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Covid-19 highlights UFB investment wisdom

New Zealand’s broadband has performed well during the Covid–19 lockdown.

Our networks have been pushed well beyond expectation. For the most part, they have not been found wanting.

That’s the good news. The bad news is that too many New Zealanders are still on the wrong side of the digital divide.

Digital divides

Make that digital divides. There is more than one.

Not every household can manage the cost of a fast broadband connection or afford the devices needed to make it sing and dance.

That problem is structural, social and economic. It is beyond the remit of our telcos.

No-one can sensibly argue that New Zealand’s broadband is overpriced. It’s cheap by international standards. More so when you consider the size and distribution of our population.

Competitive

Broadband competition is so tight that telcos only make the flimsiest of margins each month. Some argue, with justification that the market is too competitive. There’s little room for them to sharpen the pencil.

One obvious fix for this is to ensure people have more money to spend on necessities like broadband. That’s not going to happen overnight the way things are now.

The other approach is to subside services for less well off customers. That’s largely down to politics.

Some great initiatives are in place to do this. We need to make sure they are taken up and, if they are not enough to meet needs, then ensure there is more money invested here.

Investment

Yes, invested is the right word. Homes with broadband have better access to education, but they also can access government services.

It is cheaper for government organisations to communicate digitally than to do so in person or by moving little packets of paper around the country.

Other households are on the wrong side of the digital divide simply because happen to be in the wrong place.

A link too far

They may be beyond the reach of fibre. If they have copper they could be too far from a cabinet for VDSL.

They may be in a RBI fixed wireless area but the local tower is full. They may be some distance from an RBI tower where performance is woeful.

We need to fix this and fix it fast. The clock is ticking. Children can’t leave their education for years. Working from home will remain important. Fast broadband is not a luxury, it is the digital equivalent of daily bread.

Fibre further

The fibre network needs to reach further into the bush.

Yes, it is expensive to connect remote homes to the network, the alternative is to accept second class citizens in our own country.

The only way to fix this is with government money. We paid for the original UFB network with a soft loan. To extend the network requires cash. It would take too long for a loan to pay back at current prices.1

Return on investment

The good news is that state investment in broadband pays a decent return.

If the idea of state control bothers you2, we don’t have to go down the Soviet route. There are plenty of opportunities to work hand in hand with local telecommunications entrepreneurs. This seems to be the preferred approach of New Zealand’s two main political parties.

There’s a point where the big telcos lose interest in extending broadband networks. That’s understandable. They are money-making businesses, not charities.

Wisps (wireless internet service providers) do a great job and they understand local needs and conditions. There should be more soft loans and subsidies to help them push broadband further up the remote valleys.

Good work

Hats off to all the service providers, not just the Wisps. They are a credit to the industry and to the nation. Spark, Chorus, Vodafone, Enable, Northpower and UFF have all reported on their performance. The smaller players may make less noise but their efforts are also appreciated.

In some cases the performance has been astounding.

On Friday Chorus reported the average fibre customer now gets through almost 500GB of data a month. The actual figure is 495GB. That’s up 30 percent of pre-lockdown consumption in February.

When you add in the customers on the copper network, the nationwide average drops to 406GB, an increase of 36 percent on pre-lockdown use. Clearly the old copper network is enjoying a new lease of life, even if in the long term it is on the way out.

It says the average speed on its network is also up to 150Mbps. That’s because more people have switched to higher speed fibre plans. Gigabit broadband is especially popular today and hyper fibre is on the way.

Fibre is king

At the time of writing around 80 percent of the country can connect to the fibre network. That will rise to 85 percent by the end of 2022.

The fibre uptake level before lockdown began was somewhere between 50 and 60 percent. So in very round numbers, almost half of New Zealand now has fibre.

All fibre companies report an increase in demand and there is a post lockdown level 4 backlog of orders to work through.

That’s huge vote of confidence for the decade-old UFB programme. It was originally started with around $1.5 billion of government money in the form of a soft loan3.

Late last year I interviewed Sir John Key and Steven Joyce who were the two ministers responsible for the original plan. Both said then that, in hindsight, the UFB was the best investment a government has made in recent times. That was before the pandemic. Today, that investment looks even better.


  1. Either that, or we accept that more remote fibre customers pay a premium to cover the higher cost of getting a service. This goes against the grain of the one-price-for-everyone approach of UFB, but it would speed things up. ↩︎
  2. There are people who would prefer a return to state-owned and operated telecommunications. That would require a political earthquake. If the Covid–19 pandemic doesn’t change this, there’s little prospect of it happening. ↩︎
  3. A small fraction was set aside for schools broadband, leaving about $1.35 billion for fibre. ↩︎

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