Hard News by Russell Brown

117

Locking in the Future

How would you feel as a consumer if you were made to pay the decreed price of a commercial monopoly supplier and were deprived by the same government of any conventional means of challenging that pricing? And, just to add a little extra juice, the commercial supplier was a government agency?

Welcome to the forthcoming world of Ultra-Fast Broadband (UFB) brought to you by Crown Fibre Holdings and its prospective infrastructure partners -- of whom the most significant by far is Telecom.

Under legislation in progress, they will enjoy the luxury of decreeing wholesale fibre broadband prices for the next 10 years. The 10 years, that is, that they will enjoy a "regulatory holiday" that leaves them beyond the reach of the Commerce Commission. They even have the luxury of publishing a price book for the whole decade. This leaves little room to move for the 13 retailers who have expressed an interest in onselling services to the rest of us.

You weren't supposed to know that. The price book was a secret until it was obtained by Juha Saarinen and reported in the Herald. As TUANZ CEO Paul Brislen points out, that's a very different approach to that taken in Australia in the development of the National Broadband network:

The difference in approach is astonishing – NBN has worked with industry to develop the pricing plans it will go to market with, while Crown Fibre Holdings in New Zealand has kept the list secret – those who have seen it are required to sign non-disclosure agreements and it’s only through the work of one journalist (Juha Saarinen) that any detail at all has come out in the public sphere.

This is not acceptable. There are a huge number of questions that need answering and keeping silent on the detail just leads to the kind of speculation and “leaping at shadows” the minister claims is going on. There’s a reason for that, Minister – nobody knows what’s a shadow and what’s a gaping hole for you to through our money into.

Meanwhile, Chris Barton at the Herald declares that the pricing is absurd and prohibitive, and replaces one monopoly with another, and Telstra Clear is now publicly fretting about being sidelined by an unbeatable infrastructure competitor.

Telecommunications regulation doesn't get the headlines attracted by more salacious political issues, but it has been a consistent -- and deeply complex -- policy battleground for two decades now. The government's apparent attempt to curtail discussion by limiting select committee oral submissions to 10 minutes (including questions) seems unhealthy in that context, if not entirely out of keeping with Steven Joyce's personal style.

It also proved unworkable, as Telecom CEO Paul Reynolds (whose only problem with the 10-year regulatory holiday is that he would like it to be longer) spent 40 minutes under questioning from Labour's David Cunliffe, who implied that a future Labour government might wade in and re-regulate.

**UPDATE:** Eleven telcos and consumer groups have officially spat the dummy. Useful NBR story here.

So I'm looking forward to this week's Media7, where I'll be joined by Barton and Brislen to talk about what exactly is going on.

You're welcome to join us for Wednesday evening's recording. It would help this week if you could present yourself at the Victoria Street entrance of TVNZ a little earlier -- between 5pm and 5.30pm -- because Mr Brislen has a date with Terry Pratchett that night, and we'd hate to deny him that pleasure.

As ever, a little email to let me know you're coming would help.

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There's another dimension here, one that has received relatively little attention: content.

The CFH plans specifically provide for the delivery of television-style content over the new fibre. The problem is that one party seems to have a developing lock over television-style content. And that party is Sky Television.

On the evidence so far, Sky will supply TV content to third parties -- but its supply contracts will resemble nothing so much as the kind of deals Telecom used to present to the market in the mid-90s: wholesale services priced like retail, tightly bundled so as to include other services the wholesale customer may not want but must accept.

TelstraClear (yes, them again) onsells Sky content via its existing cable network on basically these terms. The contract also includes a "right of first refusal" clause which means TCL cannot purchase and provide any content without first asking Sky to provide it -- on Sky's terms.

With Freeview about to approve new middleware for decoders and TVs that will support IP-based video, and other new entrants likely to be looking for opportunities, the state of this market really is a potential problem.

In Britain, the problem was addressed via a regulated wholesale market that allows independent cable operators to buy Sky channels, unbundled, at a wholesale rate. Given the deep and abiding friendliness shown to Sky by the current government, such a move seems exceedingly unlikely here.

Nonetheless, it seems very likely that this issue will be raised in submissions to the Commerce Commission's study of "demand-side issues" in the uptake of UFB. Effectively the Commission's last hurrah before it's told to bugger off for a decade, the study will seek to "identify whether there are any barriers likely to inhibit the uptake of high speed fibre broadband services in New Zealand, including peering, IP interconnection, data caps and content arrangements."

It's hard to believe that peering issues -- perhaps the biggest obstacles to an open an efficient internet for the past decade -- have been relegated to a bullet point in a study the government seems likely to ignore. But I think, nonetheless, that this study will be worth watching.

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Meanwhile, I/S at No Right Turn is poring over the documents he's obtained via OIA with respect to the deal that allowed Mediaworks to finance its spectrum licensing costs with the government, rather than pay its fee up front, as it was required to.

I don't have much of a problem with the decision itself, but I do with the secrecy around it. And the new material obtained by No Right Turn makes it look murkier than ever.

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