While Fibre is the future, it isn’t here yet. It’ll take another six or seven years to reach everyone. Telcos and ISPs could do far more with the copper already in the ground, but that may undermine the case for fibre.
When it arrives, the government sponsored UFB fibre network will deliver download speeds of 100 Mbps and upload at 50 Mbps. The cost is little higher than today’s ADSL broadband plans. Fibre is a compelling product at a decent price.
If everything goes to schedule the last residential suburb will get UFB some time in 2019. At that point the network will reach 75% of New Zealanders. Separate networks will connect rural New Zealand to the internet.
Business districts, schools and health centres are a priority, that means suburban homes – and the country’s many micro businesses are last in line. Some will wait seven years to get a fibre connection. That’s too long to wait for fast broadband.
And too long to wait when you consider fibre-like speeds are potentially available for many copper customers today thanks to VDSL technology.
ISPs selling UFB offer two speeds. Alongside the headline, premium 100 Mbps speeds they also offer 30 Mbps plans. VDSL can realistically offer 50 Mbps to most customers on the copper network. Alcatel-Lucent uses VDSL2 vectoring to do this in Belgium. In other words, engineers can squeeze UFB levels of performance out of the existing technology.
Not about the technology
So why aren’t we doing this in New Zealand? The simple answer is there are ISPs offering VDSL, but wholesale copper prices are regulated. ISPs have to pay Chorus a premium to deliver VDSL over the copper network. One could argue that premium is an artificial barrier erected to make fibre pricing look more attractive to users.
The argument against this premium is that VDSL is like a gateway drug to fibre. People will get hooked on VDSL’s higher speeds and will jump to the new network when it passes their gate.
The flip-side argument says VDSL is so good, customers will see no need to switch from it to fibre when the UFB network arrives. In this way it undermines the entire business case for a fibre network.
There’s a lot in this. There aren’t that many practical fibre applications at the moment for small businesses and residential users. Some observers worry the industry will have difficulty persuading customers to trade in their slower ADSL connections for fibre, let alone trade in VDSL. Slow sales of residential fibre accounts to date underline this fear.
Carrots and sticks…
If the premium charged for VDSL is simply to steer consumers towards fibre, why not change the regulations so that the premium only applies once fibre passes a customer’s gate? This would have the added advantage of sending a clear signal about intentions.
If the premium isn’t about influencing customer behaviour, why have it at all? The Commerce Commission can make sure Chorus isn’t out-of-pocket by adjusting unbundled copper local loop (UCLL) unbundled bitstream access (UBA) prices accordingly.
And if the market has to rigged to make fibre an attractive proposition for consumers, doesn’t that suggest there’s something wrong with the model in the first place? I’d love to hear your thoughts on this.