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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 one of the best investments 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. ↩︎

33 thoughts on “Covid-19 highlights UFB investment wisdom

  1. They finished putting fibre into the ground on our road just before lockdown. But had to stop connecting it up. So now we don’t know when it will go live 😭

  2. There’s a backlog but connections have started again. It’s not just the missing 4 weeks, demand is also through the roof as more work from home

  3. Great piece, Bill. Keep beating the drum. And yes, credit where it’s due, the UFB network really is the outstanding achievement of the Key government.

    Cost information is hard to find on the internet, but I did find the figure of $60,000 / km to lay fibre. It seems plausible. Costs could well be lower in back-country rural roads.

    So $240M would get us at least another 4000 km, and on-going maintenance is maybe another $4M per year. Very little downside risk, but a great deal of upside social benefit to laying that fibre in less well off regions.

    About the only thing that outcompetes it is the public health benefit from insulating, damp-proofing, and draught-proofing our dire, dire social and rental housing stock.

    Much better either of these, than subsidising sportsball competitions and sailboat races which everyone will have forgotten in 15 years.

  4. “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.”

    If margins are small there’s little need to sharpen the pencil. In fact in the supply of an essential public service any pencil sharpening should be avoided in favour of giving everyone the basics.

    And who are these “telcos?” That’s a term from a dead world of vertical integration. Let’s be honest, the margins for the overwhelmingly dominant providers of fibre connection and the bitstreams they are exclusively able to provide on it are fine.

    The thin margins are in retail service provision where only what the LFCs provide is available for sale. And how thin are they? How would they compare with other utilities. The return on utilities should be as low as the risk, and that risk is empirically lower, with returns higher, than other investments or assets. It is time the expectations of champagne returns on utility investment ended and it be recognised that in a world of NIRP, you don’t need a bit return on a certainty to attrct

    The rough estimate of 50% of the population has fibre is a sad contrast to the fact that 100% of New Zealander’s contributed to the “soft” loan, and 50% got nothing. Where it is available you have gone on the record that you expect 60% uptake. What does it say when 60% of New Zealanders pay for a service that 16% don’t have even the option for? I would say it suggests, and noöne disagrees, this is the new electricity or telephony (services we pushed farther than a hair fine wisp of fibre, back when we cared rather than calculated) and should be universal.

    The Soviet fear mongering is as old and unnecessary as the vertically integrated Telco of our youth Bill.

    The State owns and runs the road reserve and free space spectrum, but not the services on it. This was the intended model for UFB, now that it is technically trivial, but the point got lost. Unless you’re afraid of the State control of the roads and RF, you need not worry about State owned fibre with private/public sector competition running over it.

    At least in that model you wouldn’t have Chorus and the three dwarfs getting funded into two layers of the network stack and keeping 100% of the profit (though admittedly not all the benefits, to their chagrin there are spillovers they don’t get to charge for).

    Yes, everyone is impressed with the need for this basic utility, everyone acknowledges the challenges of getting it into the hands and futures of more New Zealanders, and then there’s a sigh, a shrug, and a regretful capitulation to the logic of a spreadsheet and the profits of a private company that is no doubt doing very well in the current environment. Their network, paid for in part by us, is no doubt earning well.

    It’s time the degree to which fibre is affected by the public interest was recognised and the structural separation of telecommunication, beneficial in the past, and intended for UFB be resurrected for all New Zealand.

  5. Spot on commentary again. Being someone on the wrong side of the digital divide I have found that I have no advocate for better internet (apart from Bill Bennett), nobody will take any responsibility for pushing the case you so clearly lay out here. Cost is also an issue, there does not seem to be any competition with the price for wireless RBI 4G, those unlimited ufb prices seem just a dream to rural folks.
    Is it unreasonable to see a few extra local roadside cabinets to fill in the VDSL gaps as a stop gap measure.

  6. A couple of thoughts round rural access to fibre.

    I live in exceedingly hilly country that’s prone to heavy rainfall, slips and flooding. And, if power poles are used for telecoms, they can get taken out by high winds and trees falling onto them. It isn’t great country to have wired communication, underground or overground. Telecom ditched the ‘wired’ link from the nearest town many years ago, in favour of microwave radio link – and then back onto copper – to provide a reliable service. And it is extremely reliable.

    It’s possible – and some rural communities have done this – to lay fibre – or the ditches for it, as a rural community initiative. Being farming country, every other property owns the heavy machinery necessary to dig a ditch – farmers are doing exactly that all the time.

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