Trans-Tasman rivalry - connectivity edition

Andrew CushenA blog post from Andrew Cushen, InternetNZ's Deputy Chief Executive
9 November 2016

New Zealand and Australia have a strange familial relationship. We've got each others back, but just like siblings everywhere, we love a little bit of Trans-Tasman rivalry. In that spirit, I'd like to compare where New Zealand and Australia are at in terms of their signature connectivity initiatives - the UltraFast Broadband (UFB) initiative and the Rural Broadband Initiative (RBI) in NZ, and the National Broadband Network (NBN) in Australia.

Both of these programmes are intended to provide each country a great leap forward for national connectivity; colossal investments in Internet infrastructure, designed to better position economies and societies to make the most of more connectivity.

But there, the comparisons kind of end. New Zealand put $1.5 billion into essentially soft loans to the Local Fibre Companies, in order to push out 'Fibre to the Premise' to 75% of New Zealanders between 2010 and 2020. Alongside that, around $300 million was put forward via the RBI to push Internet access to rural New Zealand up to at least 5Mbpss. At a total cost of $1.8 billion that's about $403 per New Zealander. A big signature move of the NZ solution was to drive the break up of Telecom New Zealand, into what is now Spark as a Retail Service Provider (RSP) and Chorus as a wholesale-only network operator.

Australia on the other hand sought to implement a far larger vision. The NBN is based around building a wholly new, wholesale only network operator, that will compete against other networks like that owned by Telstra. Before 2013, the original scope was an 'Fibre to the Premise' build for 93% of Australian households, with fixed wireless and satellite connectivity to cover the remaining 7%. The original cost of this build was a comparatively whopping A$29.5 billion. This equates to $1,275 per person, over three times the cost per person compared to the New Zealand solution. After a significant review in 2013, FTTP is only one of the solutions that will be deployed alongside other techs in what is called a Multi-Technology Mix (MTM) approach.

Despite the apparent similarities, it's clear that New Zealand and Australia have taken two quite different approaches. These different approaches are already leading to different outcomes as well. The chart below was released yesterday by FigureNZ:

Figure NZ graph

It shows New Zealand now leading the world on fibre uptake with Australia coming in a respectable 5th. In light of this, which of us have got the model right?

Let's look at Australia first. They were more ambitious in their programme. The original solution of fibre to 93% was more ambitious than the New Zealand goal of fibre to 75%. Likewise, the Australians were more ambitious in outcomes for rural Australians too, even going to the extent of launching a new satellite to provide better connectivity to those that are really remote there. Of course, the scale of geography is different here, but commitments such as this tell a story of a more ambitious project.

Call me patriotic, but I think the list of what New Zealand got right is longer. In our favour is cost efficiency; $1.5 billion in soft loans and $300m in industry levy funding looks like a bargain in comparison to the many, many billions the Australians are spending, particularly when the Australians aren't getting better outcomes than us. Much has been made of the fact that the soft loans are to be repaid and the money then being recycled in the form of additional soft loans. This multiplicative effect means that the actual impact of the $1.5 billion is far more than it looks at face value.

Much of that cost difference is driven by the fact that Australia is building a wholly new network and network provider too, that will compete against others. We used the incentive of funding subsidy to invest in the Local Fibre Companies - and in doing so created what could be seen as new fibre monopolies in different geographies. Sure, that's more efficient but it means that processes like the Telecommunications Act are vitally important in terms of how we protect against monopolies behaving badly (and is a nice aside to refer to our submission on exactly this topic too).

But mainly, New Zealand wins because the proof is in the pudding. We are seeing a faster growth rate of New Zealanders connecting to faster Internet than the Australians, and at far less cost. Our UFB isn't perfect, but it is on time and on budget - unlike the NBN which is late, and apparently blowing its budget significantly.

Either way, both counties are better off. These are two great examples of nations investing in Internet infrastructure, and we are starting to see statistics coming through about what that means for their citizens and their economies. Soon, we will start seeing ever more stories and examples of how New Zealand and Australia are driving utilisation of this connectivity for economic and social ends - but that's a future blog post.

In the meantime, I'd love to know what you think. What stands out to you as the difference between NZ and Australia's rollouts of better Internet infrastructure? And who do you think is winning, and why?