Although it is called a levy, the $50 million government collects each year from telecommunications companies looks a lot like a tax.
That’s not necessarily a bad thing. The Telecommunications Development Levy pays for worthy causes like the government’s $300 million Rural Broadband Initiative, services for deaf people and upgrades to the 111 emergency call service.
Subsidising rural users
The TDL replaces an earlier scheme called the Telecommunications Services Obligation (TSO) which, in theory anyway, divided up the cost of providing land-line telephone services to unprofitable rural customers.
In effect it meant companies like Vodafone, CallPlus and Orcon had to shoulder some of the costs mainly carried by Telecom as a hangover from the days when a phone system was a public service, not a commercial business.
There was no end of arguing over the TSO. Vodafone pointed out those subsidised rural land line customers might be better off with mobile coverage than land-lines. There were other disputes.
New fund, new arguments
Now Chorus, which provides wholesale services to retail telcos, argues it shouldn’t pay the new levy. The company’s prices are largely regulated. Chorus can’t pass the additional cost on to its customers. The Commerce Commission, which manages the TDL doesn’t agree.
After considering charging content providers like Sky who deliver services over the telephone network, the Commerce Commission has backed off. The telcos aren’t happy about this, not is the Tuanz, the telecommunications user association.
The usual process is New Zealand is for too-ing and fro-ing between interested parties before the Telecommunications Commissioner makes a final decision.
While this sounds radical and will no doubt worry telcos it isn’t extreme. Europe is heading in the same direction. In theory the Australia and New Zealand economies are almost as closely tied as the European ones.
InternetNZ wants link roaming to the planned spectrum auctions – making spectrum licences conditional on better behaviour or, like Tuanz, scrapping roaming charges.
A key test for any government intervention is “has the market failed?”. Economists might question whether trans-Tasman roaming is a failed market in an abstract, academic sense. Others prefer a common sense approach. Business people will notice the dampening effect roaming rates have on trade between the two nations.
Something must be wrong if the first thing we have to do on landing is buy or refresh a local pre-paid Sim card, then divert calls to the new number. That can get tricky if device settings need changing at the same time.
Telcos: What market failure?
Telecommunications companies on both sides of the Tasman argue competition is enough to push down roaming prices. They say regulation is unnecessary. In Australia Optus says the problem is a lack of consumer information – that’s a startling, arrogant claim.
How does New Zealand get another submarine cable project off the ground in the wake of Pacific Fibre’s fund-raising failure?
Ryan Ashton posed the question at a technology industry networking event last night. Ashton wants to trigger a debate and people at the event joined in. At least one had worked for Pacific Fibre.
Ashton’s idea for a new cable amounts to crowd-funding. He says the three or four hundred million dollars required could be spread over, say, a million New Zealanders. The same logic could be used to argue for government funding.
An informal after work event held in a bar isn’t the best place for this discussion, yet this is a necessary debate. There are many issues to consider.
First we have to decide if an alternative to the existing Southern Cross Cable Network is necessary. And if it is, does that imply there’s something broken that government can fix by regulation or means other than building a fresh cable?
Replacing Southern Cross
Southern Cross will need replacing at some point and we don’t want to leave it to the last-minute. On the other hand, money is tight, perhaps it could be better spent elsewhere now and the problem revisited later.
Security is an issue. Southern Cross is a loop with two lines in and out of the country, that’s better than a single point of failure. A new cable will make us more secure. What would be the optimum number of cables for a country with a population of less than five million?
Does a new submarine cable need to stretch right across the Pacific when a simple drop across the Tasman could offer a quicker and cheaper alternative?
Is this something best left to market forces or is there a case for government involvement. How do we square China’s enthusiasm to take part when the US and Australian governments are hostile towards firms like Huawei?
Media coverage of a report from IDC Research says sales of Wi-Fi only tablets have passed sales of 3G models in Australia and New Zealand.
IDC’s analyst explained the shift away from mobile networks to Wi-Fi in terms of product offerings. This misses the point: for most people 3G doesn’t make sense on a tablet.
3G option is costly
Adding 3G, and now with the new iPad, 4G to an Apple tablet adds NZ$200 to the price. For the 16GB iPad, that’s a hefty 27 percent premium. For that kind of money, you need to know you’ll use that tablet while on the move.
To use mobile data you also need a Micro-Sim card and a mobile data account with a carrier. Make that an extra Sim card and account unless you don’t have a mobile phone.
3G is troublesome
When I bought my iPad 2 I decided this would be too much trouble. I might only need to use 3G with my iPad once or twice a month and I didn’t want to deal with extra Sim cards and mobile accounts.
Instead, if I need a 3G iPad connection while I’m on the move I use my mobile phone as a Wi-Fi hub. That way my phone account picks up the data cost.
I’m not likely to travel anywhere with my iPad and not take my phone as well.
Phone Wi-Fi hub fast enough
I haven’t benchmarked speeds on my iPad and phone combination against a 3G iPad alternative because the comparison is not important. My set up is more than fast enough for my everyday needs, the only drawback is using my phone as a Wi-Fi hub drains the batteries faster than normal use.
This approach means less administration and it consolidates all my data buying in a single account which means economies of scale.
If you’re always on the run and need plenty of data a 3G tablet might make more sense, for most users it doesn’t.
Web hosting operations in Australia and other western countries face a nasty double whammy in coming months. Not only are the various Internet markets in these countries heading towards saturation, but at the same time, many of the national economies are facing a slowdown. Asia on the other hand is, in Internet terms, so massively underdeveloped that any economic hiccups are unlikely to hinder regional web hosting growth prospects.
According to Forrester Research, by 2004 some 99.7% of US small businesses and 83% of America’s medium-sized companies will have some kind of web presence. Australia lags behind the US – but not by much. Although there’s still a long way to go before the saturation point is reached, web hosting operations can see an end to the rapid growth in customers and sites that has characterised their industry until now.
As far as Australian hosts are concerned, there are three likely drivers for further growth. First, there’s the option to sell a broader range of products and services to existing customers. Although there is plenty of scope for offering value-added services, this strategy largely depends on the still unproven ASP business model.
A second option is to expand by acquisition. In global terms the web hosting market could certainly do with a round of industry consolidation. There are currently more than 1000 hosting operations selling to international markets and while the intense competition has delivered low prices and spurred innovation there’s doubt about the long-term viability of many players.
The third option is to expand existing hosting operations into new geographic markets. Given that Europe and North America already have mature web hosting operations, for most Australian companies this means looking north to the Asian market.
Leading the charge is WebCentral. The company is Australia’s leading hosting business with 700 servers and around 40% of the local hosting market.
There’s certainly a strong business case for selling to Asia. According to a report by eMarketer and Dataquest, the Asian Internet market is still in its rapid growth phase. In 2000 there were some 49 million users in the region, by 2004 this will swell to 174 million users – that’s a compound annual growth rate of 38%. During the same period, Asian users will go from being 21% of the global online community to around 27%. More importantly e-commerce revenues are forecast to climb from US$39.4 billion to more than US$338 billion.
This is all very promising, but behind these numbers are even more compelling statistics for would-be Asian hosting operations. By world standards Asia has very low levels of business-to-consumer eCommerce – an area of great interest to web hosting companies. During the four years to 2004 this is set to rise twelve-fold. And according to Ovuum, a European-based research company, only 7% of Asian companies use web-hosting services compared with 37% of European companies.
Australian hosting companies will find the Asian Internet landscape is vastly different from the local scene. For example, compared with Australia, most of Asia has considerably less access to fixed line telephone systems. This means that for many consumers their only practical route to the web is through the wireless telephone networks. And the online experience for wireless users is considerably different to that for users with personal computers, modems and fixed telephone lines.
Another problem for local web hosting companies planning to expand into the region is that, while there is not a strong indigenous hosting industry throughout the region there are pockets of strength. For example, India already has a well-developed hosting market.
What’s more, many of the world’s largest telecommunications and Internet players already have their eyes on the yet to blossom Asian market. For example, last year Japan’s Nippon Telegraph and Telephone announced its intention to dominate the Asian hosting market when it acquired the US-based Verio hosting operation.
In December, France Telecom subsidiary Global One opened a major regional hosting operation in Singapore. This January saw Exodus Communications buy the GlobalCenter web hosting subsidiary from Global Crossing. The two companies formed a joint venture to supply web hosting services to Asia – a business which is expected to generate some US$4 to 5 billion in revenues over the next ten years.
From the Australian Financial Review 11 April 2001