RBI2: Who wants to make a bang with the bucks

Andrew CushenA blog post from Andrew Cushen, Deputy Chief Executive at InternetNZ

The second phase of the Rural Broadband Initiative (let’s call it RBI-2) aims to address the challenge of providing better Internet to rural New Zealanders. The Government has committed to spend $100 million on this second phase of RBI, alongside another $50 million for the Mobile Blackspots Fund.

That money has come from Internet users via the Telecommunications Development Levy (TDL), as collected and paid by the telcos. Of course, all of the bids below involve additional funding being put in from the bidders themselves. The Government has made clear that they want this money to connect as many people as possible to the best Internet services possible; in other words, it’s all about bang for buck.

Bids for RBI-2 closed on Monday last week (3 April) for those that want those bucks to make a bang. Not all of this information is public unfortunately - so some of it is guesswork at this stage. Nevertheless, there are three contenders and I’m going to assess them on what they’re offering, what I think sounds good about their bid and what I think could be a challenge for them.

Bidder #1: Chorus

What they say they want to do:

Chorus’ press release says “We have provided CFH with multiple proposals, and in a similar vein to the first Rural Broadband Initiative, Chorus will happily work with other industry participants to maximise the sector’s investment and ensure better broadband reaches as many New Zealanders as possible,” said Kate McKenzie, Chorus CEO.

What that means: Chorus will want to leverage its existing fixed infrastructure - the copper network that’s nearly everywhere and its fibre network that’s growing all the time. I expect that means VDSL for rural users (one of the newer, fancier versions of copper Internet) and it also likely means more fibre backhaul for both fixed and mobile connections.

What sounds good: Copper is already everywhere, and rolling out VDSL is a logical and pretty exciting tune up of that network. Chorus thinks that VDSL is capable of up to 100mbps, which lines up with the Government connectivity target. Extending fibre backhaul is a very welcome idea as backhaul like this improves connectivity of all kinds - and is a nice start on maybe one day rolling out fibre everywhere.

What’s challenging: It’s copper, and copper is long in the tooth. Sure, VDSL and more fibre backhaul would breathe some new life in. But the challenge remains that in rural New Zealand the economics of maintaining copper connectivity is tricky already, and some of this gear is as old as the hills. Is copper really up for the job?

Bidder #2: 2Degrees, Spark and Vodafone

What they say they want to do:

Their press release says “The proposal would see in the order of 500 new cell sites delivering a 25 per cent increase in land coverage across New Zealand. Thousands of rural households and businesses would gain access to fast broadband as well as quality mobile coverage, and more than 1,200 kilometres of additional mobile coverage along state highways.”

What that means: Surprise surprise - just like Chorus, the mobile guys want to leverage their existing infrastructure. That means better connectivity delivered over 4G mobile, and presumably an easier upgrade path to even better 5G connectivity once it becomes available. The three of them working together means more towers and more connectivity.

What sounds good: This proposal came as a bit of a surprise. Sharing this mobile infrastructure in this way is something I never thought I’d see happen but it's very welcome that it has. This fundamentally changes the economics of building out this connectivity, meaning that more rural New Zealanders should get better connectivity; if they win of course. That this is the same networks and equipment that is used everywhere else in New Zealand is also appealing - your phone will work on the farm and in town.

What’s challenging: Is there room for anyone else on this gear? This could start to look a bit like an oligopoly here if there’s no room on the towers they build for anyone else. Mobile connectivity solutions also haven’t enjoyed a spotless track record. 4G fixed-mobile is capable of say 30-50mbps which is an improvement, but 5G would need to happen before things get much better than that. Is this too much of an ask to leave rural New Zealand to mobile?

Bidder #3, 4, 5...Wireless ISPs

What they say they want to do:

They say The strength of the WISPs lies in local relationships with farmers and other landowners, and the practical know-how to deploy leading edge technology far more cost-effectively than the national providers.”

What that means: I made an error in an earlier version of this post in inadvertently implying that there was a shared bid between these Wireless ISPs. Instead, they are bidding separately for different parts of New Zealand - meaning that there’s more than one bidder in the mix here. This is that correction - thank you and apologies!

More wireless connectivity, provided in a reasonably wide variety of ways by a range of different providers from around New Zealand. The Wireless ISPs are the small guys that revel in building specific solutions for the specific needs and challenges of their local customers. This likely means smaller sites than what the mobile guys would build, but those sites designed to meet specific requirements for good connectivity.

What sounds good: The Wireless ISPs live and breathe this bang for buck ethos. We should expect that the sort of money on offer would do more with these guys than with the others. Some of the technology they use is capable of incredible speed - far in excess of 100mbps. Plus because they’re based in the communities they serve, perhaps the local appeal will help with uptake.

What’s challenging: These small ISPs don’t usually sell through anyone else, and no-one else will be able to use the physical infrastructure they build. In other words, if they win, these could turn into regional mini-monopolies. Will the Government want to work with over a dozen smaller providers when the big guys are able to offer extensions of existing tech?

What’s next?

Crown Fibre Holdings is assessing these bids, and say it’ll be ready to make a decision in the middle of the year. After that, whoever wins this process will likely need a number of years to rollout.

I don’t envy CFH in making this decision. These are three innovative, but actually quite different, approaches to better connectivity. Its great to see a competition of ideas and approaches happening and great to see that more New Zealanders will get better Internet.

We’ll be keeping our eyes on this process at InternetNZ and offering our take on what it means. Stay tuned.