Ovum calls for copper network shutdown

Ovum’s Australia-based research director David Kennedy says if New Zealand’s government is serious about making Ultrafast Broadband work, it must name a date to close the copper network.

Kennedy says:

“Tensions in the New Zealand telecommunications policy framework will persist as long as New Zealand has two access networks, FTTN and UFB, operating in parallel.

He links this to the copper network access price issue that has caused so many problems for Chorus and by extension the government:

"Apart from the pricing problems, New Zealand telecommunications would operate much more efficiently if demand were consolidated onto one fixed access network. Policy currently envisages a gradual, organic migration to fibre, but at some point the FTTN network must be shut down in the UFB footprint.”

Kennedy is based in Australia. His proposal is similar to the heavy-handed approach Australia’s government originally aimed to take with its NBN fibre project.

That line of reasoning says giving consumers choice is an indulgent luxury. Kennedy appears to agree:

“If the Government remains committed to the UFB program, then migration should not be left to chance. A migration timetable, with scheduled shutdown of FTTN where UFB is established after a reasonable transition period, is the logical extension of the government’s commitment to UFB.”

Kennedy also sees closing the copper network as a way to get around the financial problems facing Chorus. He says:

“The regulator’s recent pricing decisions significantly affect Chorus’ revenue base and investment capacity after 2014, and will also make fibre relatively unattractive to end users.

We’ve heard this argument before. The rationale is that pushing the wholesale price of a copper connection significantly below the price of a fibre connection means customers will be more inclined to choose the cheaper option.

Kennedy takes it a step further. He says the regulated copper price also makes delivering copper connections relatively more attractive to retail ISPs.

He says:

“Chorus and the other UFB investors are structurally separated and so are dependent on these ISPs to promote fibre to end-users. The ISPs now have less incentive to do so".