Vision through the broadband murk

I have said before that things always seem to happen in threes, and so it is again. A month or so ago, the Minister of Communications, Amy Adams, released a discussion document on a review of the Telecommunications Act. This is a fundamental look at how the country regulates the communications sector beyond 2020.

A week or two ago she then issued a media statement setting out an inspirational target for future broadband services - of particular note was 50Mbps broadband service for 99% of New Zealanders. At the time many of us, while applauding the aspiration, queried why it had not proceeded and influenced the discussion document. After all, discussing the regulation of the sector without a view of what you are wanting to achieve is cart before horse.

We have now heard rumours that the Government's proposed Rural Broadband Initiative extension (RBI2) is to be merged with another current telecommunications initiative - the Mobile Blackspots Initiative (MBI). If the rumour is true this, on the face of it, is probably a sensible and pragmatic approach but once again the timing stinks. Rural councils up and down the country have spent a lot of time and doubtless a lot of ratepayer money in responding to a tender process for the RBI2 and MBI. They will feel that the goalposts have been shifted for them.

So what do these three things taken together signal? First, that the Government is belatedly getting its ducks in a row before the Commerce Commission releases its final pricing determination on copper broadband in December. But it is potentially also sending a signal to the Commerce Commission as well. That signal is that New Zealand will have fibre to the premise broadband (FTTP) for the urban and inner-rural 80% of users and mobile or fixed wireless broadband for the remaining rural and remote 19% or 20%.

The Commission, as part of its copper pricing determination, is juggling between which technologies it should price for that last 20% - in effect if there was a blank canvas would a modern telecommunications company deploy copper, fibre or wireless/mobile in the last 20%. Almost everyone (as usual Chorus is the prime exception) believes that wireless/mobile is the only sensible option. Unfortunately, the Commission has to follow the law not what is the most sensible option and there the waters are, as usual, murky at best. A Government signal that it too sees a wireless future for rural broadband might help the Commission see the correct answer through the murk.

A clear delineation between the preferred technologies will have other real benefits for the future. For example, it will be clear that there will be little effective competition to fibre broadband in the 80% area and that the fibre price will have to be regulated. Whereas the broadband price in rural will likely be competitive between wireless/mobile providers and may not need to be regulated. Rural users may well have to pay more for mobile broadband than urban users pay for equivalent fixed broadband services - but they will have the additional benefits of mobility and better a 50Mbps service than the likely default of a 5 Mbps copper service. And of course, if Chorus wished to compete with the mobile operators using its copper or fibre services it would be free to do so but would not need or be able to cross subsidise between its urban and rural customers.

If there is a possible cloud on this rosy picture - it might be the mobile/wireless technology. We have no doubts that future LTE mobile technology will be able to deliver a 50 Mbps broadband services - the question will be though to how many people?  Will the service rapidly degrade as more and more customers take it up?  Will the operators have sufficient bandwidth/spectrum to accommodate demand and will the temptation then be on operators to manage excessive demand by increasing price?