Portugal Telecom says it will start closing copper switches next year. By 2020 that nation’s copper network will be history.
The telco says being fibre-only will help it sell services in a competitive telecommunications market.
Analyst Benoit Felten notes removing copper means Portugal Telecom will no longer have the cost overheads of running two networks in parallel.
Copper: In New Zealand it’s complicated
Removing copper is more complicated in New Zealand. Even so it is still a good idea.
It will lower costs and simplify the telecommunications market. Pulling out copper will reduce regulatory tensions. It will take the political heat out of the market and force service providers to focus on future technologies. It will spur further innovation.
A decision is overdue.
There are barriers:
Regional New Zealand needs copper for years to come
The first stage of New Zealand’s nationwide urban UFB fibre roll-out finishes in 2020. It will reach the 75 per cent of the population living in cities and larger towns. Stage two will take the total to around 80 per cent of New Zealanders.
Some customers not covered by UFB will be able to get fixed wireless broadband from the Rural Broadband Initiative. Vodafone is building new RBI towers outside of the main population areas. Most are now built. More towers are on the way. The RBI can be extended.
At first RBI customers found performance unsatisfactory. That was when the fixed wireless broadband service used 3G cellular technology.
With 4G cellular, rural users are getting fibre-like speeds. I spoke to one farmer buying fixed wireless from Spark who had 80 Mbps. That’s good by any standard.
Fixed wireless is now possible on other cellular towers. It is also available in cities thanks to Skinny Broadband. Other fixed wireless services will start soon. Expect competition. There are also specialist providers servicing rural markets with other innovative wireless products.
There may be further UFB and RBI extensions later. For now around 10 per cent of the nation falls into the gap between the two programmes. All things being equal, copper could serve these customers well into next decade. Their copper lines will have to remain intact for now. But swapping them out is possible.
Chorus owns the copper network
Chorus still owns the nationwide copper network. That’s not a problem in the areas where Chorus also owns the new UFB fibre network. In those areas Chorus has a clear financial incentive to move customers to fibre.
In places where other fibre companies — that’s Northpower, UFF and Enable — operate, the Chorus copper network competes with fibre. It remains a lucrative source of revenue for the company.
Over time that revenue will drop as users switch, but for now it is important.
Should the government decides to close the copper network in these areas, Chorus may have a case for compensation. That could lead to drawn-out negotiations or even litigation.
Either way, it is a problem that needs solving before closing the copper network.
Dramatic change in the cost of supporting copper lines
The cost of maintaining the copper network is averaged across urban and rural areas. It’s not a huge figure, nor is it negligable.
On the whole, maintaining copper networks is cheaper in towns than in rural areas. As more and more inexpensive-to-support urban customers drop off the copper net, the maintenance cost of each remaining copper line will rise.
If this doesn’t make sense. Think of what happens when there is one last copper customer in a street or on a cabinet loop.
As some point, supporting the remaining copper customers will be prohibitive.
Opportunities in closing copper network early
On the positive side, this last barrier is also an opportunity. It gives government and the telecommunications industry an incentive to modernise connections for those users left in the gap between UFB and RBI.
Number crunchers can revisit their models and provide details. My guess is that with the way cellular technology is evolving, wireless broadband services providers will soon offer most users in that gap a superior, cost-effective alternative to copper.
By the time any change comes we’ll be looking at 5G mobile. This promises gigabit wireless connection speeds and thousands of simultaeous connections. It means users will have fast broadband links that are cheaper to install than fibre and cheaper to maintain than copper.
The attraction of providing those customers with 5G broadband will be so tempting, carriers will want to invest in towers serving any sizable community. It would help if regulators could ease the burden by allowing or even regulating for shared access to cellular towers in the same way this already works with the RBI.
Sooner or later all the users in the gap between UFB and RBI will come into the fast broadband, post-copper fold. Ten years would be a pessimistic deadline. Setting a date to drop copper networks in the cities will bring that day forward.
In his post, Felten mentions unbundled copper exchanges where ISPs have DSLAMs. This also applies in New Zealand, but by the time copper is removed from our cities those unbundled ISPs will have recovered the cost of any investment and, in theory, at least, will have moved most of their business to fibre.
One network good, two networks not so good
Putting an end date on the copper network will focus minds on what’s needed to make this work best for everyone. It will also give telecommunications investors something they often ask for: certainty.
Knowing, say, ten years out, Chorus will rip out copper in a suburb or town will help everyone plan. It’s inevitable anyway, so let’s admit that now and move on.
If the government had moved sooner to name a copper shutdown date, it could have avoided much of the fuss over the so-called copper tax.
Asking telcos and consumers to pay a dollar or two over the odds (from their point of view) for access doesn’t sound so bad when everyone knows it is for a limited time only.
Until government names the copper shut-down date, there will always be market tensions. The regulatory framework will look muddled and investors will face higher than necessary risks.
It’s time to get on with the job. Set a date to pull out the copper.