Kordia slams 'tragedy for rural New Zealand'

UPDATE: Vodafone's Matt East responds: 

Kordia chief executive Geoff Hunt implies that Vodafone's wholesale offering will simply entail co-location on RBI-funded cell-towers.  This is incorrect.

As part of it's RBI commitments, Vodafone will offer a number of end-to-end wholesale services to the market.  These services will run across the Radio Access Network.

In line with the Government requirement for open access, all the RBI infrastructure will be available for competitors such as OpenGate to  build their own competing services.

All other cellsites in New Zealand are available for co-location as required by the regulated service on commercial terms.

For more counter-argument, read Joyce bites back.

OpenGate (Kordia and Woosh Wireless) and FX Networks, who together bid for the government's $300 million Rural Broadband Initiative (RBI), are dismayed by the government’s decision to stick with the status quo provided by the incumbent duopoly, the companies said in a statement this morning.

Former Tuanz boss Ernie Newman consulted to Kordia on its bid, and helped the state-owned company navigate the murky shoals of the MED, which was charged with sending a recommendation to cabinet.

Earlier, in announcing commercial negotiations had begun with Telecom and Vodafone, who submitted a joint bid, Communications Minister Steven Joyce called on the "unsuccessful parties" to  start working with Telecom and Vodafone to look at ways to further improve solutions for rural New Zealand

Held hostage by same old duopoly
Kordia chief executive Geoff Hunt said that this decision effectively condemns rural communities to suffering from same old duopoly services that continue to under-deliver and hold rural New Zealand hostage.

"Tragedy for rural New Zealand"
The company's comms boss, Emma Morrison, also weighed in, commenting after NBR's initial story that the result was "a tragegy for rural New Zealand.".

Even on Friday, Kordia had been frantically lobby for the OpenGate cause.

Opportunity missed
In Mr Hunt's view, “The government had an opportunity through the RBI to provide a technology step-change in services for rural New Zealand that would have laid a future-proof and highly competitive foundation for the next 15 years."

“We should remember that this was supposed to be the rural broadband initiative and not the rural mobile initiative.”

Poor performers
Mr Hunt said Telecom’s copper has been rejected for urban New Zealand, and performs even more poorly in rural environments. “The 3G element of the Telecom Vodafone solution is being superseded all around the world by 4th generation wireless (4G) technologies like TD-LTE."

OpenGate’s proposed technology solution for the RBI was 4G wireless. Australia, India, China and the US are all planning to roll out this technology now, and between them will have over one billion customers. We thought this would have been a compelling sign for New Zealand if the Government wanted to keep in-step with its key trading partners. Alas, no,” Mr Hunt said.

4G now vs 4G later
Instead of 4G and genuine competition today, the government has opted for limited 3G broadband across much of rural New Zealand and to greatly diminish competition by handing over the fixed broadband market to the incumbent mobile duopoly.

Telecom and Vodafone have included 4G towers in their bid but will have to wait until the govenment auction's spectrum freed by the digital TV changeover (scheduled to be complete at the end of 2013) before they can push ahead with the faster wirless technology.

By combining its spectrum with Woosh, Kordia would have had the necessary cellular bandwidth block to offer 4G from today.

The OpenGate and FX proposal would have delivered 83% of rural New Zealand with speeds in excess of 10 Mbps; 68% with speeds up to 20 Mbps and 88% with speeds of 1 Mbps or more. Within two years, more than 80% of all households and schools in rural New Zealand would have had access to seriously fast broadband.t.

Narrow definition of open access
Hunt said that OpenGate’s proposed open access network exceeded requirements, but fears that the definition given to open access by Vodafone may be somewhat narrower. 

Vodafone has already said it is not seeking funding to build the radio access network (RAN), which means they have no plans to deliver a wholesale end-to-end service. Statements regarding magnanimous co-location offers are simply more of the status quo. "They have to do that today,” said Hunt.

“Truly open access in the radio access network would have stimulated new product development, innovation and competition. With this decision, rural customers will see rebadged Vodafone products only – and Vodafone will dictate the price. If there is no competition at the wholesale level, there will be no pressure for prices to reduce over time.

“Look at what happened to competition in the international bandwidth space when we announced our trans-Tasman cable project. Incumbent prices first dropped by 50% and then down to less than a third of the original price. Without competition, it is hard to see this duopoly doing anything other than rolling out the minimum requirement of 5Mbps over six years. Urban users in the same timeframe will have access to 100Mbps.

No certainty that Vodafone can win 4G spectrum
“Any upgrade path promised by Vodafone and Telecom is hypothetical, as it can only follow the 700 MHz spectrum auctions that are planned some time before 2014. Vodafone will have to compete with other parties to buy spectrum, so unless the government has accepted their bid conditionally on the outcome of the spectrum auction, or plans to alter the auction process accordingly, delivery of any promised upgrade is not a certainty by any means,” said telecommunications consultant, Ernie Newman.

Steven Joyce's office has previously told NBR: "Successful RBI bidders will need to compete for 4G spectrum as any other party.

"The government has announced however that it will consider relaxing acquisition caps on spectrum management rights in the 2.3, 2.5 and 2.6GHz bands to support the possibility of RBI bidders offering 4G services without requiring access to the 700Mhz digital dividend spectrum."

Mr Hunt adds that all too recent history shows that once the incumbents deploy, there will be no incentive without Commerce Commission action and government intervention to upgrade.