Chorus is rolling out faster broadband, at 10Mbit/s-plus, but people aren’t buying. The Telecommunications Commissioner has a theory why - and it involves a new focus for the commission - TV.

Respected global service provider Akamai has released its latest survey of average broadband speeds - and New Zealand rates 35th in the world for the three months to September 2009.

Kiwis’ average broadband speed is a mere 2.97Mbit/s (a 10.4% improvement over the previous quarter).

Overall, the survey found many countries were consumers didn't want to pay for the fastest DSL or fibre plans on offer.

Source: Akamai

The Akamai rating comes at a time when Telecom’s Chorus division is half way through its government-mandated, $2.4 billion (and counting) project to roll-out fibre-to-the-node (roadside cabinets that shorten the amount of copper between your home and Telecom’s nearest fibre) and other initiatives to boost its network.

With the NBN not yet underway, it’s the largest single telecommunications infrastructure upgrade across Australasia.

Its aim: to provide 80% of New Zealanders with 10Mbit/s or faster connections by the end of next year.

The raw bandwidth is there
A Chorus rep told Keallhauled yesterday:

“To date, 1,732 Whisper cabinets have been deployed connecting more than 338,000 customers. The average broadband speed in an upgraded area is 13Mbit/s.

“Almost 1 million homes and businesses (56% of Chorus’ 1.8m access lines) are now within reach of high-speed broadband from either their local telephone exchange or one of our upgraded roadside cabinets.”

Yet Akamai finds the average Kiwi is connecting at only a fraction of Chorus’ average rated speed (for upgraded areas).

And Akamai - as a company that provides caching services (local mirroring of international content) for many of the world’s biggest websites - is in an excellent position to judge actually broadband performance.

So what gives?

Telecommunications Commissioner Ross Patterson seized on the Akamai survey during his speech to the Tuanz Telecommunications Day conference on Tuesday.

But few apparently few takers
The problem is not with Chorus, whose relentlessly on-time upgrade project is widely respected across the industry.

Rather, the Commerce Commission regulator identified a mismatch between supply and demand.

“Many consumers still favour lower cost low speed plans, notwithstanding faster speeds are available to them,” said Dr Patterson.

He noted the problem was barely unique to New Zealand.
In fact, notably, in Japan, 90% of households have access to fibre connections (the highest penetration rate in the world) but only 30% have taken it up.

As a result the Japanese Government is considering separation of NTT (the Japanese equivalent of Telecom), said Dr Patterson.

People want more than speed: TV drives updake
The Telecommunications Commissioner said the lesson to be learned from few consumers taking advantage of faster broadband, worldwide, was that a raw speed boost was not enough.

Echoing earlier comments by OECD economist Taylor Reynolds, Dr Patterson said:

“What this suggests is that the time has come to not only focus on the supply side of telecommunications services, but also to take more account of the demand side.

“The 2006 reforms have already achieved a lot; New Zealand is no longer a laggard in terms of infrastructure investment and availability.

“There has however been a lack of uptake on the demand side; when consumers are faced with paying for improved broadband services, they have chosen not to do so.

“It is significant that, in particular in Europe, uptake of fast broadband services by consumers has been driven by demand for HDTV products delivered by telecommunications companies.

“It is apparent that similar offerings are not available to New Zealand consumers. This may be one of the reasons for a lack of demand (or more accurately, a lack of willingness to pay) for high speed services. This is a matter the commission will be looking at in 2010/2011.”

Sky TV's rebuttal
Directly after Dr Patterson wrapped up his speech, 2degrees founder Tex Edwards sprang to his feet and asked if his comments meant the commissioner was “going to bust the emerging pay TV monopoly” (or Sky TV, as he later clarified to Keallhaulled).

Sky TV chief executive John Fellet, however, has long said the boot is on the other foot.

Previously, Mr Fellet has told Keallhaulled he would be happy to reanimate Sky TV’s internet TV (IPTV) service. But first, he needs ISPs to offer unlimited data plans.