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Ross Patterson: Government-funded fibre makes sense

At the NBR former telecommunications commissioner Ross Patterson defends the case for the New Zealand government’s investment in a fibre-to-the-premises network. 

Patterson is responding to an earlier article by Bronwyn Howell. He says:

…demand for fibre services is greater than anticipated at this stage of the rollout, and the proportion of fibre customers on 100 Mbps or higher plans is also ahead of expectations. Uptake has now passed 20%, and ultimate uptake in New Zealand will be well in excess of the 30% target of the private investor in the Netherlands.

Howell is critical of government involvement in telecommunications. She is an academic and comes at the subject from a hard economic perspective.

Even if you disagree with her premise, much of what she has to say is often worth listening to. Her arguments probe current thinking and provide fresh insight. Howell’s input stops the debate from being an echo chamber.

But not in this case. By the time her comment about people not wanting fast broadband were aired, it was out of date. There were a few other mistimed comments. My guess is her opinion piece was published weeks after it was written.

Patterson uses the UK as an example of what the New Zealand fibre market would look like if the government had not stepped in. At he points out, the UK is now Europe’s fibre laggard.

He does a great job of explaining market dynamics:

In the early part of the build, uptake is low, because retail service providers do not actively promote fibre services. If only 10% of the customer base has access to fibre, there is no business case to invest in services which 90% of the customer base cannot receive.

A tipping point typically occurs at about the 35% penetration mark, when service providers perceive that the available market is of sufficient size to justify launching new services. In New Zealand this tipping point was reached in March 2015, when the fibre network passed 600,000 homes, at which point Netflix entered the New Zealand market.

Patterson overlooks VDSL, but otherwise he offers a neat summary of the current state of fibre in New Zealand.

Updated with link to Bronwyn Howell’s original comment. 

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