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For the last week or so Chorus has issued a daily update on the data traffic passing through its network. After an initial surge when large numbers of people began working from home, things have settled into a pattern.

It’s the new normal. As Spark’s technology director Mark Beder points out, weekday data use now looks the way weekend’s looked before the lock down. Weekend peaks are now higher again.

Spark says the amount of data on its network has doubled since widespread remote working started. Data peaks are about 27 percent higher than before the pandemic arrived.

Peak mobile traffic is up 22 percent. The company says it has seen some congestion at times and is working on adding capacity.

Call of Duty update

An update to the Call of Duty game on the first weekend of the lockdown period caused what Spark technology director Mark Beder describes as a “massive spike”.

Away from Spark, Tuesday evening saw traffic peak at 2.70Tbps on the Chorus network. There was an update to the Fortnite game during the evening which may have accounted for the extra traffic. The busiest midday this week was Wednesday with 1.72Tbps.

Both Ultrafast Broadband and Enable Networks have registered similar increases. UFF says it now sees about double the amount of pre-lockdown data.

Traffic well within capacity, for now

The Chorus figures are well within the network’s capacity limits. In the run-up to last year’s Rugby World Cup, which was streamed by Spark Sport, Chorus and most of the rest of the broadband industry brought forward capacity upgrades by 18 months or so.

Today the network is built to cope with 3.5Tbps. That’s comfortably above the peaks we are seeing at the moment. Traffic could go higher again when school and university terms restart, but there appears to be more than enough headroom to cope.

 

Chorus says it will waive wholesale broadband charges for up to 50,000 homes that do not have network access. The move aims to help students now forced to study at home because of Covid-19 pandemic measures.

For six months households identified by the Ministry of Education as needing broadband for education will get a free connection. This only applies where there is suitable Chorus infrastructure.

The plan is to use the best available broadband. That means fibre where a connection is in place, VDSL if fibre is not installed and ADSL if VDSL is not available. Because there are restrictions on installing new fibre connections under the Covid-19 lockdown, Chorus says it expects most of the connections will use the copper technologies: VDSL and ADSL.

Speed is of the essence

Ed Hyde, Chorus chief customer officer says: “I am excited to be able to confirm that the Chorus network can be used to provide access to essential tools for learning to students in homes that do not currently have a broadband connection.

It is important to get these homes connected as quickly as possible. Hyde says Chorus will work with internet service providers so that learning can resume from the start of the second school term of the year.

He says; “As a wholesale provider, Chorus can’t deliver the whole solution. We’re now looking to the internet service providers who package up our products for consumers to also support the Ministry of Education, with both financial and operational support.

Operational challenge

“Delivering these connections to students in a matter of weeks will present a huge operational challenge for the industry but we know how important this is so we will be working hard to get this done.”

InternetNZ CEO Jordan Carter says he is pleased to see Chorus working with ISPs and the government towards increasing digital inclusion during the lockdown. “Affordable internet access for all New Zealanders is vital to maintaining social cohesion, sharing essential information and maintaining work and education.”

Tuanz CEO Craig Young says he expects retail internet company to pass on the free wholesale price in full. He says: “There is a real need for this collaboration we’re seeing to continue, but also to widen across the industry”.

Enable, Ultrafast Fibre move to serve excluded schoolchildren

Enable says it will offer free wholesale fibre broadband to connected homes where schoolchildren unable to access the internet. The company says there are up to 2000 unused fibre connections at the moment.

Steve Fuller, Enable CEO, says: “I can only imagine how isolated some children are feeling when they can’t connect to their school community or their friends and we want to help as many of them as we can”.

Central North Island fibre company Ultrafast Fibre has made a similar move. It says there are around 1,650 households in its area that have an unused connection. Like Enable, UFF will offer a 200/20 connection.

Chorus’ biggest data traffic surge since the Rugby World Cup took Kurt Rodgers, the company’s network strategy manager by surprise.

Data traffic has grown hugely in recent years, but there are still surge events like the Call of Duty Warzone release.

This squares with earlier experience. Chorus’ biggest ever day for data was when Wales met France in the quarter final of the Rugby World Cup.  During the game network traffic hit 2.6 Tbps. That was up 37 percent on the 2018 peak. The second busiest day was when England played Australia in the other RWC quarter final,

Rugby World Cup aside, the biggest day in 2019 was on October 15 when. the Fortnite game was updated. Traffic hit 2.47 Tbps.

Earlier in the week Rodgers told me Chorus has noticed increased traffic with more people working from home in the wake of the Covert-19 pandemic. Chorus says it has more than enough network capacity to cope if working from home increases during the outbreak.

 

Early next year Chorus will start rolling out Hyperfibre, that is faster fibre services of up to 4Gbps. Forget whether you might need that speed today and focus instead on what it says about fibre broadband.

Not many countries boast residential broadband services running faster than a gigabit per second. When I looked, I found seven. Perhaps there are ten.

Soon New Zealand will be one of them.

It turns out when government and industry are right when they remind us we have a world class broadband network. It isn’t just idle boasting.

Fibre is fast and reliable. It’s not expensive.

Hyperfibre shows it can go faster still. It’s the Porsche option, although without the price tag.

Chorus hasn’t announced the Hyperfibre wholesale tarrif yet, but it says it will be only a ‘modest premium’ on gigabit prices. That said, early buyers are likely to be business users willing to pay a premium for the extra speed.

At first Chorus will offer 2Gbps and 4Gbps services. An 8gbps service will come later. On paper the XGS-Pon standard being used can crank all the way up to 10Gbps.

Faster fibre is not for everyone. Few people other than movie and TV professionals need Hyperfibre speeds.

That’s really not the point. Having it available as an option is important. It tells us where things can go. If you need more speed, it’s there.

Marketing types might tell us it’s an aspirational thing. Perhaps. Yet it does get us thinking about faster fibre and what we might do with it.

If we’ve learnt one thing about data networks, it’s that what seems like more bandwidth than you ever need soon becomes not quite enough.

When the UFB project started, most users took 30mbps down, 10mbps up services. That quickly climbed to 100mbps plans. Today the majority of customers have 100mbps, but the fastest growing market is for 1gbps services.

We don’t need to go over the why would anyone need a 1Gbps service argument any more. A family with HD TV, Playstations and other devices can easily make use of the bandwidth.

Faster broadband means a better experience for everyone. If you shop around, it only costs the price of a coffee or two to move up to a faster plan.

Some of the talk after Chorus’ announcement pitched Hyperfibre as a counter to the fixed wireless threat. That’s the angle Chris Keall took for his NZ Herald story.

There’s no question that Spark and Vodafone will attempt to sell fixed wireless broadband as a fibre alternative. Yet few, if any, customers are going to make a choice between fixed wireless and Hyperfibre.

Fixed wireless is best for people who either can’t get fibre, have a difficult-to-connect home, or are happy with a basic, bare-bones and sometime slightly cheaper alternative1. Hyperfibre is for people bumping up against the limits of today’s 1Gbps fibre plans.


  1. Not much cheaper. The lowest cost 1Gbps fibre plan is $5 more than Spark’s cheapest fixed wireless plan ↩︎

fibre-optics

On Thursday Chorus released its proposed unbundled fibre pricing for industry feedback. Would-be unbundlers responded with a noise resembling what you might hear when placing an electric guitar in front of an amplifier: a loud howl.

This was always going to happen.

New Zealand’s telecommunications regulations mean that the fibre networks must, by law, be open for unbundling from the start of 2020.

Unregulated, for now

For now, the unbundling process and the prices wholesale fibre companies can charge is not regulated. The idea is that the industry can hold commercial negotiations. If that doesn’t work, then the regulator will step in.

Unbundling worked well for some ISPs when Telecom was forced to unbundle the copper network over a decade ago. ISPs installed their own hardware at an exchange and paid Telecom a monthly access fee.

This worked well for a number of reasons. First, the service providers could cherry pick the most lucrative neighbourhoods. Second, there weren’t many exchanges and each exchange served a large number of customers. Third, the monthly access fee was regulated.

Bitstream then and now

It turned out that the price was considerably lower than the fee Telecom charged for bitstream access. Bitstream access was, to a degree, similar to the service ISPs now buy from New Zealand fibre companies.

The gap between these prices left ISPs with enough room to offer competitive prices to their customers or take the difference as increased margin.

Unbundling fibre is different. Instead of hundreds of exchanges each serving thousands of customers, there are thousands of fibre nodes each serving a handful of customers.

The other big difference is the way we price fibre services. Today’s layer 2 prices are regulated. Prices depend on the level of service, but typically they run from around $40 to around $65 for a gigabit service. The Commerce Commission based its pricing structure on a fibre company’s costs.

Difficulties

Now, this is where things get difficult for would-be unbundlers. The input cost difference for a wholesaler between operating a layer 2 service and an unbundled layer 1 service is pennies, not dollars. That $40 monthly access fee might drop to $38 or thereabouts if it was regulated along the same lines as a bundled line.

This doesn’t leave an unbundler with enough margin to play with.

Despite the unattractive underlying economics two telcos, Vocus and Vodafone, joined forces to push an unbundling programme.

Since late last year they’ve been showing a demonstration of what the technology might look like. They’ve also been dropping unsubtle hints suggesting that: ‘unbundled fibre had better be cheap’.

Like copper only different

Scratch the surface and its clear their thinking is the difference between bundled and unbundled fibre should be in line with things in the copper world.

Chorus’s proposal is that unbundling service providers pay a monthly access charge of $28.70 per line. This covers the fibre line from the customer to the nearest node, Chorus calls these nodes ‘splitters’. Usually 16 customers connect to each splitter.

On top of that, Chorus wants to charge $200 a month for the connection from the splitter to a central point where the service providers can connect the unbundled service to their own networks.

Unbundling at scale

You don’t need to be good with arithmetic to realise that this only works for a service provider if a lot of customers at any splitter want to buy their connection. A would-be unbundler would need to have more than a dozen connections at each node for prices to drop below the basic regulated bitstream monthly fee.

Although keep in mind here that an unbundled fibre line might operate at a blistering 10Gbps. That’s a service that could command a premium retail price.

To no-one’s surprise Vodafone and Vocus made it clear they don’t like the proposed price. A press release from the pair has the headline: “Chorus machinations could put competitive UFB on ice”.

Maths

In it, a clearly angry Vocus CEO Mark Callendar says the maths just doesn’t stack up. He is right. But the legislation was designed that way. There isn’t enough margin between layer 1 and layer 2 to make an ISP happy.

An access price that would please Callendar, at a previous media function he told me it should be under $20, would leave the fibre wholesale companies under water. They’d be bankrupt in no time and that would put critical national infrastructure at risk.

Back to the release where Callendar says: “…the Commerce Commission will now need to intervene, it’s as simple as that. The UFB network was designed to be unbundled and ultimately is an asset that the government has helped fund.”

The Commerce Commission was destined to be dragged into this row from the moment Vocus and Vodafone first announced an intention to unbundle.

Intervention

If it does intervene and assuming it follows a similar cost-based model, the would-be unbundlers are going to be as disappointed then as they are now. The economics of fibre unbundling mean it is a path that’s not worth the trouble, at least as far as residential customers are concerned.

Now, it’s quite possible that the spat you see on the surface is all there is. Yet there’s something else at play. Since the fibre network started, most of New Zealand’s service providers have raced to the bottom on price. It’s about the only point of difference they feel able to compete on.

As Vodafone CEO Jason Paris has said to me in a previous interview, they have competed away all the profits in the broadband business.

Thin margins

Margins are razor thin. Unbundling had potential to fix that. It’s also an opportunity for two high profile telcos to position themselves publicly as against New Zealand’s telecommunications regime without actually saying they are against the regime. Make no mistake, that’s the real object of their ire. 

In the public statements so far, they’ve poked the finger at Chorus.

There’s something in that. But Chorus is a creation of a telecommunications regime that the previous National government set up. The Labour government continued the same regime. There’s a broad political consensus that our telecommunications market is working as designed.

You could see Chorus as the government’s proxy in these matters. A useful punching bag if you don’t like the rules. 

Equivalence

One part of the disliked regime is something called equivalence. The idea is that Spark, Vodafone and Vocus get exactly the same prices, products and services from fibre companies as a five-person regional ISP working in rural Taranaki.

The big firms hate that. They like to use their clout and economies of scale to negotiate better terms from suppliers. Regulation stops them.

Consciously or unconsciously, Vodafone and Vocus hope the government is listening. That’s why so much of their rhetoric about unbundling uses politician-pleasing words like ‘innovation’ and ‘competition’.

Competition

Unbundling is clearly a competitive1 move, but it’s not really innovation in the sense we normally use the word. Assuming it is doing everything right at the back-end, the only practical option an ISP has to innovate with unbundled fibre services is to remove some of its capability from certain customers.

Remember this as the war of words heats up in coming months and the various parties troop into the Commerce Commission. They’d like to get a lower price for unbundled fibre.2 Who wouldn’t? But what they really want is to take back a little control and restore profit margins.

Disclaimer: Chorus pays me to edit the Download magazine and a weekly newsletter. It didn’t pay me to write about unbundling. Indeed, this post doesn’t reflect anyone’s opinion other than my own, certainly not Chorus’. No one vetted or otherwise approved this. Any mistakes are down to me. Your corrections or alternative opinions are welcome.


  1. Spark has options with its fixed wireless broadband. These should ramp up when 5G arrives. Vodafone ought to be able to do the same, but the local firm isn’t getting the investment it needs from Vodafone Group. Unbundling is a cheaper option. ↩︎
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  3. I’d expect the Commerce Commission to insist wholesale fibre companies propose a single per-line price in place of the more complex line and splitter tariff. ↩︎