Is fibre the answer? 'Yebbut', says telco panel

Fibre can drive productivity, telco executives say, but the business case for investment remains questionable

The business case for fibre investment was once again being questioned in a high-powered panel session at the Telcon10 summit in Auckland yesterday. The first panel discussion at the summit sought a response to the question: “Fibre, the answer to NZ’s broadband prayers?” but ended up covering a range of related issues as well. Is fibre to the premises king? The answer was a resounding “yebbut” with Chris Dyhrberg, general manager of product management at Telecom’s Chorus questioning whether there was a business case for it. Labour candidate Jordan Carter, meanwhile showed political sloganeering nous with “we’ll miss out on missing out” and stated that there are services that simply cannot be delivered over copper, only fibre. On the Big Telco side on the panel was Dyhrberg and Chris Abbott, TelstraClear’s regulatory group manager. Abbott is no stranger to regulatory issues: prior to his role at TelstraClear, he worked as chief adviser at the Commerce Commission during the four years local loop unbundling was first recommended, then rejected and then back on the cards again. Duncan Blair, head of brand and communications at Orcon replaced the state-owned ISP's chief executive, Scott Bartlett in a last-minute switcheroo and InternetNZ’s Deputy Executive Directory, Jordan Carter, brought up the non-telco rear together with NZICT’s Brett O’Riley who chaired the discussion. Abbott was clear that there are undisputed productivity and other benefits to a FttP network, but to his mind, the question is how do we get there. Earlier on, his boss Alan Freeth had opposed the idea of government money being used to build a network that’d likely compete with TelstraClear’s one. Freeth threatened to not go ahead with various investments such an upgrade to the DOCSIS 3 standard that would take TelstraClear’s HFC cable network to dizzying 100Mbit/s shared bandwidth speeds. Perhaps those statements were on Abbot’s mind when he considered the fibre question. A question from the audience on why it was necessary to demand a return on the $1.5 billion FttP network when each year, we pour some $2 billion into roading with no such expectations, was given short shrift by Dyhrberg. “It’s rubbish. Broadband networks are not like roads,” Dyhrberg stated categorically. The vexed question of the expensive international connectivity, courtesy of New Zealand's main network link to the world, the Southern Cross Cable, was then put forward by O’Reilly. Here, Abbott said there are more cables than the SCC, but a new trans-Tasman piece of string would certainly introduce some “competition dynamics”. Carter is keeping his fingers crossed that the “Kordia thing” or PPC-2 would come off. Blair agreed that the expensive overseas bandwidth is a “big issue that’s not receiving enough attention” and even Dyhrberg, whose Telecom mothership owns 40% of the SCC, said that if there is demand, another cable will be built. Carter was more frank and labelled the fact that most NZ Internet traffic goes over a single cable to the outside world a “market failure”. This makes it all the more strange that the Labour government of the day didn’t take a stake in the SCC when it had a chance during the days of MCI going under. The panel wasn’t able to give a straight answer to a question from the audience about why NZ has meagre data caps and how do we get rid of them, beyond the usual “international bandwidth is expensive”. Luckily, a member of the audience explained it rather well — the vast majority of traffic on the SCC is to and from Australia, with ISPs like Telstra there taking the lion’s share of capacity. Being big customers, the Aussies get much better deals. New Zealand isn’t a high-demand market, so we get rotten deals from the SCC. That’s why we have small data caps. Chicken and egg anyone? Finally, the audience wanted to know what the point was to running fibre to the node when it would be obsolete in ten years’ time. Wouldn’t it be better extend the fibre to the premises now already? Dyhrberg got in first, saying it’s the wrong question. Telecom has in fact been building an FttP network for the last 10-15 years, but in steps. The present step is FttN, after which FttP will take place. Investment incentives permitting of course. Interestingly enough, Dyhrberg said the electronics in the roadside cabinets used by Telecom have an economic lifespan of five years only before being depreciated. Technology moves on, faster than ever, clearly. Blair was poked by telco analyst Paul Budde on sub-loop unbundling, and said Orcon is upset about it. There’s no business case to go into the cabinets, Blair said if the current determination stands. There’s no way Orcon can get to the 30% market share needed to make cabinet unbundling worthwhile with current pricing, Blair said. Budde asked if that meant wholesaled Bitstream was the only option left for access seeker ISPs, and Blair agreed that as things stand, it probably is. However, Abbott wasn’t quite so pessimistic, and said there could be cases where TelstraClear was able to make it worthwhile to go into the cabinets. Business districts were one such case, Abbott said. Dyhrberg sounded a conciliatory note, saying Chorus wasn’t all that happy with the determination but he can’t do anything about it and besides, the cost has to be recovered even though the cabinets form part of Telecom’s legally binding Undertakings. If costs can’t be recovered, what kind of signal would that send to investors in the NZ telco sector, Dyhrberg asked? The basic problem with SLU is that the economics of it don’t stack up, Dyhrberg concluded, something that perhaps the Commerce Commission silently agreed with, when it came to its decision that saw the backhaul cost go from a few hundred bucks a month to several thousand. The audience politely applauded the panel of industry sages, but left feeling somewhat unconvinced that strong commercial imperatives were the best drivers to solve problems of national interest, such as building the next-generation broadband infrastructure the country needs to remain competitive in the world.

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Tags telecomTelstraClearOrconChorusNetworking & Telecomms IDTelcon10

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