3 min read

VDSL broadband missing in action

At Businessdesk Pattrick Smellie reports Chorus chair challenges telcos on slow VDSL uptake.

He writes:

“Some 400,000 internet users in New Zealand are on a slower form of internet connection than is available, with almost no cost involved in changing to the faster version[1], says Patrick Strange, the chairman of telecommunications infrastructure provider, Chorus.

Strange tells Smellie 179,000 customers have VDSL broadband accounts while there are around 400,000 subscribers using ADSL.

More broadband, same dollars

This is odd because VDSL delivers faster broadband than ADSL but the cost is the same. In New Zealand ADSL users might get broadband speeds of up to 24 Mbps on a good day. Most get between 10 and 20 Mbps. While VDSL speeds are in the range of 40 to 60 Mbps.

Typically an ADSL connection is not fast enough to stream high-definition television, while VDSL can handle HD TV and leave plenty of capcity for other users on the same line.

Both ADSL and VDSL deliver broadband over copper connections. In both cases their speed depends on the distance from the exchange or roadside cabinet. This explains why they have a range of speeds.

Fibre broadband still tops

Neither ADSL or VDSL can hold a candle to fibre connections which now go all the way up to 1 Gbps.

Yet they remain important as the fibre network is still under construction. Some urban users will not be connected until 2019. Users in rural areas will have to wait longer. Meanwhile there’s an every growing demand for fast internet services.

Smellie continues:

Asked why retailers, such as Spark and Vodafone, weren’t offering VDSL actively to the ADSL customer base, Strange said: “Good question.”

It is a good question. As you might guess, the answer comes down to money.

Chorus is the monopoly owner of the copper network and acts as a wholesaler. It sells connections to ISPs or retail service providers[2]. They pay the same price whether the connection is VDSL or ASDL.

Pricing VDSL

Most service providers then charge consumers the same price for VSDL and ADSL. There is no extra charge at Vodafone or Orcon.

Spark New Zealand adds $10 to the monthly bill for VDSL customers. The extra charge more than covers the other costs the company faces but it changes the upgrade economics. Spark has an incentive to give broadband customers the best available service.

More than half of all New Zealand households buy unlimited data plans. As a consumer you might pay, say $100 a month for an unlimited VDSL or ADSL broadband plan.

Because a VDSL connection is faster, it will get through more data. This is partly because people with faster broadband connections can do more and download more in the same amount of time.

Need more data

But it is also because some services, especially streaming television, are adaptive. If you have a faster broadband connection, services like Netflix will detect this and download a higher quality picture. That takes up more data.

A service provider buying a copper connection from Chorus also has to pay to get traffic from the node back to their own servers. They also have to buy international capacity. In both cases they have to buy enough bandwidth to keep their customers satisfied.

If a user has faster download speeds thanks to a VDSL connection, then the service provider needs to buy more capacity to service the customer.

A little less margin

When these costs are aggregated over a large number of customers, extra cost of carrying VDSL traffic compared with ADSL traffic is tiny, but service provider margins are razor-thin.

In most cases service providers buy capacity in advance. They have to anticipate demand, big jumps in demand can add to their costs. If, say, all their customers wanted to switch from ADSL to VSDL overnight, they would face a big increase.

There’s also a small management overhead switching customers from one service to another. And for those service providers who supply routers and modems to customers there is the cost of hardware upgrades.

For all these reasons many service providers are not in a hurry to upgrade copper connections from ADSL to VDSL.

As a broadband user, you should make a point of asking for an upgrade. It may not cost you anything, unless you’re a Spark customer.

  1. In most cases you will need a new home router or modem. Expect to pay a one-off $100 or so.
  2. Chorus prefers to use the term retail service provider or RSP. This makes sense as these days many service providers sell more than just internet.