While Telecom and Vodafone make nice, TelstraClear has further isolated itself from the government’s $1.5 billion fibre initiative - offering more belligerent commentary alongside its announcement of plans to upgrade 80,000 Wellington and Christchurch cable connections. (Separately, the telco announced it was extending its $229/month 25Mbit/s plan from Chrischurch to Wellington and Kapiti).

In their reaction to the government’s $1.5 billion, fibre-to-the-home initiative, the difference in tone between Telecom and Vodafone on the one hand, and TelstraClear on the other, continues to be striking.

Communications minister Steven Joyce’s original proposal for up to 25 local fibre companies, and ban on retail telcos holding a majority stake in any, was bad news for all three telcos.

Good cops
Telecom and Vodafone reacted by putting forward (separate) alternative plans for a single national fibre network. The minister said it would be remiss of him not to consider these and - in a possibly related move - delayed his decision on the final shape of his government’s fibre plan for two and a half months to mid August. The two proposals put forward by Telecom (both of which involve Chorus taking charge of a partially state-funded network) both pour praise on the government’s overall goal. And Vodafone’s proposal for a new FibreCo includes a 25% stake for the state.

Bad cop
But TelstraClear’s message to the government remains: butt out of the whole process.

Telstra’s new boss in Australia, Kiwi ex-pat David Thodey, is trying to re-inveigle his company into the government’s affections, and undo the damage wrought by his predecessor Sol Trujillo with his caustic attacks on the national broadband network.

But TelstraClear chief executive Allan Freeth seems to be still living in the Sol Age.

NZ's fastest broadband
Last night, Dr Freeth announced a plan to spend $10 million upgrading 80,000 TelstraClear fibre optic cable customers on the Kapiti Coast, Wellington and Christchurch to 100Mbit/s connections by March 2010.

The upgrade is scheduled to take one year, and will boost speed for TelstraClear “InHome” cable customers by a factor of 10 - and create easily New Zealand’s fastest broadband connections in the process (although note Paul Budde's comments in the DomPost that TelstraClear's cable upgrade might only be good for four or five years, and that it will not support 100Mbit/s uploads, only downloads. TelstraClear disputes this.)

Disincentiving private investment
Dr Freeth reiterated his earlier comments, at TelCon10, that such private investment means the government’s fibre initiative has no place in Wellington, or Christchurch - where a council-owned cable operator, Enable, has put its hand up for up to $400 million of the $1.5 billion in taxpayer money earmarked for crown-funded fibre.

Enable, which has already spent $36 million upgrading cable, was using ratepayer money to chase taxpayer funds to overbuild TelstraClear’s existing fibre, Dr Freeth said, wasting money, and removing his company’s incentive to upgrade its network.

Dr Freeth says there is now no need for the government to invest in Wellington or Christchurch (his company has no plan to expand its retail fibre into Auckland). Non-TelstraClear customers - and anyone who agrees with Paul Budde's analysis that TelstraClear's upgrade is technically limited - would beg to differ.

A more pragmatic view would be that the government’s $1.5 billion fibre push is going to happen. Communications minister Steven Joyce sees state funding in this area as essential to help boost the private sector (and schools and hospitals) overall. It’s now only a question of how. In its original submission, TelstraClear hinted at a roll for itself in connecting the 25 regional fibre networks. But in continually rubbishing Mr Joyce’s overall plan - last night Dr Freeth called it the “yet to be confirmed” $1.5 billion plan, TelstraClear is marginalising itself.

Last night, Mr Joyce offered only a brief, diplomatic comment that any private investment in fibre is welcome - although at a June 25 Commerce Committee sitting, he did address Dr Freeth's objection that part crown-owned fibre companies, with fuzzy profit horizons, could undermine private investment. A sample exchange from the hearing:

Clare Curran [Labour communications spokeswoman]: Do you think that there will be an issue in the Crown providing soft equity to privately controlled local fibre companies that will then be free to set different prices for their fibre connections, which, whether it’s short-term or medium-term, would be mainly sold to Crown-owned entities such as schools and hospitals? And would this be affecting whether you would steer towards a more commercial deal with Telecom that’s got a more agreed fixed price?

Joyce: You mean the Allan Freeth argument that you end up with a Crown competitor who’s competing in the market place at lower prices because they’ve got softer equity options? Is that your concern?

Curran: Yeah, and so that the regions would be competing, perhaps, with each other and that, therefore, you would want a fixed price across the nation?

Joyce: I don’t think that’s really going to be the issue. I don’t think the regions will end up necessarily competing with each other. I think the point around, if you like, soft equity from the Crown is that actually the process is going to be setup with ... RFPs and tenders with operators, which means existing telcos can participate as much as anybody else.

Enough bandwidth for high-def TV
At TelCon10, Dr Freeth also questioned whether there was any demand for services that could be delivered over 100Mbit/s cable connections. But judging by his comments last night, he’s found one: high definition TV.

The telcos fibre upgrade will be coupled with new, HDTV and IPTV-capable set-top boxes. TelstraClear recently announced it was partnering with two companies (Digisoft and Verimatrix) to build its own system for delivering television over the internet.

A focus on TV over fibre is a good thing.

People here are continually scratching their heads over how fibre from the curb to the home can ever make economic sense (ignoring the fact that in the US, Japan, Korea and many other countries, cable connections are far more common than DSL, and have been for years). Bundling TV, broadband and phone services together is the obvious answer (although it’s still not clear how this could play out if each service must be offered by a different retail provider).

However, again it would be good to see a more collaborative approach, with TelstraClear committing to expanding its existing relationship with Sky TV, or allying with Freeview (and its soon-to-be broadcast partner TiVo) rather than trying to reinvent the wheel.