Everyone knows fibre is the best way to get broadband. It’s reliable and can deliver gigabit speeds. Soon it will be able to go even faster.

After 100 years on top, copper is on the way out for most people. But not for everyone. At least not yet.

There is still life in copper broadband. Scientists and engineers have squeezed every last electron of performance from wire-based data transfer to the point where, with the right conditions, copper can deliver fibre-like speeds.

For the most part, the right conditions means living no more than about 1.5 kilometres from a roadside cabinet or exchange.

VDSL interim until fibre arrives

This is good news because the second phase of New Zealand’s government supported UltraFast Broadband roll-out will not be complete until 2022.

People in areas at the back of the queue will have to make do with copper broadband for now. Fixed wireless broadband is also an option.

Those people in areas not yet scheduled for fibre will wait still longer. Eventually fibre will reach beyond 87 percent of the population, but not soon enough to keep everyone happy.

Chorus, Nokia crank up VDSL speeds

Relief is on the way. Chorus and Nokia are working on the latest version of VDSL2 vectoring which could see copper broadband users get speeds as high as 130 Mbps.

Vectoring uses noise-cancelling technology to remove the crosstalk interference found when many signals share the same copper connection. If that sounds too technical a description, focus on this: Vectoring means higher speed.

You’ll need to be close to a cabinet to get maximum speed. The further you are from the cabinet the slower it gets.

Existing VDSL2 users living next to a cabinet should see speeds of around 80 mbps. One kilometre away from the cabinet the speed drops to around 25 to 30 mbps. By the time you are two kilometres away, the speed is down to around 20 mbps, maybe a fraction lower.

The ratios are likely to be similar when vectoring is applied. So expect around 130 mbps near the cabinet and roughly 30 mbps two kilometres away.

Fibre-like speeds

This isn’t bad. When fibre first went on sale in New Zealand customers were offered 30 mbps plans.

To put the speed in context, Netflix recommends 5 mbps for HD television streaming and 25 mbps for ultra high-definition.

In other words, get ready to enjoy Spark’s streaming coverage of next year’s Rugby World Cup or Premier League football. If that’s not your thing, there are plenty of other streaming TV options.

VDSL fine in practice

Until recently I was getting around 50 to 60 mbps on a non-upgraded VDSL2 copper connection. I live around 700 metres from the nearest cabinet. This gives you some idea of the potential.

Chorus head of Network Technology Martin Sharrock says getting the fastest possible broadband experience to customers is a priority.

He says: “Vectoring has improved average VDSL downstream speeds by over 40 percent and upstream speeds by over 30 percent. This is especially important for rural New Zealand where fibre to the home has not yet been planned.”

Federico Guillén, president of Nokia Fixed Networks, said: “Nokia’s copper solution with vectoring technology compliments Chorus’ fibre roll-out and provides another way to deliver significantly higher speeds that enhance the way customers experience digital content.”

And then there is wireless

As mentioned earlier, fixed wireless broadband is an option for people in areas not served by fibre. Some wireless towers are full, they’re not open to accept more customers. This is the case in my Auckland suburb where fibre is an option.

While fixed wireless broadband can, in theory, deliver speeds faster than VDSL with vectoring to people further away from a cabinet, the speed tends to vary depending on how many others are using the same bandwidth at the same time. It will probably slow down at peak TV viewing times.

If you’re not on fibre, it’s worth investigating both technologies. You can find out if a copper VDSL2 connection is available at your address from the Chorus broadband checker. To get a bigger picture of all your broadband options use InternetNZ’s excellent National Broadband Map.

Imagine if at 9pm one Thursday evening there was a sudden 20 percent surge in demand on the electricity network. At the very least there would be a few households reaching for candles and electric torches.

Yet that’s exactly what happened to the national internet network last week when a software update to Fortnite, the popular computer fighting game, landed.

The network company Chorus saw a 20 percent spike in traffic yet nothing untoward happened. There were no reported outages. If anyone noticed their fixed-line connection slowing, it wasn’t serious enough to be public news.

Robust, resilient, reliable

Our internet network took the surge in its stride. That’s a measure of how far we have come. It’s robust, resilient, reliable: all the R-words.

And if you don’t think this is a big deal, take a look across the Tasman where Optus efforts to stream the 2018 World Cup strained telecommunications infrastructure.

Chorus has become used to seeing spikes. Every month or so it reports a new, higher peak as network traffic continues to rise. From the consumer point of view this has all happened in the background with no obvious side-effects.

The normal pattern on the network is for data traffic to hit a peak at around 9pm when the number of people streaming TV content reaches a daily maximum.

Fortnite cover

Last Thursday the Fortnite version five patch became available at about 8pm. This is just as the daily streaming traffic rises towards its crescendo. At the 9pm peak data traffic was 20 percent higher than normal.

Fortnite on fibre

Chorus says the amount of extra traffic at that time means as many as 30,000 New Zealander gamers were downloading the Fortnite patch at the same time.

As anyone who experience mobile network downloads of, say, an iOS software update for the Apple iPhone earlier this decade will remember, big software updates can clog networks. And yet that didn’t happen.

Network strategy manager Kurt Rodgers says Chorus has never seen a spike like that before. He says Fortnite is a great example of how fibre internet can support gamers.

There needs to be considerable headroom for any network to be able to take a 20 percent spike without blinking.

Disclosure: Chorus didn’t pay me or ask me to write this story. While I am paid to edit the company’s magazine I’d have written this story the same way regardless.

Chorus’ network hit its 2017 peak at 9.25pm on December 10. The broadband network was delivering 1.328 Terabits per second.

We once measured large amounts of data in terms of books or towers of compact discs between here and the moon. This time Chorus says the peak was the same as 260,000 HD video streams being watched at the same time.

Four days into 2018 high demand during a storm broke the record. On January 4, at the same hour, the network hit 1.33 Terabits per second. No doubt the record will soon broken again as numbers continue to climb.

The people of Porirua are the most voracious data consumers. In December the average household chewed through 202GB, that’s 34 percent up on a year earlier.

Nationwide average data consumption on the Chorus network is now 174GB a month. That’s up from 123GB a year ago.

Fibre broadband accounts use more data

Users with fibre accounts use more data than those with a copper connection. While the average monthly data base across the entire Chorus network is 174GB, customers with fibre use around 250GB.

In September a Chorus forecast said this will climb to an average of around 680GB a month by 2020. In part the rise will come as more accounts move from copper to fibre.

The growth is largely about television moving from broadcast distribution to online, on-demand delivery.

Chorus network strategy manager Kurt Rodgers says it is not just the big international providers like Netflix driving this change. He says TVNZ and Three launched live streaming in 2017 and that has helped online television become mainstream.

Rodgers says people are watching on smart TVs, but they also watch on phones and tablets connected to home wi-fi networks. He says phone handsets are used more often with wi-fi than as traditional phones.

Broadband speeds on the Chorus network are also higher. Dunedin, which was the original Gigatown now has an average connection speed of 265Mbps. Rotorua is next on 72Mbps and Wellington is in third sport with 70Mbps. The national average across the Chorus network is 64Mbps.

A note on broadband averages

Chorus measures average use because that makes number sense for a network operator. It divides the total amount of data across the network by the number of user accounts.

The figure is, simple, easy to understand and demonstrates how demand for data is growing. It helps Chorus plan for growth. It makes discussion straightforward.

Not everyone likes this measure. Some point out that the data use pattern is not a Bell curve. They says that a small number of high-end users skew the average number higher. They argue that the median amount of data used is lower than the average.

There’s something in this. Yet the median and the average numbers are moving closer as more and more New Zealanders switch to streaming video. Or in other words, high data use is becoming mainstream.

Chorus active wholesaleComputerworld New Zealand reports that Chorus says it has moved to ‘active wholesale’ to stem the loss of customers to rival networks.

The story covers comments made by Chorus CEO Kate McKenzie at the company’s annual general meeting. She says the number of connections on the Chorus network has fallen following Spark’s move to push customers to its fixed wireless broadband services.

She says: “Total connections reduced by about 125,000 last year and by a further 20,000 in the first quarter to the end of September”.

From passive to active wholesale

To deal with this Chorus has moved from being a passive wholesaler to taking a more active role.

In response, McKenzie said Chorus had “gone from being a passive wholesaler to being more active in the marketplace. We can’t rely on all retailers to promote our products for us when they have their own competitive motivations.”

Among other things this has led to a Chorus information campaign highlighting the performance benefits of fibre broadband over a wireless service.

There has also been advertising promoting fibre. McKenzie told the AGM this is already showing results with defections to wireless slowing in recent months.

Follow the money

It’s not hard to understand why Spark wants to move customers on to fixed wireless connections. It makes a lot more money that way.

When a customer buys a fibre broadband connection from Spark, the company pays around $40 wholesale fee to the fibre company. In much of the country that’s Chorus, but the same applies in areas serviced by Northpower, UFF and Enable.

The wholesale cost of a line is around 40 to 50 percent of the price Spark charges its customers. So cutting out the wholesale level means better margins and greater profit. There’s enough room to pass some of the saving back to the customer.

Control

Aside from the money, a fixed wireless connection keeps everything under Spark’s control. It means it becomes less reliant on others. At the same time, it regains some of the benefits of vertical integration.

In a normal market this would give Spark leverage to negotiate better rates from the fibre companies. Spark is by far the largest buyer of broadband connections, so it could expect something for economy of scale and something else to counter the wireless broadband threat.

That’s not how New Zealand’s open access fibre broadband market works. Prices are regulated by the Commerce Commission, fibre companies are not allowed to play favourites. They can’t offer one rate to Spark and a different rate to other players.

The wireless threat

When this model was first drawn up, wireless wasn’t a serious threat to fibre. At the time I asked then Communications Minster Steven Joyce if the rapid development of wireless broadband had been considered, he said it had not and dismissed the idea the technology could one day compete with fibre.

In a sense wireless broadband doesn’t compete with fibre. It can’t deliver high speeds and the big wireless operators have kept tight caps on data downloads to stop networks from overloading.

And yet not everyone needs gigabit speeds and vast quantities of data. Fixed wireless broadband is ideal for low-use customers. It also makes sense in areas where fibre is not available.

This week the Commerce Commission published its draft numbers for the $50 million Telecommunications Development Levy. In a way the TDL acts as a report card on the shifting fortunes of the main telecommunications companies.

The levy is, in effect, an extra and, somewhat discriminatory, tax on telecommunications companies imposed by the outgoing National government. It adds up to a roughly one percent increase in telecommunications prices.

As in previous years Spark and Vodafone are the biggest contributors paying 35 and 26 percent. Chorus and 2degrees are three and four.

The big four players will pay more than 90 percent of the total levy. Another eleven companies will pay about eight percent of the TDL between them.

Investing in rural networks

The TDL helps subsidise investment in rural networks. Most of the money will go back to three of the biggest payers. Spark, Vodafone and 2degrees, as the Rural Connectivity Group, won the contract for bid the second phase of the Rural Broadband Initiative.

There’s a double whammy for Chorus investors. Not only does the company not get any of the TDL money back in the form of contracts, but unlike the telcos, Chorus can’t raise prices to fund the tax because most of its rates are regulated.

What the TDL says about the industry

Only companies with telecommunications revenue of more than $10 million pay the TDL. When deciding how much each should pay, the Commerce Commission extracts a number it calls qualifying revenue. This figure can often be well below $10 million.

The commission adds all the qualifying revenue. Then companies pay a share of the $50 million TDL based on their share of qualifying revenue.

You could look at the way the share changes as a crude, yet effective, measure of relative performance.

The total pool of qualifying revenue changed little between this year’s determination and last year’s. In both cases it comes to a little over $4.2 billion.

In other words, taken as a whole, New Zealand telecommunications industry growth is flat. Taking inflation into account, that means it is actually in gentle decline.

Spark still dominates, but falling

Spark remains the largest contributor to the TDL. In the 2016-2017 year its share was a fraction over 35 percent of the total. That’s down from almost 38 percent a year ago, a fall of around 2.5 percent.

Vodafone barely shifted position in the year at a little over 26 percent. Its share of the TDL total climbed by 0.1 percent. You could see this as closing the gap on Spark. In very round numbers Spark is around a third of the total market and Vodafone is a quarter.

Chorus saw its share of the total grow by half a percent. It remains the third largest telco with getting on for 23 percent of the total.

2degrees is a climber. Its share of the total grew from 7.25 percent to 8.38 percent. This reflects the company’s strong performance in the market. While it is still a long way behind Vodafone and Spark, to be almost a third the size of Vodafone after seven years in the market is a major achievement.

Vocus is down a smidge at 3.25 percent of the total. It is less than half the size of 2degrees and less than a tenth the size of Spark. The company’s relative size could mean few regulatory hurdles if other New Zealand telcos attempt to buy it.

The five largest telcos collectively account for almost 96 percent of the total TDL in this year’s determination. That’s down one percent from last year.

Fibre effect

This is because of fibre and the rise of the regional fibre companies. Ultrafast Fibre, Enable and Northpower saw their total share climb from less than one percent of the total to about 1.6 percent.

This happens because as customers move from the copper network to UFB fibre some of the money those customer pays switches from Chorus to the regional fibre company. As more sign up for fibre these companies will continue to grow their share of the TDL, but at some point they will stabilise.

Most of the other changes are down to what scientists might call noise in the numbers. Although there is a newcomer in the TDL list this year, Now only accounts for 0.13 percent of the total.