Broadband barney: three universities terminate Reannz contracts

Just as the Crown company is set to become an anchor tenant of the new Hawaiki Cable, three of its largest customers defect.
Reannz chief executive Nicole Ferguson says it will be the "cleanest option" if government funding cuts are reversed — but she's also willing to go hunting for new customers

Three universities have cancelled their contracts with Reannz just as the Crown-owned broadband network provider is about to turn on its new service with Hawaiki Cable.

"Victoria University terminated our contract with Reannz because we were unable to reach agreement on cost-effective pricing," vice-chancellor Grant Guildford tells NBR.

Canterbury University also cancelled its contract on July 1.

"The cost of Reannz [was] exceptionally high, given the services we actually use," vice-chancellor Rod Carr says.

Lincoln also bailed.

Reannz (the Kiwi Advanced Research and Education Network) was created in 2006 to provide fast internet access for tertiary institutions and Crown research Institutes.

It has also been used as a political tool.

Looking to encourage a competitor to the 50% Spark-owned Southern Cross Cable (which connects Australian, NZ and the US), the previous government pledged that Reannz would become an anchor customer for any new international cable operator. The Crown company would pay $15 million upfront, and buy at least $50m in bandwidth over the following two and a half decades.

That money ultimately went to Hawaiki Cable, the startup backed by NBR Rich Listers Malcolm Dick and Sir Eion Edgar.

But while the previous government gave Reannz a $15m wodge of cash to fund its anchor contract with Hawaiki on one hand, it took away with the other.

After a review last year, the results of which were released shortly before the election, then-Science and Innovation Minister Paul Goldsmith released a new, seven-year investment plan for Reannz, including a $21m contribution from the Crown.

Mr Goldsmith touted the headline number, not mentioning that it represented a $1m-a-year haircut for the network operator, which would have received $28m if the Crown had maintained its previous contribution.

Canterbury vice-chancellor Rod Carr calls Reannz' rates "exceptionally high." (Image: supplied)

Reannz chief executive Nicole Ferguson says, in effect, that means the government moved from covering 25% of the Crown-owned company's budget to 18%. 

Victoria, Canterbury and Lincoln thought this would lead to price hikes when their contracts came up for review on July 1, for what they already considered a pricey service.

Ms Ferguson sought to buy time by offering to leave their current rates while a six-month review is carried out by MBIE, and Reannz assesses its own options for offering a more flexible, pick-and-mix service.

It wasn't enough. The three varsities still walked.

There were immediate howls on social media.

"Thousands of New Zealand researchers are losing a significant service, and this will impede collaboration within New Zealand and with the rest of the world," tweeted physics professor Shaun Hendy, director of the Auckland University-hosted Te Pūnaha Matatini (The Centre for Complex Systems and Networks).

The numbers
Ms Ferguson says after the three universities' departure, Reannz now has 40 customers.

The three were presumably larger customers, but the Reannz boss won't say what percentage of her company's earnings they represented (last year, Reannz had a $6.7m surplus on total revenue of $21.8m. The Crown chipped in $9.2m; its regular $4m annual contribution — reducing to $3m this year, as outlined above – plus a $5.2m special contribution as the latest instalment toward the $15m anchor deal with Hawaiki, which it is fully covering).

Ms Ferguson won't say how much each of the three defectors paid for broadband access, and neither will the vice-chancellors, but NBR understands Victoria was stumping up $600,000, while Dr Carr offers "Canterbury’s expenditure is of the same order of magnitude of Victoria.")

The Reannz boss says Victoria, Canterbury and Lincoln were among her company's less intensive bandwidth users; in Canterbury's case, she puts it down to it "still suffering after the quakes."

Victoria vice-chancellor Grant Guilford says Reannz was not cost-effective. (Image: supplied)

Where to from here?
Reannz is testing the Hawaiki Cable this month, and expects it to be fully operational in August, at which time the new cable will become Reannz' primary international bandwidth provider (earlier this year, Mr Dick told NBR that Hawaiki would be commercially operational by June; however, two months is not a bad delay at all, given the way most big IT infrastructure projects go).

Her organisation still has a year to run on its Southern Cross Cable contract (which is via Australia's AARNet, the Aussie's equivalent to Reannz). Ms Ferguson says options will be accessed at the end of the 12 months.

She's also waiting on the results of the MBIE review.

Wouldn't the best option simply be if the ministry recommends to the new science, research and innovation minister (Megan Woods) that the Goldsmith cuts be reversed?

"That would be the cleanest option," Ms Ferguson says.

"But it's not the only option. We could leverage the wider community," she adds, explaining this means a play for Crown agencies outside the tertiary and CRI sectors who also have intensive-broadband needs.

NBR understands Victoria is open to re-joining Reannz, if what it sees as the right services can be offered at the right price.

And Canterbury's vice-chancellor is upfront about the fact he's open to a return. 

He tells NBR that in the run-up to his university pulling the plug, three months was spent in negotiations with Reannz. Canterbury's key demand was that the network operators "Eduroam" service (which lets university or CRI staff access Reannz broadband and other services at their own organisation, or on the move) be offered as a standalone service, and at a keener rate

The vice-chancellor says he'll make his final decision once MBIE and Reannz' respective reviews wrapup.

For now, Canterbury is having all of its external broadband need filled by its commercial provider, 2degrees.

Why even Reannz?
When Reannz was set up in 2006, the need was obvious for a specialist broadband provider catering to researchers. 

Fast broadband was hard to come by and achingly expensive.

Today, it's a different story. The UFB has given New Zealand one of the best domestic broadband networks in the world, with even home users accessing one gigabit per second accounts (in lay terms, 10 times faster than what any researcher could dream of a decade ago) for $120 a month.

And substantial upgrades to the Southern Cross Cable, plus the new Hawaiki and Tasman Global Access cables (the latter is a Spark/Vodafone/Telstra Auckland-Sydney joint venture, which went live last year) mean international bandwidth and pricing has got dramatically better, too.

So why do the likes of Victoria, Canterbury and Lincoln even need Reannz?

"Commercial providers have lifted their game, but shifting large amounts of data around the globe is still a big ask, Ms Ferguson says

"Not all bandwidth is created equal," she adds.

She says Reannz provides a range of services beyond raw bandwidth. It also offers authentication, security and device-management services, she says, and will make sure data gets from a desk to its destination. Large chunks of research data can be misidentified as a DDOS attack if they're not properly shepherded through the system. 

Those are services that appeal to universities but not, it seems, at any price.

All content copyright NBR. Do not reproduce in any form without permission, even if you have a paid subscription.

POSTSCRIPT: Welcome back, Cotter

Longtime Reannz CEO Steve Cotter has popped up again at the Centre for Space Science Technology (CSST), a Crown-funded "space hub" set up in May last year.

The hub was awarded $14.7m by MBIE, the former US Marine Corps pilot is now having to downscale its plans. Full story here.


Login in or Register to view & post comments