Chorus warns Australia on structural separation

Chorus manager of marketing strategy and insight Rosalie Nelson warned Australia’s telecommunications industry on the risks of New Zealand-style full structural separation. She was speaking at the CommsDay Melbourne Congress and reported in Communications Day.

Nelson’s comments come as Optus chairman Paul O’Sullivan calls for Telstra to split along similar lines to Telecom NZ (now Spark) and Chorus.

When Chorus demerged from Telecom NZ, it inherited the copper network, a considerable share of the former company’s debt and almost all the regulatory obligations.

Nelson says the Commerce Commission ruling on the price Chorus can charge telcos and ISPs to use the copper has hurt its ability to pay for the fibre network.

While the arguments are well-known, what isn’t widely understood is how dependent Chorus is on revenue from the copper network and how it doesn’t get to set the prices for copper services.

She says that for every dollar the government puts into the UFB build, Chorus puts in two. For every dollar Chorus earns it needs 60 cents of capital expenditure.

Nelson says the assumption telecommunications is like other utilities needs questioning because it is subject to rapid change. That leads to uncertainty — yet investors are usually drawn to utilities because of their stability and relative certainty.

She warns Australian telcos to make sure all their funding sources are secure before taking part in an industry restructure.

Fibre-only MyRepublic aims to lead UFB push

MyRepublic, New Zealand’s newest ISP, sells nothing but full speed fibre-based broadband without data caps. Significantly are none of the pointless 30Mbps down, 10Mbps up entry-level fibre plans offering copper-like performance.

Instead consumers can choose between two 100Mbps plans: one for gamers, the other for everyone else. MyRepublic’s $99 a month Pure plan includes installation and gigabit router — an unsubtle hint at the company’s near-term ambition. Pure customers get a 20Mbps upload speed.

Customers buying MyRepublic’s Gamer plan get the same deal with a 50Mbps upload speed and customised routing to improve game performance.

MyRepublic also offers a $199 100Mbps up and down plan for business users.

CEO Vaughan Baker says the MyRepublic user experience will be different to other ISPs selling UFB services because his company has an optimised network and has allocated more international bandwidth per customer than its rivals.

Baker is best known for leading the electricity companies’ bid to build the UFB network in 2011. The lion’s share went to Telecom (now Chorus) with electricity companies picking up about 30 percent of the contracts.

At the launch of MyRepublic, Baker said he was a foundation investor in the Singapore-based parent company. He put his money into the company intending to  bring it to New Zealand.

Baker says until now ISPs have sold UFB services in the same way they sold copper services. He says for the most part they simply transferred their old systems to the new service. However, he says fresh thinking is needed for fibre services to take off in New Zealand.

Price is only part of the equation. While MyRepublic’s rates are low, they are not the lowest in the market. Just two days before the MyRepublic launch, Spark’s BigPipe operation announced an uncapped 100/20Mbps plan for just $79 a month. There’s also a 200/200Mbps uncapped plan at $129 a month.

Part of MyRepublic’s pitch is a Fibre TV service. Baker says it will serve the world’s best streaming content to customers even during the evening when the network is congested. Initially the FibreTV service is free, after three months there will be an extra $15 charge. Content fees are extra, but MyRepublic appears to have found a way around geoblocking although details on how this works were sketchy at the launch.

It’ll be interesting to see how MyRepublic’s optimised services for gamers and TV viewers work in practice and whether customers respond to what might sound like secret sauce.

Baker says the company’s launch in Singapore triggered a surge in fibre connections. It also caused other ISPs to sharpen their pencils to the point where Singapore went from the 14th cheapest place to buy fibre services to second spot.

Fibre uptake past 20% in Christchurch suburbs

Enable Networks reports it is connecting about 600 customers a month to the Christchurch fibre network. The company says it has a total of 6,100 customers already connected — making a total uptake of 11 percent across the city. That’s a little better than the national average.

Three Christchurch suburbs now have more than 20 percent of premises connected to the network. Rolleston tops the list with 24 percent connected, Burnside is on 22 and Addington has 20 percent.

These numbers are good. In fact, sign-up rates are improving at a fast clip across the entire country. This underlines the wisdom of extending the UFB network beyond the 75 percent of the population into smaller towns.

Meanwhile, the fibre roll-out is paying off in terms of overall speeds. The latest Akamai State of the Internet report notes New Zealand saw a huge 21 percent quarter-on-quarter rise in average fixed connection speed, taking it up to 6.8Mbps. The year-on-year headline speed is up 47 percent.

New Zealand’s average peak fixed connection speed climbed 31 percent in the quarter to 31.8Mbps. That’s a 52 percent year-on-year increase.

NZ telcos wince as they foot rural bill

One of the National Party’s election promises was to extend the government’s Ultrafast Broadband network. Originally the plan was to spend $1.5 billion to cover 75 percent of the population living in cities and towns. Now the government aims to spend another $150 million to $200 million reaching an extra 200,000 people for a total of 80 percent of the population.

It’s a good idea and solves the problem of connecting people living in medium-sized places not reached by the earlier UFB plan or the Rural Broadband Initiative.

Updated: Previously this section wrongly said the government would extend the Telecommunications Development Levy for three years to pay for the UFB extension. The government is using its Future Investment Fund — from asset sales — to build out the UFB. The Telecommunications Development Levy is paying $50 million to fix rural mobile black spots and $100 million for the contestable fund. Thanks to Chris O’Connell for pointing this out. 

Although the name suggests otherwise, the TDL is effectively an extra tax on telecommunications companies. They collectively pay $50 million a year into a fund to pay for the RBI. It replaces an earlier levy collected to compensate Telecom NZ (now Spark) for maintaining a universal telephone network reaching rural customers that would have been commercially unprofitable to serve.

The Commerce Commission gets to decide how much each telco pays into the levy based on calculations about their relative market share. Chorus, which isn’t a retail telco, also pays into the fund.

In some ways the fund is an unfair imposition on telcos. New Zealand’s carriers have faced falling revenues in recent years as competition bites. The effect of earlier government imposed regulations also eat into their margins.

At the same time, New Zealand’s telcos are losing revenues to giant multinationals like Google and Apple. These companies offer so-called over-the-top services that let people make calls or send messages bypassing traditional carrier networks.

There are a number of ironies here. While Google and Apple make a lot of money in New Zealand, they barely pay any taxes. Like many multinationals they claim their local sales are actually made elsewhere — usually Ireland. Meanwhile, New Zealand’s telcos do all their business here and have little opportunity to transfer sales to more favourable tax regimes.

So, in effect,we tax telcos twice while the competitors who are eating their lunch are barely taxed at all.

One proposal would be to compel companies like Google and Apple to contribute to the TDL. There’s a good case to make for this although because they don’t charge for telecommunications services, as such, it would be difficult to fix a fair sum.

It’s worth keeping in mind that should Google or Apple be taxed on New Zealand sales to the same extent as the telcos the extra revenue would be greater than the amount raised by the TDL.

New Zealand’s government doesn’t have the clout to unilaterally change the way large multinationals shuffle money between countries to avoid taxes. If they paid up we could afford to extend the UFB network and pay for other essential services. That’s not going to happen, but it might be an idea to put some of our best brains on to finding ways to squeeze them for TDL contributions.