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.

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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.


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.

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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.

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Rural VDSL2

Cynics were quick to label the government’s generous broadband funding announcement as pork barrel politics. There’s something in that. New Zealand is, after all, in the run up to what looks like a tightly fought election.

Yet anyone looking closely at the existing fibre network and the second phase of the Rural Broadband Initiative could have figured out that government needs to spend more to fill the remaining broadband gaps.

It was only a matter of time.

English, Bridges plug holes

In the event, Prime Minister Bill English and Communications Minister Simon Bridges managed to find the extra money needed to plug the holes. Sure, it is smart politics. It is also a smart communications strategy.

By the time the money is spent, New Zealand will have world-class broadband infrastructure. The cities were always going to get that. Now the regions will too. On paper New Zealand will have the world’s best rural broadband.

What’s more, we get that world-class network sooner. Five years from now the earth movers, fibre-laying gear, hard hats and high visibility jackets will be packed away. Just about everyone in New Zealand will be able to watch high-definition streaming video or quickly upload vast amounts of data to a cloud.

Fibre, copper, wireless

Before this week the government committed about $2 billion to building a fibre network that would reach around 80 to 85 percent of the population. Another 10 percent or thereabouts would have either VDSL from fibre-fed cabinets or a fixed wireless connection of some description1.

This week’s spending brings the total spend up to around $2.5 billion. Between them the network builders2 will invest about twice as much again. That’s all private money. No-one uses the term in telecommunications; New Zealand’s new broadband network is a classic public-private partnership.

The cost to taxpayers is minimal. The $1.5 billion or thereabouts put aside for the first wave of Ultrafast Broadband was a soft loan. By 2025 the treasury will get that all back.

Old money

Much of the remaining billion dollars from government is either the same money recycled, or funds raised from levies imposed on telecommunications companies.

While taxpayers will ultimately cough up for this through higher service prices, it’s still clever accounting. And the cost per user is minimal. My back of an envelope calculation3 puts it about 50 cents per month.

Compare this with the tens of billions Australia is spending on NBN. Many figures have been used over the years, around A$50 billion is the most common current estimate.

Australian’s will tell you it’s a bigger, more ambitious job reaching more people and spreading further. It’s true. Even so, it looks like the New Zealand people are getting a far better deal. Most of us also get better services than Australians too.

99 percent

At its peak, the old copper telephone network reached around 99 percent of the population give or take. You can assume the last one percent is beyond reach in practical terms.

Connecting the 75 percent of the population living in cities and towns isn’t that hard. Laying fibre to the door for these people isn’t prohibitive.

The next ten percent of the population is harder to reach, the cost per connection might be one and half to two times the cost of connecting the first 75 percent of the population. It’s harder, takes longer and is more expensive. But it’s still doable.

Problems start with the remaining 15 percent. In many cases it is cheaper to reach them with wireless services. Some of the last 15 percent will be in communities which already have fibre connected to a local school. In others, there may be enough people in one spot to make fibre-fed cabinets and VDSL over copper a viable proposition.

Where fibre gives way to wireless

In round numbers the cost per connection rises with each percentage point as you move from the 85 percent mark to 99 percent. At some point along this line the economics of fibre and copper give way, first to cellular fixed wireless and then to the more tailored, local approach used by wisps.

Fibre is the best way to get a broadband connection. Fibre-fed cabinets and VDSL over copper is second best so long as you are near enough to the cabinet. Today’s wireless technologies can often perform almost as well.

This plan leaves almost no-one behind and anyway, govenment will plug the few remaining gaps over time. New satellite technologies promise to perform almost as well as fixed wireless.

There’s a clear political slant to this week’s announcement. While the timing is deliberate, the decisions are money well spent. This is a sound infrastructure investment.

  1. Fixed wireless services from wireless internet service providers or wisps are not quite the same as the RBI fixed wireless broadband services delivered from cellphone towers. ↩︎
  2. Chorus, Northpower, Enable Networks, UFF, Spark, Vodafone, 2degrees and the wisps. ↩︎
  3. Total levy is $50 million a year. Divide that by the number of mobile, landline, fixed wireless and broadband accounts and then by 12. At a guess I’d say there are eight to ten million telecommunications accounts. ↩︎

2degrees has signed a multi-year backhaul contract with Chorus. The deal replaces a mix of services from providers including Spark and Vocus.

The network will connect UFB points of presence and data centres to the international network. 2degrees says it now has a fully diverse and highly resilient network that transports voice and data worldwide.

It’s a strategic move for both companies. At 2degrees it marks the latest step as the seven-year-old mobile carrier emerges as a full-service telco. It is now New Zealand’s third largest retail telecommunications carrier.

Future proof

Mark Petrie, 2degrees chief fixed officer says: “By combining 100Gbps links into our network we’re future proofing our ability to support the ever-increasing data demands of the country’s largest enterprises, for whom having this capability is critical.”

The deal marks the first national customer to sign for Chorus’ 100Gbps nation-wide fibre backbone network. Chorus’ chief commercial officer, Tim Harris describes 2degrees as an important strategic partner for Chorus.

While it is an important business win for Chorus, there’s an even greater significance. It marks the national wholesale network provider’s move away from regulated monopoly services into a more competitive space. This gives Chorus a route away from settling down as a mere utility provider into more commercial areas.