because the best answer to the Ufb debacle will come from people thinking about future needs and how they will be met.

This article helps. Thanks.

UFB and future needs - is it just supporting an entertainment industry to deliver 4k TV?
I thought UFB was about driving economic growth ?

For anyone with some IT background would understand how broadband works what is a good but also a cost effective solution. Chorus is getting it right with the giga byte fibre, but political uncertainty and regulation risk is forcing it to play safe and avoid much extra investment. It is up to Chorus and its voting shareholders to decide what to do in this mess created by Labour, Com Com and Vodafone.

The Southern Cross pipe also adds to cost of broadband as it is effectively a monopoly.

The government should have supported the second offshore pipe Sam Morgan and his mates tried to get off the ground.

Steve,

This is blatantly wrong. If you look at an average $75 plan, by far the largest costs in that are access (think Chorus), the SX part would be around $ 2-5 depending on your plan and the ISP's buying power. This is less than the cost of marketing for most ISP's.

Content and carriage have actual costs. Because NZ is a net taker of content, usually from the US, we have to pay.

yes we have to pay for carrying content to NZ, but we are a long way from anywhere.

It's important to note that NZ gets the same sort of SX pricing as Australia does (which is a competive cable market), and they don't have the same issues or perverse. Perhaps because they have content competition (ie no skytv monopoly) and more users...therefore more buying power for the content

AT&T are currently causing a storm by letting corporate content providers pay for their consumers' data use (sponsored data). Potentially giving them an advantage over a competitor with not so deep pockets. A number of ISP's here currently zero-rate specific sites in a similar way. http://www.pcworld.com/article/2086735/atandts-sponsored-data-plan-draws-net-neutrality-concerns.html

-KENT

you evidently haven't seen the Chorus contract with CFH. It will bankrupt them (rightly or wrongly) to abrogate the contract.

My first thought here is that much of what you say is based around consuming a service - and internal/onshore consumer strategy is just a cost to the country in an entertainment luxury - we are too small to have anything major in terms of an internal economy.

Our success has to be to focus on providing service outside of New Zealand and in this case the first application of budget should have been to create more high speed data pipes offshore - and this would allow us to target the 7 billion world wide customers. Secondly if you want to focus internally we should be looking at fibre to networked business hubs and and satellite office stations within the residential communities, and in particular outside of Auckland as now many people do not have to be anywhere in particular to work, this would help in the housing and transportation issues - it is a much greener option that trains and public transport and it is fully scalable both inside and outside the country, if given these new offshore data pipes.

To be honest the standard TV is fine - and 100 GB movies are really something we can look to acquire after we make the data connections earn money for us rather than simply consuming wealth which we are not abundant in.

"In terms of fibre connections, we are fourth from the bottom with barely 1% of our broadband connections falling into this category, by comparison, Japan sits at a whopping 68.5%."

You've just compared an orange with an apple and tried to say they're the same thing.

In most Asian countries (South Korea, Hong Kong and Japan) where FTTH exists it's more often than not FTTB using VDSL2 or Ethernet in building for last mile delivery. There is nowhere near 68.5% of the Japanese population using a full end to end fibre connection.

Some great comments. I don't always get it right and you guys provide some balanced views.

To you, reprobates, who don't have the courage to sign your names and are more interested in slagging me off, rather than the idea, suggest you contact me so we can have a chat.

This is about engineering debate.

I almost don't know where to start - there are so many errors in this article that it makes it difficult to cherry pick just a few...so I'll start with the opening paragraph which is the premise for the whole article.

A 'typical' HD movie is not 10GB - maybe some 4hr epic might get close to that, but the typical 2hr Hollywood movie is around 4-5GB. Using H.265 it is estimated that a 4K video would be around twice the size of a current HD movie encoded using H.264 - so the figure of 100GB is just not true for movies designed to be transferred via the internet in the next few years.

The US market (where those 4k TV units you talk about were released) only has marginally faster average internet speeds than NZ ( based on speedtest.net results, around 20% faster) and for the most part their delivery infrastructure is being close to maxed out ( 20-30yr old cable tv networks).

I strongly believe NZ is going down the right path with its fibre rollout - FTTP gives the best shot at future proofing, and In 5 years time when the initial rollout is complete, around 85% of NZers will have access to at least 100Mbps internet, most likely 1Gbps given that Chorus is already trialling 200Mbps a little over 1 year after commercial availability of the UFB service.

Wireless technology sounds attractive, but it just can't match the dedicated bandwidth to each user that is possible with fibre - as soon as multiple users start connecting, performance per user drops away...for proof of this try using your 3G cellphone connection in a busy shopping mall at lunchtime on a Saturday.

The fibre network on the other hand can be (relatively) easily upgraded to at least 1Gbps using 10GPON and as the hard work of installing micro ducting is complete, in the worst case of some new technology requiring a different type of fibre, this can simply be blown down direct to the premises on a per user basis.

About the only point I can agree with you on is that the business model for the infrastructure investment is wrong - although I think that the network should be government owned (or even council owned, as the old power line companies were) rather than a commercial operation, with any profits plowed back into maintaining and expanding network coverage. Keep commercial involvement to the service level (I.e. ISPs)

Chris