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Portugal Telecom says it will start closing copper switches next year. By 2020 the nation’s copper network will be history.

The telco says being fibre-only will help it sell services in a competitive telecommunications market.

Analyst Benoit Felten notes removing copper means Portugal Telecom will no longer have the cost overheads of running two networks in parallel.

Copper: In New Zealand it’s complicated

Removing copper is more complicated in New Zealand. Even so it is still a good idea.

It will lower costs and simplify the telecommunications market. Pulling out copper will reduce regulatory tensions. It will take the political heat out of the market and force service providers to focus on future technologies. It will spur further innovation.

A decision is overdue.

There are barriers:

Regional New Zealand needs copper for years to come

The first stage of New Zealand’s nationwide urban UFB fibre roll-out finishes in 2020. It will reach the 75 percent of the population living in cities and larger towns. Stage two will take the total to around 80 percent of New Zealanders.

Some customers not covered by UFB will be able to get fixed wireless broadband from the Rural Broadband Initiative. Vodafone is building new RBI towers outside of the main population areas. Most are now built. More towers are on the way. The RBI can be extended.

At first RBI customers found performance unsatisfactory. That was when the fixed wireless broadband service used 3G cellular technology.

With 4G cellular, rural users are getting fibre-like speeds. I spoke to one farmer buying fixed wireless from Spark who had 80 Mbps. That’s good by any standard.

Fixed wireless is now possible on other cellular towers. It is also available in cities thanks to Skinny Broadband. Other fixed wireless services will start soon. Expect competition. There are also specialist providers servicing rural markets with other innovative wireless products.

There may be further UFB and RBI extensions later. For now around 10 percent of the nation falls into the gap between the two programmes. All things being equal, copper could serve these customers well into next decade. Their copper lines will have to remain intact for now. But swapping them out is possible.

Chorus owns the copper network

Chorus still owns the nationwide copper network. That’s not a problem in the areas where Chorus also owns the new UFB fibre network. In those areas Chorus has a clear financial incentive to move customers to fibre.

In places where other fibre companies — that’s Northpower, UFF and Enable — operate, the Chorus copper network competes with fibre. It remains a lucrative source of revenue for the company.

Over time that revenue will drop as users switch, but for now it is important.

Should the government decides to close the copper network in these areas, Chorus may have a case for compensation. That could lead to drawn-out negotiations or even litigation.

Either way, it is a problem that needs solving before closing the copper network.

Dramatic change in the cost of supporting copper lines

The cost of maintaining the copper network is averaged across urban and rural areas. It’s not a huge figure, nor is it negligable.

On the whole, maintaining copper networks is cheaper in towns than in rural areas. As more and more inexpensive-to-support urban customers drop off the copper net, the maintenance cost of each remaining copper line will rise.

If this doesn’t make sense. Think of what happens when there is one last copper customer in a street or on a cabinet loop.

As some point, supporting the remaining copper customers will be prohibitive.

Opportunities in closing copper network early

On the positive side, this last barrier is also an opportunity. It gives government and the telecommunications industry an incentive to modernise connections for those users left in the gap between UFB and RBI.

Number crunchers can revisit their models and provide details. My guess is that with the way cellular technology is evolving, wireless broadband services providers will soon offer most users in that gap a superior, cost-effective alternative to copper.

By the time any change comes we’ll be looking at 5G mobile. This promises gigabit wireless connection speeds and thousands of simultaeous connections. It means users will have fast broadband links that are cheaper to install than fibre and cheaper to maintain than copper.

The attraction of providing those customers with 5G broadband will be so tempting, carriers will want to invest in towers serving any sizable community. It would help if regulators could ease the burden by allowing or even regulating for shared access to cellular towers in the same way this already works with the RBI.

Sooner or later all the users in the gap between UFB and RBI will come into the fast broadband, post-copper fold. Ten years would be a pessimistic deadline. Setting a date to drop copper networks in the cities will bring that day forward.

In his post, Felten mentions unbundled copper exchanges where ISPs have DSLAMs. This also applies in New Zealand, but by the time copper is removed from our cities those unbundled ISPs will have recovered the cost of any investment and, in theory, at least, will have moved most of their business to fibre.

One network good, two networks not so good

Putting an end date on the copper network will focus minds on what’s needed to make this work best for everyone. It will also give telecommunications investors something they often ask for: certainty.

Knowing, say, ten years out, Chorus will rip out copper in a suburb or town will help everyone plan. It’s inevitable anyway, so let’s admit that now and move on.

If the government had moved sooner to name a copper shutdown date, it could have avoided much of the fuss over the so-called copper tax.

Asking telcos and consumers to pay a dollar or two over the odds (from their point of view) for access doesn’t sound so bad when everyone knows it is for a limited time only.

Until government names the copper shut-down date, there will always be market tensions. The regulatory framework will look muddled and investors will face higher than necessary risks.

It’s time to get on with the job. Set a date to pull out the copper.

Chorus vanChorus posted a lower profit for 2015. In a statement chief executive Mark Ratcliffe said the fall was due to the lower regulated copper price.

What he didn’t say is the numbers could have been much worse. The company dodged a bullet, maybe more than one, when the Commerce Commission ruled to cut the copper access fee by less than its first draft price.

Even with a higher regulated price the company suffered. In the last six months of 2015 Chorus made an after-tax profit of $33 million. That’s almost half the $64 million made in the same period a year earlier.

Chorus owns the local copper network and sells access to internet service providers like Spark, Vodafone and CallPlus. The price it can charge is fixed by the Commerce Commission.

Copper wrangling

It took almost three years of wrangling to decide the regulated copper price. Most observers and analysts regard the final price as a Chorus win, although that’s not how the company spins it.

While this was taking place Chorus suspended dividend payments to shareholders. With the new price in place these have resumed.

The company says it expects to pay a dividend of 20 cents per share for 2016. There will be an interim payment of 8 cents in April.

Investors seem pleased. Chorus shares were up almost five percent immediately after the announcement.

In a letter to shareholders chairman Patrick Strange noted two other highlights:

Ultra-fast Broadband (UFB) build is now complete for 48% of planned premises, including seven towns, and the Rural Broadband Initiative (RBI) rollout is almost complete. These programmes have now brought better broadband within reach of about 646,000 consumers nationwide.

Demand for fibre continues to increase and more than 112,000 mass market consumers have now been connected to fibre services. Growing numbers are opting for a 100Mbps service or better.

average throughput per user chorus

 

A slide in the results presentation shows how fixed line connections are moving fast from copper to fibre. Meanwhile, the average throughput per user is climbing at a rapid rate.

Skinny broadband

Skinny Broadband is a solid, affordable low-end alternative to a copper or fibre internet connection. It suits many customers’ broadband needs.

It is competitively priced. Even after the $200 upfront payment for a suitable fixed wireless modem, Skinny Broadband is New Zealand’s cheapest mainstream broadband plan.

We’ve been conditioned to think wireless data is expensive. So you might think it odd that Skinny can deliver wireless broadband for less than any terrestrial broadband plan.

Skinny bypasses the copper tax

The reason is simple. Skinny doesn’t pay Chorus or any other network provider a regulated $42 (or thereabouts) each month for copper or fibre network access.

Don’t underestimate the effect this is going to have on the broadband market.

Some have described the access fee charged by Chorus as a copper tax. I’m told by industry insiders and advocacy groups that the government threatens retribution if they use that term again.

Flaw in UFB project

Forget what the Commerce Commission says. Government needed a high copper tax to placate Chorus shareholders. That’s because the government nailed fibre network builders to the floor when negotiating contract prices. Without the copper tax income, Chorus shareholders would get an unfair investment return.

In effect, the UFB deal the government first offered Chorus was financially unsustainable. The company had no choice at the time but to accept a poor deal[1] and hope it could negotiate or lobby for concessions later. Concessions like, say, the Commerce Commission settling on a high copper tax.

Before winning a higher copper tax through the lengthy Commerce Commission process, that earlier,  strong-armed fibre deal represented  a threat to Chorus and to the company’s shareholders.

It also threatens the government’s UFB fibre broadband project.

A bigger picture

The threat goes further. If word got around that doing big NZ government infrastructure projects was financially risky, the government would struggle to get roads, railways, airports or hospitals built. Shareholders wouldn’t let managers bid for future NZ government projects.

Experts, analysts and industry lobbyists argued the toss over the right copper tax level for months. In the end, the Commerce Commission settled on a regulated access price that pleased the government and Chorus shareholders while disappointing everyone else.

Now that high price has become a different problem. It makes fixed broadband vulnerable to wireless competition.

Copper tax headroom

If the Commerce Commission had settled the access price at the lower level the industry had previously anticipated, there wouldn’t be much headroom for an alternative like Skinny Broadband to muscle in.

Who knows what market share Skinny will pick up? It will win some business for sure. The price is keen enough to pull customers from existing plans.

Assuming Skinny Broadband grabs more than a handful of customers, it will mean a slice of the potential market is lost to copper, to UFB, to Chorus and to the other fibre companies. That will, in turn, change the economics of those businesses.  Costs will spread over few customers.

The UFB business model only works if a large number of potential customers sign up.  It may even mean the Commerce Commission will need to return and strike a higher copper tax to keep Chorus and the UFB on track.

There’s more to this than Skinny

If this was just about Skinny Broadband, Chorus and government would have little to fear. They could shrug it off as a small competitor.

However, Vodafone is sitting on a huge chunk of suitable bandwidth. 2degrees has some. Spark may enter the market it its own right. As New Zealand’s largest ISP that would cause headaches for UFB.

There are other slices of spectrum. In theory all, or at least most, of it can be used to bypass UFB fibre with similar wireless broadband products.

New Zealand has a small population and relatively uncrowded airwaves. There may be enough spectrum to meet all the market demand for broadband.

Vodafone threat

Vodafone also has a neglected, but still viable, HFC cable in Wellington and Christchurch which bypasses Chorus and Enable Networks. So far it has remained on the sidelines, but if the vultures circle UFB, this could come into play.

Should all these broadband alternative chickens come home to roost at once, they could put a serious dent in fibre demand.

Forewarned about wireless

Wireless has been a known threat to fibre since the UFB was first announced. Wireless was listed as a possible risk before the UFB contracts were awarded. The technology has improved since then.

Now it is maturing as a viable alternative, not for everyone, but for some users. Maybe enough users to upset market assumptions. Fibre may have advantages, it may be a better technology. History shows us that merely being a better technology has never been enough to ensure success.

While this is enough of a challenge for terrestrial broadband planners to be getting on with, it is only the start. Work is already underway on 5G mobile, that promises to deliver fibre-like speeds with greater efficiency.

No-one in government is going to heed the words of a journalist like me, but if it wants to avoid future problems with UFB, now would be a good time to revisit those original contracts and offer Chorus and the other fibre builders better, more sustainable terms.

Then revisit the so-called copper tax.


  1. At the time Chorus was still part of Telecom NZ. If Telecom NZ didn’t agree to build the UFB network it would have found itself up against a government subsidised and supported fibre network competitor.
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Skinny broadband

Skinny Broadband is cost-effective wireless alternative to copper or fibre internet. It is fixed wireless broadband, piggybacking off Spark’s 4G mobile data network. Sometimes this approach is known as BoLTE: broadband over LTE.

You get the same basic data service as a Spark mobile phone user on the 4G network, but in a fixed, not mobile, package. A Skinny Broadband connection only works from the address where you register the account.

In many ways, Skinny Broadband is a nationwide version of the service Vodafone and Spark use to connect remote customers to their fixed wireless rural broadband networks. It even uses the same fixed wireless broadband modem.

Low prices

Skinny is Pak N Save to Spark’s New World. A low-cost no-frills brand that hits important competitive markets without harming the corporate mothership’s upmarket reputation.

Which explains why Skinny Broadband uses Spark’s 4G network. This is important, Spark owns more 700 Mhz spectrum than any other carrier. So, in theory anyway, it will out-perform any direct competitor. It also means Spark has spare capacity to support Skinny Broadband.

At NZ$55 a month plus a one-off $200 for the modem Skinny Broadband is one of the cheapest and fastest ways of getting online.

For when a fibre connection is too much

Skinny Broadband is a great option for users who feel they don’t need a fibre firehose blasting vast amounts of data into their homes.

Another advantage is that Skinny allows casual contracts — that makes Skinny Broadband an ideal back-up or an option for a bach or second home. Once you’ve paid for the modem, you only need to pay for the months you are using the service.

Broadband for dummies

Skinny Broadband also happens to be one of the simplest ways of getting online. Immediately after the courier dropped off a fixed wireless modem, I was on the phone to organise a review account. I was connected within 20 minutes of the delivery.

There is no waiting for engineers to install anything. No hanging around for remote provisioning.

Skinny sent me a Huawei LTE modem. Some rural wireless broadband customers get the same device. It is not as pretty as my Netgear modem and the Wi-Fi isn’t as fast, but it comes with four gigabit Ethernet ports so you can plug in your network devices. There is one bright yellow Ethernet cable in the box.

You’ll get the best broadband performance if you plug your PC into one of the Ethernet ports. But that’s optional. It needs to be as many modern devices don’t include Ethernet ports.

Not the best Wi-Fi

The router has Wi-Fi so you can connect all your devices: computers, phones, tablets, TVs and so on without the need for cables. The documentation says it will handle 32 devices. It doesn’t say how well it will handle that many.

It supports the 802.11 n version of Wi-Fi. An 802.11 ac device would be better. You can’t use your own device, the Huawei kit is locked to the network.

The router needs a mains power socket. It comes with a cable that’s about a metre long. This could be a problem. Skinny’s technician told me to put the router on a window sill — luckily there’s a suitable one — we’ll come back to that point in a moment — within a metre of my distribution board.

The instruction leaflet that came with the modem mentions optional extension antennae, there were none in my box.

These extra antennae might be useful. My home has only moderate Spark 4G coverage. I never noticed this with my phone.

If I choose to keep the Skinny Broadband account I’ll start hunting for the antennae.

Performanace is a mixed bag

When I first connected I saw a speed of around 18 Mbps down and 7 Mbps up. By moving the modem unit around I managed to get this to 21 down and 7.5 up. I could get a better speed if I cheated and taped the modem to the top of my office window, but that is not a good look when visitors come to the house.

Skinny broadband speediest

Performance is far more sensitive to the modem position that you might imagine. When out cat jumped on the window sill and moved the modem about 100 mm, the speed dropped 5 Mbps. This lead to an hour hunting for the optimal, non-taped spot, which, luck would have it, was my first choice.

Sometimes fast

Skinny’s support engineer, who lives in the next suburb to me, told me he regularly sees 40 Mbps. At first I thought this might be part of the company’s marketing spiel, then I noticed a comment from Geekzone owner Mauricio Freitas who says he also got 40/17 Mbps.

If I could get that speed, I’d be sold on Skinny Broadband today. I tested other places around my house, 22 Mbps is the best I can get unless Spark does something to my local tower.

My existing VDSL account is consistent at about 40/9 Mbps. It may bounce around but only by a few percent. The ping time to Spark’s Auckland service is 9ms on VDSL, with Skinny Broadband I was getting 20ms plus for pings to local servers.

In contrast, Skinny Broadband’s speed varies over a wide range. On Friday I was nudging past 20 Mbps. Saturday it was topping out at 17. Early Sunday morning — there’s a reason for this, read on — it was back above 20. By Sunday evening it was just 12 Mbps.

While that speed is disappointing, it is still useful. Sunday and Monday mornings I watch English football on my iPad Air with Premier League Pass. VDSL handles the streaming video with aplomb. I was interested to see how Skinny Broadband coped.

On the day Skinny Broadband didn’t miss a beat. For two hours the sound and vision streamed a glorious Retina image without missing a beat. I also used it for a Facetime conversation to Paris, again without a glitch.

I suspect that I would struggle to get that performance if anyone else in the house was online at the same time. But for me, that’s my most demanding regular internet application. Skinny Broadband passed the test.

Value proposition

The monthly NZ$55 fee buys 60GB of data. That’s enough for day-to-day browsing, emails and basic Internet use. There’s even headroom for some streaming video although binge viewers of HD quality video might hit the data cap.

Extra data costs $20 for 10GB. This is far cheaper than buying extra 4G data for a mobile phone account. In part Skinny can sell its broadband for less than a standard 4G mobile account because it is fixed. The network operators know where the users are located and can provision their service accordingly. With mobile data this becomes more complex and expensive.

Skinny Broadband’s price is on a par with Spark and Vodafone’s rural wireless broadband services. Both companies sell their basic service for $105 a month. That money gets rural users 80GB of data and unlimited national calling. To get 80GB with Skinny you’d pay $95, add $10 for a VoIP service and you’re looking at the same price.

Beyond the copper tax

Because Skinny Broadband and rural broadband offered by Vodafone and Spark used fixed wireless connections, they avoid the copper tax. That’s the roughly $40 a month ISPs have to pay for Chorus to deliver services over copper or fibre.

This goes some way to explaining why Skinny Broadband is one of the cheapest options on the market. Dial-up is cheaper but useless. Trustpower has a $75 for 50GB ADSL plan and a $49 unlimited plan, but that means buying other services from Trustpower and signing for a 24-month term.

The catch is the $200 upfront for the modem. If you stick with Skinny Broadband for a couple of years you’ll definitely be ahead over the long term. Although, in effect, that’s the same financial burden as signing a contract. Otherwise you’ll need to weigh up that cost. If fibre is coming down your street in the near future, it may pay to wait.

Who should buy Skinny Broadband?

Fixed wireless broadband isn’t for everyone. If you need lots of data, perhaps you’re an avid TV viewer, then get a terrestrial connection. It’ll be cheaper in the long term. The same applies if you run large online backups or similar applications.

Likewise, if fibre is available and you need consistency and speed, then that is usually going to be a better choice. I’m not a gamer, but I suspect the latency in a terrestrial connection will be more to your taste if you are.

Everyone else, and that’s the majority of users, should at least consider Skinny Broadband. It will change life for people who live in fringe areas at the edge of fibre or copper networks, but still close to mobile towers. I think it is an especially good choice for moderate internet users who want to keep costs under control. That probably doesn’t apply to many readers — but you can influence your friends and family members.

What I’d like to see with Skinny Broadband

The router is fine, but basic. I couldn’t log in to the admin page, which won’t worry most users but is a concern to me.

I’d also like to see support for faster Wi-Fi. It would also be helpful if Skinny could supply the add-on antennae, even if that means an additional cost.

Also not clear from the documentation is whether it is possible for Skinny or Spark to tweak the antennae on towers to improve performance for individual users.

Skinny doesn’t offer a VoIP option, that’s a shame because, otherwise, the broadband service is an excellent reason to cut the cord. At $55 a month, the price is not much more than the price of an old school telephone connection.

Summary

  • 60GB of data for $55 a month is one of the best broadband deals around if you’re comfortable with a $200 upfront payment for the modem.
  • Some people get solid speeds, you may not. It would pay to check the quality of Spark 4G reception before paying the $200.
  • A good option if you think you won’t need fibre broadband.

Chorus Van

There is no question as far as New Zealand media is concerned: Chorus won. The Commerce Commission final determination on regulated copper line charges means Chorus can charge $120 million a year more for customers to connect to its copper phone and broadband network.

Chorus CEO Mark Ratcliffe says the new price takes on board “the real world costs of building a network”.

He says:

“We have consistently said that the previous draft prices significantly underestimated the true value of Chorus’ network”.

Champagne for Chorus shareholders

Chorus shares jumped 24 percent immediately after the announcement. This underlines the size of Chorus’ victory.

This may be good short-term news for Chorus investors, but it hides something disturbing. Sharechat quotes Paul Glass, executive chairman at Devon Funds Management: “From a capital markets point of view it is a regulatory debacle, a shambles”.

He says the regulator “almost broke the company and now they are almost over-rewarding Chorus. It almost makes regulated assets uninvestable.”

“We need a more mature approach to regulation that reflects the fact that these sorts of violent swings raise the overall cost of capital of regulated businesses,” he said.

Spark managing director Simon Moutter makes the same point from a business investment point of view:

“The massive swings in successive Commerce Commission decisions within a matter of months makes it extremely hard for any business to invest, plan and price its services effectively. We have now had two years of market disarray, with significant fluctuations at every stage of the process. The losers out of this are New Zealand consumers and businesses.”

Anger management

The rest of the telecommunications industry did little to hide its anger. A press release from Vodafone quotes CEO Russell Stanners who says his company is “extremely disappointed”.

He says:

“The pricing set today is even higher than the in the Commission’s draft decisions and is well out of step with international benchmarking”.

International comparisons

That international benchmark got a run from Juha Saarinen in an NZ Herald opinion.

Saarinen says Internet NZ points out that we are the only country in the world putting up copper pricing. He says:

“We pay more for fixed broadband than most developed countries – research from the International Telecommunications Union (ITU) put us in the 60th place in the world.

”Australia, hardly a poster boy for great, affordable internet access, is twenty places ahead of us, and New Zealand will drop even further down the rankings as pricing here goes up.”

Incentives

Saarinen wonders about the signals this ruling give Chorus in terms of incentive. Taxpayers are funding the nationwide UFB fibre roll-out, Chorus has about 70 percent of the contracts. The job is scheduled to complete by 2019.

He notes that the copper network is a much bigger business for Chorus than fibre and now that it’s more lucrative: “You have to wonder how much incentive there is for Chorus to hurry up with the fibre rollout in the big cities over the next five years.

There’s a simple answer to that. Chorus has a contract to deliver the fibre network by a set date and will be penalised if it misses the target. There will also be a lot of egg on faces. Of course, Chorus can lobby its way out of penalties. It appears to do this better than any rival. Yet by 2019 another government will be in power, possibly one less ready to listen to Chorus’ special pleading.

Consumers will pay

When there are winners there are losers. Saarinen says the money will come from New Zealand consumers.

Spark’s Moutter thinks along similar lines. He says: “We are now also forced to increase our retail voice and broadband pricing to take into account the significantly increased costs now faced from higher regulated Chorus line charges.”

You wouldn’t expect Tuanz, which represents telecommunications users, to be happy with a regulated price hike. CEO Craig Young says:

“These prices will have a direct impact on users, and especially those users who are unable to take up UFB services. These include the 20 percent of the population who live rurally, and who have no other fixed line options and will continue to rely on copper phone lines for the foreseeable future.”

Rural users cop it worst

This brings up an interesting point. Since telecommunications first arrived in New Zealand urban customers have subsidised rural users through something that came to be known as a universal service obligation. The idea is that everyone pays the same price for a connection regardless of how much it costs to run and a maintain a line to their premises.

The point about this is in the past everyone got the same kind of phone line. That made sense with copper. It doesn’t make so much sense today where fibre can connect large clusters of customers and wireless services can link the most remote connections.

Telecommunications users still subsidise rural customers through a $50 million levy used to underwrite the government’s Rural Broadband Initiative.

So while the 20 percent of rural users might feel cheated at having to pay more for their copper lines than urban customers pay for a better fibre service, they are still being subsidised. Subsidies are a political problem that need a political solution. If New Zealand decides rural users are a deserving case, it has to find the money to pay for their connections.

New Zealand First: “disgraceful corporate welfare”

Yahoo has an unbylined story quoting New Zealand First’s Tracey Martin who has gone in to bat for rural consumers. She says: “It’s disgraceful that government under-investment forces Chorus to raid the wallets of hard-pressed Kiwis as government approved corporate welfare”.

The story is a touch confused:

“Rural Kiwis will get hit hardest by the Commerce Commission’s decision allowing Chorus to charge its regulated copper line customers almost $8 a month more than New Zealand retail broadband providers, says New Zealand First.”

Chorus is a wholesaler, it can’t sell direct. The retail broadband providers do this. So that paragraph is meaningless.

Travesty and a barb

Some of the strongest language comes from InternetNZ which describes the decision as a “travesty”. Chief executive Jordan Carter says: “The Commission has to ensure that they have delivered to the long-term benefit of end users. We are not sure that that test has been met today”.

He says: “We are the only country that InternetNZ is aware of that is putting prices up for legacy copper-based broadband services.”

And there’s a sting in the tail from Carter: “The extreme nature of these price rises will likely mean that some parties will be contemplating court action.”

Let us read that as “We’ve already asked our lawyers and we’re checking to see if anyone else has”. There’s a strong possibility this will end in court. The cost to big service providers like Spark and Vodafone will run into tens of millions a year, throwing a couple of million into the legal pot now could be a smart move.

Three years in the making

At ZDNet Rob O’Neill’s Chorus cheers, Spark jeers final copper broadband pricing points out: “After three years, regulator the Commerce Commission finalises its thinking over the price of legacy network services.”

Three years is a long time for investors to not know which way the dice would fall.

O’Neill quotes Newly-minted Labour ICT spokesperson David Parker:

“Today’s shock announcement of a 10 percent increase in the regulated wholesale copper phone line price will cost all households – particularly in areas where they are still waiting for ultra-fast broadband”.

That’s a good point. I’m not due to get UFB for at least two years. Having to pay more for an inferior network makes it feel like I’m doubly penalised.

Prices to rise

Writing for Fairfax’s Business Day, Tom Pullar-Strecker gets to the nub of the matter from a customer point of view in Price of phone lines expected to rise by about $3. Let’s put that figure in perspective, the price rise for the basic line cost is about 7 percent at a time inflation is 1 percent or thereabouts.

Pullar-Strecker writes:

“The cost of a landline is set to rise by about $3 a month after a surprise ruling by the country’s competition watchdog that has put a rocket under Chorus’ share price.”

He goes on to mention a possible silver lining for Spark customers: “who may not to have to pay more immediately, or who could be in for a one-off $40 refund.”

More threats of litigation

As we’ve already seen there’s a possibility the telecommunications companies will get lawyered up ready to fight this decision.

Pullar-Strecker says M2, which owns Slingshot, Orcon and Flip hints at a possible legal appeal: “M2 chief executive Mark Callander expected price rises of at least $3 for Slingshot, Orcon and Flip customers and said the Australian-owned company had not decided whether to go to court to challenge the commission.”

Cynical?

At the IITP Tech Blog Paul Brislen brings up another theme that has been in the background ever since the government announced it would build a fibre network. The business of moving people from copper to fibre.

He writes: “Of course, a cynical person would say none of this is about copper lines at all and is designed to drive customers to switch to the shiny new Ultra Fast Broadband (UFB) service being rolled out around the country.

“UFB is fibre based and so does not have the same regulatory pressure that copper lines have. It’s also being built by four companies, not one, although Chorus has the lion’s share of the project and each Local Fibre Company (LFC) has, in effect, a regional monopoly.

“UFB uptake has been low to date but ultimately it will be the network of choice for everyone who can get it. It is world class and, if we look at the Australian debacle, somewhat in a league of its own. But users shouldn’t be forced to take it up it and for those who will never get it, the copper tax will be a cost they can’t avoid.

Nobody mention the copper tax

We haven’t heard the term copper tax for a while. That’s not an accident. Privately many in the telecommunications industry have told me they have been threatened with all kinds of sanctions by the government if that term gets another airing. Brislen and the IITP aren’t open to that kind of bullying.

“…while all this is over for now, the entire Act is being reviewed and by 2020 a new regime will be in place – the fourth major overhaul since 2001.

Which is a good point. It seems that once it gets started, a government can’t stop tinkering with telecommunications policy.

In the long run we’re all dead

There’s a huge amount of fuss over the copper tax. It’s not hard to see why. Apart from anything else, it means the transfer of over half a billion dollars from taxpayers to Chorus shareholders. It might have been cheaper for the government to nationalise the business.

Cheaper, not better. This is, in effect, what happened in Australia with the NBN and we all know how well that is going.

But some perspective is called for. Most of New Zealand either has fibre or soon will. Many of the last 20 percent will get it eventually and a good number will have wireless alternatives.

In the long run only a small fraction of the population gets the rough end of this. And they were always going to suffer anyway. The per-user cost of maintaining a copper network will rise as the total number of copper lines dwindles.

Technology to the rescue

Yes, it looks bad for a small minority. What we tend to forget is how fast technology is changing. Five years ago when the Rural Broadband initiative was set up, the fastest wireless broadband used 3G mobile technology.

It didn’t sound that great at the time and it proved to be as bad as the pessimists feared. Then came 4G mobile. And suddenly farmers found they could get city-style fibre speeds from rural wireless towers at the kind of prices urban consumers were paying a couple of years earlier.

By the time 2020 rolls around the 4G technology will move to higher speeds and better performance. Not long after the industry will begin working on 5G networks. Five years might seem like ages, but it isn’t. A decade from now the fuss over line prices and the copper tax will be ancient history.

Update: Greens blame Steven Joyce

The Green Party press release turned up after the original story was posted. It contains a couple more fresh perspectives on the ruling.

Green Party ICT spokesperson Gareth Hughes notes the confusion. He says:

“The price-setting system clearly isn’t working because the process has resulted in so many draft pricing decisions that are so different from each other, which means the industry and consumers are kept in the dark about what the actual price will end up being.

This is in stark contrast to all the talk about “regulatory certainty”. This phrase crops up time and time again, often from Chorus. Yet it seems players are only happy with regulatory certainty when regulations swing their way. Otherwise, they send in their regulatory affairs team to unpick the last round of regulation.

Hughes has no doubt where the blame for these problems lie:

“Today’s price rise has its origins in Steven Joyce’s meddling with the Telecommunications Act back in 2010-11 when he was Minister, which created a mess that the current Minister Amy Adams is still trying to clean up.

“I hope the current review of the Telecommunications Act can clear up all the uncertainty and disagreement and allow New Zealand to embrace a high-tech, high-skilled, low-pollution path to economic prosperity.”

There is something in this. The Labour Party’s Clare Curran has said much the same thing in the past.

If there was a problem it was that the government nailed the local fibre companies to contracts that were at best borderline and at worse unsustanable. The government got a lot more fibre network for its $1.5 billion investment. The fibre companies, particularly Chorus, had no option but to accept poor terms. Almost all the fuss since then has been a direct consequence of those contracts.