Tag Archives: online

Are the wheels coming off New Zealand’s ultrafast broadband?

Steven Joyce installing Auckland's first UFB cable - Albany - 24 August 2011

Happier days: Steven Joyce installing Auckland’s first UFB cable – Albany – 24 August 2011

At first sight Chorus’ submission to the Commerce Commission on the price the company can charge ISPs to deliver broadband over the copper network is just business as usual.

While the regulator wants to cut copper access prices, Chorus argues against the move saying it could wipe up to $160 million from its annual profit.

Fair enough, the government did a deal with Telecom to spin-off the Chorus network division. It is only natural for the new businesses’ managers and shareholders to fight to protect their investment.

Chorus’ submission to the Commerce Commission goes on to argue cutting the price ISPs pay to use the copper broadband network undermines the UFB fibre network. Chorus is one of the companies building that network with the help of a soft government loan.

Delaying tactic?

Chorus has also requested a full review of the costs of delivering copper broadband. If nothing else  this will delay any ruling to cut prices.

And that’s where things get difficult for the government and Chorus.

If the price of copper broadband falls, it becomes more attractive to customers. In other words: more attractive than the UFB fibre network Chorus is helping to build.

Things get complicated because the roughly $1 billion dollars interest free loan the government is giving Chorus isn’t anything like enough to finance its share of the project. When the project was designed, there was a mechanism to plough back money from the built parts of the fibre network to finance the later part of the project.

Optimistic forecasts

Now we get to the hard part. The early forecasts of how many customers would buy fibre services were ridiculously optimistic. Numbers were quoted that are higher than in other countries with similar projects – planners fell into the “New Zealand will be different” trap. The government hoped to see 45% uptake. Its contract with Chorus is for a minimum of 20%. There’s now a question mark over that figure. Cheaper copper broadband isn’t going to help.

And that planning was done well before mobile data took off. Indeed, it didn’t take improvements in copper delivered broadband performance.

Prime Minister John Key has already talked of further government intervention – most likely a policy change to stop the Commerce Commission from regulating lower copper prices. An alternative would be to throw more government money at the project: that’s tax dollars.

A billion here… a billion there, soon you’re talking real money

The cost is peanuts compared to the money spent on roads. And there’s always a possibility Chorus will collapse. Although the current government is unlikely to let that happen under its watch, it could be out of power by the time things reach crisis point.

Many taxpayers will be unhappy about subsidising shareholders who knew they were taking on a risk. Others will be just as unhappy if the government allows the pension fund and Kiwisaver money locked up in Chorus to whither away. Yet more could be annoyed if the project changes so that they are forced to pay more for copper broadband while watching their neighbours enjoy the benefits of fast fibre broadband – especially if the project timetable drags out.

Shadow of Australia’s NBN?

Whatever happens next, the UFB project could yet become a political nightmare for the government. You only have to look across the Tasman at Australian to see how that could play out. Among other things we could see electorate politicians taking a close look at the UFB construction maps and cutting deals about which areas get built next.

Labour communications spokesperson Clare Curran wasted no time blasting the government earlier today. She said: “Chorus’s deliberate delay tactics with the Commerce Commission are a blow to Kiwi consumers and must be condemned by the government”.

Curran accused the government of playing favourites with Chorus. That’s possible. Or perhaps Chorus has the government by the balls on this. And as Reg Hammond writes at InternetNZ there’s also the matter of dealing with the companies who didn’t win UFB contracts because their price was too high. Where will all this leave them?

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“Click” a generational marker

Endangered species: computer mouse

Endangered species: computer mouse? (Photo credit: labuero)

Martin Belam makes an interesting point when he writes The word “click” will become a generational marker. I was thinking about this myself – how much longer will the mouse or touchpad be considered essential computing gear?

Personally I love touch on smartphones and tablets, but having to constantly touch the 24 inch screen on my desktop would be an ergonomic disaster.

As an aside, I never considered the Windows, Icon, Mouse interface intuitive – touch technology gets closer.

Related articles

Why Cisco flicked Linksys

Cisco is set to offload its Linksys business. Business Insider reports the deal may already have taken place.

Linksys makes wireless routers for home users. That makes it a consumer brand languishing in a company that is best at dealing with business and corporate customers.

Networking giant CIsco made its billions riding the Internet growth spurt in the 1990s. In 2003 it sniffed the wind – correctly at it happens – and decided the future lay in consumer and small business products. The company dipped into Uncle Scrooge McDuck-like swimming pools full of gold to pick up Linksys.

At the time it seemed like a good idea. Alas, Cisco never got consumer. Its Linksys products were largely lacklustre – I had the misfortune to own one for a while. Cisco also made a complete mess when it purchased the Flip consumer camera business a few years later.

Now Cisco plans to become an all-embracing enterprise IT business with products and services aimed at the data centre. Making low-margin devices, piling ‘em high and flogging them though retail channels simply doesn’t gel with that kind of business. Getting rid of Linksys is a smart move.

What I’d love to know is whether Cisco turned a profit on the US$500 million it paid for Linksys in 2003.

New Scientist’s annoying extra charges for online, smartphone, tablet

New Scientist

New Scientist (Photo credit: Wikipedia)

For most of the last six years I’ve subscribed to New Scientist magazine. My degree is in Physics and I like to keep up to date with the subject – even if only in a casual way.

Right now I’m on a subscription breather. I do this when the pile of unread paper magazines gets too high. Most likely I’ll subscribe again early in the New Year.

Or maybe not.

A one year subscription to the New Scientist print and web editions costs NZ$255. That’s a good price.

What isn’t so good is the magazine wants NZ$383 to extend that subscription to smartphone and tablet. Presumably we’re not talking about accessing the standard website from mobile devices. I guess the extra NZ$130 or thereabouts is to pay for apps.

An online-only package including smartphone and tablet is NZ$229.

I’ve no objection to paying for an online subscription. I don’t expect to get this kind of information for free and lord knows its difficult to make money from selling advertising into online publications.

But to charge an extra $130 just to view content via an app seems a bit steep.

What do you think?

 

Kim Dotcom’s cloud cuckoo land cable

Kim Dotcom put the idea of a fresh submarine cable linking New Zealand to the West Coast of the USA back in the news last week. Chris Keall reports on Dotcom’s plans at the NBR.

Dotcom’s plan simply isn’t going to happen. At least not in the form he proposes. The reason is simple, rightly or wrongly Dotcom’s name is poison with at least two of the groups that hold the keys to a trans-Pacific cable:

  • The US government hates Dotcom. It needs to give landing rights permission. Given many American officials still want to throw Dotcom in jail, this isn’t going to happen so long as Dotcom’s name is attached to the project. They will see the cable as a pipe designed to suck all the profits and eventually the lifeblood, out of the US film and music industries.
  • Few Institutional Investors will touch Dotcom. They thought Pacific Fibre too risky. Dotcom is worse.

Is the New Zealand government on this list. Dotcom is something of a folk hero, that doesn’t mean government likes or wants him. In a minor way he threatens our trade relationships. Dotcom needs government permission for local landing rights, he also needs government departments to commit to buying fibre capacity.

Pacific Fibre couldn’t make a compelling business case to build a fresh cable. At least not one that investors would buy. That project has some of the country’s best business brains. They are well-connected and wealthy. There aren’t question marks hanging over them.

If Pacific Fibre couldn’t do it, it is unlikely anyone else can.

Dotcom’s plan to build a giant server farm using hydro electricity is clever. It could generate the traffic needed to make a cable viable. Branding it with New Zealand’s clean, green image could work as a lure. Keeping it outside the ambit of US Patriot Act legislation that allows spooks to pry into data at the drop of the hat is also a big plus. There’s also a case for backing up data in a small. democratic country in a tucked away part of the world.

But we’re back to risk. Putting data in a small, remote country with only a handful of fibre links may not look attractive to big corporations – especially if that server is associated with someone like Dotcom.

This isn’t about whether I think Dotcom is guilty or flaky – until he has had his day in court we won’t know how to judge the man. This about how others see him. When it comes to dealing with business risk perception can be as important as reality.