Hard News: Locking in the Future
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I don’t have much of a problem with the decision itself, but I do with the secrecy around it.
Quite – but having said that I wish Drinnan would either STFU or just get his facts right. I’m a little sick of the Herald editorially pontificating about transparency and competition, when APN has consistently been coy about it’s own lobbying of government and how it’s effectively crushed anyone trying to muscle in on the effective monopoly in New Zealand largest media market since the Star closed down over twenty years ago.
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NBR's Chris Keall had trouble logging in here (he used to be so good with computers!) but has expressed to me the view that the CFH price book is "meaningless because it doesn't allow for data caps, or international data."
Which is odd, but presumably those are deemed matters for retailers. Who don't appear to have any room to move on them.
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It's hard to see how this is going to work. Basically (assuming no government or inter-customer subsidy) FTTH is going to be substantially more expensive than ADSL2 + broadcasting + video stores, which is the incumbent delivery channel.
It's not clear how many customers are going to be convinced to pay the extra. For one thing, there isn't that much content out there - production of such content is pretty marginal commercially, hence the failure of several such services recently. (Alt TV, etc).
An ideal solution would be for wealthy corporations to build the network, be bankrupted in the process, and have it acquired from the receiver for a song, allowing the service to be sold cheaply (effectively, subsidising it with the money of mug investors). This worked well with the US fibre bubble.
Failing that, the only options would be to either pour large amounts of taxpayer dollars into subsidising the service, force cross-subsidy from ADSL and POTS customers, or force existing ADSL/POTS/broadcast users to upgrade to fiber, whether they want to or not.
It's a question of whether fibre is such a shiny must have that we have to conscript the majority into financing it?
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Russell Brown, in reply to
An ideal solution would be for wealthy corporations to build the network, be bankrupted in the process, and have it acquired from the receiver for a song, allowing the service to be sold cheaply (effectively, subsidising it with the money of mug investors). This worked well with the US fibre bubble.
And Canada. It has been my favoured option for some time.
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Am I right in thinking that the risky lose-lose is:
Business - "I would like to use that shiny new fibre, it might make me money, but I can't afford it right now.."
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Russell Brown, in reply to
It’s not clear how many customers are going to be convinced to pay the extra. For one thing, there isn’t that much content out there – production of such content is pretty marginal commercially, hence the failure of several such services recently. (Alt TV, etc).
Which is where that Commerce Commission study will be very interesting. It's entirely possible that that we could end up with a single company enjoying a dominant grip on most of the satellite infrastructure, the biggest single chunk of UHF spectrum to be freed up after digital switchover -- and all the best content. Not an optimum result.
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I can't see how a "regulatory holiday" ie declawing the commerce commission says anything other than the Telcos are planning to rip everyone off and they want to make sure the consumer watchdogs are kept at bay.
Fibre will be expensive to install the govt contribution is large but only a fraction of the cost so it's reasonable to allow companies to recoup the investment cost by charging. I have no problem with that so long as they don't rip everyone off. That's exactly what the commerce commission exists to prevent.
What do the Telcos expect from us - that we should trust them - snort.
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Juha Saarinen, in reply to
Apart from stating the obvious - CFH can't regulate national and international bandwidth without building further networks, or existing ones being designated - it's worth noting that resold broadband today is a low-margin business.
I checked again with ISPs; assuming they're not telling fibs, their margins are around $60 per customer and year currently. Out of that comes international bandwidth, helpdesk and more.
If correct, it goes someway towards explaining why we have such low data caps in NZ and why our connections are shared with many users (oversubscribed).
Now, I expect that when UFB finally comes on line, international and national bandwidth will be substantially cheaper than what it is today. It'll be interesting to see where the retail prices end up in that scenario. The way CFH has designed the UFB, I also expect retail providers to get a slice of the action for other services than just broadband, such as IPTV for instance.
Nothing's in the ground though, and we're not being told what the plan is so... who knows for sure?
Note that I'm not talking about LLU above, which I understand has very high margins compared to resold DSL.
Oh, and apparently the CFH isn't a regulator either.
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BenWilson, in reply to
"meaningless because it doesn't allow for data caps, or international data."
Not quite meaningless, but those questions were the first in my mind too. Unless a cap is just plain "so high it hardly matters" (which my American colleagues seem to enjoy), it's a vital part of the calculation. If it's a secret, I've come to expect that to mean that it will be a nasty surprise.
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Also no clear picture on the open-ness of the built network if Telecom gets the nod. They have to build an open network to fulfill their obligations to the govt but this, potentially only applies to the fibre build with UFB funding leaving the status of existing Telecom infrastructure unclear.
And finally, where does it leave all those local providers such as the lines companies that have invested heavily for the last decade into extending fibre in the regions? They would appear to have been sold out by the CFH despite being the type of cooperative, locally supported, interconnected solution that the government was touting up to about 12 months ago.
We all had such high hopes back then...
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Russell Brown, in reply to
The way CFH has designed the UFB, I also expect retail providers to get a slice of the action for other services than just broadband, such as IPTV for instance.
Which speaks to the content issue I mentioned in the post.
In Britain, Virgin can sell you a cable TV bouquet that includes individual BSkyB channels. Here, unless there is regulation, it will be impossible to unbundle wholesale channels from Sky -- and Sky will continue to offer contracts that stipulate that any wholesale customer must purchase all content from Sky, if Sky can make it available.
Iz not grate.
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Sue,
yay more confusion.
I know of two delightful old ladies who signed up for a 3 year tivo contact becuase they were worried about nz going digital and missing out on the royal wedding.The oldies we don't talk about them much but all this stuff just overwhelms and freaks many of them out so any old retailer with a deal that is worded just right, well they easy pickings.
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. Here, unless there is regulation, it will be impossible to unbundle wholesale channels from Sky
Sky just has it too bloody sweet in this country. With their inclusion of advertising on their pay channels, we are effectively paying twice (subscription + time displacement) and they have wilfully given away one of their USPs.
I know of two delightful old ladies who signed up for a 3 year tivo contact because they were worried about nz going digital and missing out on the royal wedding
Still, I would be willing to sign up to a package that censored out any mention of the royal family and their indulgences!
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assuming they're not telling fibs, their margins are around $60 per customer and year currently. Out of that comes international bandwidth, helpdesk and more.
Because they're providing a thin layer with negligible added value and scope for innovation. All things being equal, the larger providers are going to have lower operating costs on operations, call-centre and bandwidth than their competitors. The only way the small ISP can compete is to reduce service.
Really, much as people want to deal with locally owned small businesses, they can't compete in this market. It's a natural monopoly, and prices need to regulated.
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Bugger the rules, Prostetnic Vogon Joyce has money, connections, and rulebooks.
And I should also add that a shiny fibre network is a fat lot of use without more undersea cables, given that NZ imports and exports most of its data. It's like building 14-lane highways when what we need are more international airports.
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This just in ...
Eleven Telcos, Consumer Groups Unite Against UFB Bill
In an unprecedented move, 11 of New Zealand’s major telecommunications companies and the country’s leading consumer advocate groups have united to oppose the Government’s proposed UFB Bill.
The group, including Vodafone, 2 Degrees, TelstraClear, Call Plus, Kordia/Orcon, Opto Network and Torotoro Waea as well as , Federated Farmers, Consumer New Zealand, TUANZ, and InternetNZ, have sent a joint letter to all MPs outlining their concerns with UFB initiatives in the proposed Telecommunications (TSO, Broadband, and Other Matters) Amendment Bill.
TUANZ Chief Executive, Paul Brislen, says while the group fully supports broadband infrastructure investment, the letter outlines the group’s fears that the Bill would reduce competition and investment in New Zealand’s telecommunications market.
“Chief among our concerns are the Bill’s proposals to give successful fibre company bidders a ten year ‘holiday’ from regulation, and the removal from the consumer watchdog Commerce Commission of any oversight of prices and services until 2020..
“In our view the regulatory holiday should be scrapped or at the least substantially modified, and the consumers’ champion - the Commerce Commission - should be allowed to do its job,” says Brislen.
Prices were also likely to increase by over 20% for all urban consumers whose broadband was carried over copper telephone lines.
The Bill would also allow Telecom to create a new, wholesale monopoly when it was separated into two businesses, says Brislen.
“In our view, there must be more checks and balances on how Telecom separates and the new monopoly that is created,” he says.
While consumer groups and the broader industry agree the Bill needed to be improved, papers obtained under the Official Information Act reveal the Commerce Commission also agrees advising that ‘substantial risks to competition’ exist.
Statements by Communications and Information Technology Minister, Steven Joyce, that no monopoly will be created, that a ‘regulatory holiday’ is necessary, and contracts between Crown Fibre Holdings and successful fibre company bidders will protect consumers are not reassuring.
There is nothing in the legislation to prevent fibre companies from increasing prices and degrading services, and regulatory holidays are banned in the European Union and by the WTO, Brislen says.
“If there is no issue, why deliberately legislate to prevent the Commerce Commission from doing its job?”, he asks.
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Very useful NBR story here.
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Bart Janssen, in reply to
Steven Joyce [says] that a ‘regulatory holiday’ is necessary
Um why?
No really this is a serious question. If it is necessary can anyone explain why?
Is the proposal for some reason already known to breach consumer protections in such a way that the commerce commission would immediately act?
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Russell Brown, in reply to
Um why?
No really this is a serious question. If it is necessary can anyone explain why?
The best answer I can come up with at the moment is "Because Steven Joyce says so," which seems to be the reason for quite a number of things lately.
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More from Keall: Joyce posits a national operating organisation for UFB – suggests it could be Telecom-run.
I’m proposing a merger between Sky and Telecom, so no one else in the country really needs to be in business at all.
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recordari, in reply to
I'm proposing a merger between Sky and Telecom, so no one else in the country really needs to be in business at all.
They could call it Skynet and get Arnie to come out and launch it.
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Are they going to run fibre alongside the Puhoi to Wellsford motorway extension?
The regulatory holiday highway
/ducks
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3410,
Um why?
No really this is a serious question. If it is necessary can anyone explain why?
According to the NBR:
The minister also maintained that without the 10-year " regulatory holiday, or "forbearance period", investors would "price in" the risk of Commerce Commission interferance - driving up pricing.
See, obeying the rules might cost money, so... ditch the rules! Because that's what the Commerce Commission does; inflate prices.
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Kumara Republic, in reply to
Um why?
No really this is a serious question. If it is necessary can anyone explain why?
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Bart Janssen, in reply to
According to the NBR:
The minister also maintained that without the 10-year ” regulatory holiday, or “forbearance period”, investors would “price in” the risk of Commerce Commission interferance – driving up pricing.
hmmm and without commerce commission interference they can charge ridiculous prices which will inflate profits - that will of course attract investors.
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I'd have thought that if you're going to give a gigantic handout to a company to build an even more pervasive monopoly than they already have, that you'd be wanting to impose MORE conditions on them, not less.
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