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Cisco is set to offload its Linksys business. Business Insider reports the deal may already have taken place.

Linksys makes wireless routers for home users. That makes it a consumer brand languishing in a company that is best at dealing with business and corporate customers.

Networking giant CIsco made its billions riding the Internet growth spurt in the 1990s. In 2003 it sniffed the wind – correctly at it happens – and decided the future lay in consumer and small business products. The company dipped into Uncle Scrooge McDuck-like swimming pools full of gold to pick up Linksys.

At the time it seemed like a good idea. Alas, Cisco never got consumer. Its Linksys products were largely lacklustre – I had the misfortune to own one for a while. Cisco also made a complete mess when it purchased the Flip consumer camera business a few years later.

Now Cisco plans to become an all-embracing enterprise IT business with products and services aimed at the data centre. Making low-margin devices, piling ’em high and flogging them though retail channels simply doesn’t gel with that kind of business. Getting rid of Linksys is a smart move.

What I’d love to know is whether Cisco turned a profit on the US$500 million it paid for the business in 2003.

John Key says his government hasn’t ruled out using legislation to bypass Commerce Commission recommendations that could see a sizable fall in wholesale broadband prices.

That kind of move would protect Chorus which says it could lose up to $160 million a year from the regulatory change.

It would also become a form of price discrimination favouring the UFB fibre network being built by Chorus and three other fibre companies. In effect government intervention would make copper less attractive by making it more expensive than fibre.

While it is understandable the government would want to shore up its own fibre project, there are three reasons why this is a bad move:

1. It punishes poorer New Zealanders

It will take another seven years to build the fibre network. Business districts, schools and medical centres are a priority. Next on the list are the wealthier suburbs where the government thinks people are more likely to sign-up early for fibre. The poorer suburbs are at the back of the queue.

This means poorer New Zealanders will have no choice but to use copper for years to come. Making them pay more for it is doubly cruel.

This is politically dangerous for a National government. While it isn’t quite take-from-the-poor, give-to-the-rich, National’s opponents could easily make it look that way.

2. Not everyone gets fibre any way

If everything goes to plan – let’s assume for now it will – UFB will reach 75 percent of New Zealanders by 2019. There’s the rural RBI network for those in the back-blocks. People in small towns will be left with the fibre-to-the-node network where the last leg of distribution will be over copper. Making them pay more for their copper will add insult to injury.

Higher copper prices also mean ISPs will be less able to invest in technologies like VDSL to serve these customers.

3. Making copper dearer won’t change fibre demand anyway

Copper is the gateway drug leading to fibre. People who buy faster copper services, such as VDSL, are likely to be the first to buy fibre when it becomes available. Getting people hooked on fast broadband will do more to make sure fibre succeeds than discriminating against copper.

I’ve said all along, if the government has to discriminate against copper to sell fibre, that means there’s something wrong with the fibre project that needs fixing. Fix the problem, don’t cripple the competition.

What I would do

I’m not in favour of discriminating against copper full stop. If I was a politician and my advisers convinced me it was necessary to discriminate against copper in order for my fibre project to succeed, then I’d choose to discriminate against copper only where the fibre alternative is already in place. in that way, the price discrimination wouldn’t punish those who don’t have fibre access.

My guess is the government won’t do this, because that kind of price discrimination would only serve to highlight the problem.

A handful of New Zealand’s internet service providers (ISPs) now sell UFB connections to home users. Below you’ll find a table showing the prices they ask for various broadband offerings.

You can’t get a UFB connection until your neighbourhood is connected. Business districts, hospitals and schools are a priority, residential areas are second and the roll-out won’t complete until 2019, so there could be a long wait.

Prices from $70

Plans start at just $70, but you don’t get much data when buying bottom of the range fibre services – if you push hard you could download your entire month’s allocation in a few minutes. Pay more and plans include a decent whack of data – more than enough to keep you in video conferencing and downloaded content all month.

ISPs have little room to manoeuver on price. Apart from the amount of included data, connection speed is the only other point of difference. You can buy a 30Mbps service for around $30 less per month than a 100Mbps service.

With only a small fraction of the nation’s homes connected to fibre, the prices shown here are largely symbolic at the moment. And at the time of writing New Zealand’s two largest ISPs, Telecom and Telstra Clear have yet to go public with plans for selling the government’s UFB fibre-delivered broadband to home users.

About the table

The plans in the table below all include GST. Some ISPs charge connection fees. Lightwire, marked with the letter a) in the notes column charges a $200 fee that includes installation and a router.

If you spot any errors or omissions please get in touch with me and I’ll update this table accordingly.

Update: 

26/11/12 – Added Xnet – note b) $200 installation fee including a router
26/11/12 – Added Ubergroup
26/11/12 – Added Now

Service providerSpeed down/up MbpsData GBMonthly  $
Kiwilink30/102586
 30/1050104
 30/10100138
 30/10200201
 100/5025121
 100/5050138
 100/50100173
 100/50200236
Lightwire30/1020099
 30/10400129
 30/10600149
Now30/102070
 30/107575
 30/1012590
 30/10350110
 100/5020120
 100/5075125
 100/50125140
 100/50350175
Orcon30/103075
 30/106089
 30/10unlimited99
 100/5030110
 100/5060124
 100/50unlimited134
Snap30/105075
 100/50100110
Ubergroup201065
 203069
 2015079
 5015099
 50250199
Worldnet30/102570
 30/105080
 30/1010090
 30/10200100
 30/10300130
 30/101000200
 100/5025100
 100/5050110
 100/50100120
 100/50200130
 100/50300160
 100/501000230
Xnet30/10570
 30/101599

Kim Dotcom put the idea of a fresh submarine cable linking New Zealand to the West Coast of the USA back in the news last week. Chris Keall reports on Dotcom’s plans at the NBR.

This isn’t going to happen. At least not in the form Dotcom proposes. The reason is simple. Rightly or wrongly Dotcom’s name is poison with at least two of the groups that hold the keys to a trans-Pacific cable:

  • The US government hates him. It needs to give landing rights permission. Given many American officials still want to throw Dotcom in jail, this isn’t going to happen so long as his’s name is attached to the project. They will see the cable as a pipe designed to suck all the profits and eventually the lifeblood, out of the US film and music industries.
  • Few Institutional Investors will touch Dotcom. They thought Pacific Fibre too risky. Dotcom is worse.

Is the New Zealand government on this list? Dotcom is something of a folk hero. That doesn’t mean government likes or wants him. In a minor way he threatens our trade relationships. He needs government permission for local landing rights, he also needs government departments to commit to buying fibre capacity.

Pacific Fibre couldn’t make a compelling business case to build a fresh cable. At least not one that investors would buy. That project has some of the country’s best business brains. They are well-connected and wealthy. There aren’t question marks hanging over them.

If Pacific Fibre couldn’t do it, it is unlikely anyone else can.

Dotcom’s plan to build a giant server farm using hydro electricity is clever. It could generate the traffic needed to make a cable viable. Branding it with New Zealand’s clean, green image could work as a lure. Keeping it outside the ambit of US Patriot Act legislation that allows spooks to pry into data at the drop of the hat is also a big plus. There’s also a case for backing up data in a small. democratic country in a tucked away part of the world.

But we’re back to risk. Putting data in a small, remote country with only a handful of fibre links may not look attractive to big corporations – especially if that server is associated with someone questionable.

This isn’t about whether I think Dotcom is guilty or flaky – until he has had his day in court we won’t know how to judge the man. This about how others see him. When it comes to dealing with business risk perception can be as important as reality.

Tuanz CEO Paul Brislen says Commerce Commission regulation artificially inflates the VDSL price. He says that’s one reason the copper-based broadband technology isn’t more widely used.

He has a good point.

VDSL squeezes higher broadband speeds from cable networks than ADSL2+. That’s the main technology Chorus delivers to most of New Zealand through its roadside cabinet network.

Good for small business users

This makes it a good interim technology while we wait for the UFB fibre to reach the suburbs. In particular, it works well for video applications. According to TrueNet it suits most small businesses, especially those in suburban homes. VDSL also has potential in rural New Zealand.

Where I live, I see around 12 to 15Mbps down on my ADSL2+ connection. In theory I should get 1Mbps up, in practice I’ve never clocked uploads at that speed.

I’m 600 to 700m from the nearest Chorus cabinet. With VDSL I may get double today’s down speed and see perhaps 10Mbps up.

VDSL price makes it expensive option

As Brislen points out, VDSL2+ is expensive.

I pay $105 for a Telecom Total Home Broadband plan with 120GB of data. A VDSL2 plan with a similar amount of data costs around $160. There are gotchas with call prices and other aspects of the plans which will add to the cost. And I’d need to buy a new modem.

UFB fibre is due down my road – although maybe not past my house – in roughly two years from now. In round numbers a fibre plan with the same amount of data I enjoy today, but 100Mbps down, 30Mbps up will cost around $130.

All up, it would cost the thick end of $2000 to enjoy two years of being able to video-conference. That might just be worth the price if my colleagues and clients were keen to use video and were suitably equipped at their end. They’re not, so no VDSL for me.