how much extra should rural people have to pay for their broadband services over what urban people pay?
Fibre optic cable

Fibre optic cable

One of the identified barriers to the uptake of Ultra Fast Broadband in urban areas has now been reduced in a deal between Chorus and the government.  That is a fantastic development for urban people.  But for their rural cousins, all it does is to add another level of government-led discrimination against rural people and widen the urban/rural digital divide.

Communications and Information Technology Minister Amy Adams has confirmed a new deal for free non-standard residential connections to the ultra fast broadband (UFB) network.

Previously, the connection costs for standard connections were to be paid for by the local fibre company.  Non-standard connection charges were different in different areas.  Chorus agreed to cover the cost of the first 15 metres of a buried connection with other local fibre companies covering the first 30 metres.

The new deal between the government and Chorus, and other local fibre companies, standardises this to free residential connections for distances of up to 200 metres per house.  A distinction between buried and overhead connections has not been published.

This agreement is valid only until the end of 2015 so with the UFB network build expected to be completed in 2019, only the early adopters are assured of benefiting from this deal.

Minister Amy Adams gives hope to those not getting fibre in their street until after 2015.  She advises that the agreement “…provides certainty for the next three years while we finalise negotiations for the remainder of the build period.”

Chorus is contracted to build around 70% of the UFB network and has committed $20 million as an ‘investment’ for retail service providers to offer free connections to their residential customers.  It is not clear how many premises that $20 million will cover.  Nor is it clear what would happen if Chorus’ extra connection costs exceeds that amount before the end of 2015.

Earlier estimates of connection costs puts the average value of this subsidy at somewhere around $1,500 per household.  This substantial cost will now be higher.

The Minister expects that only about 0.3 per cent of UFB residential premises will have a connection longer than 200 metres and so will be expected to contribute to the cost of their UFB connection.

The rationale for a UFB connection subsidy is that high connection charges represent a barrier to the uptake of the service.  Without a substantial residential uptake, the new urban fibre network would likely become a white elephant. So the new connection subsidy effectively removes the barrier.

But there is no such thing as a ‘free’ connection.  In the end, someone has to pay and given the lack of rural telco competition to hold rural prices down, it is rural people who will pay extra.  Witness the recent 22% increase in Vodafone’s RBI service.

A non-discriminatory solution would have been to offer a connection charge subsidy that is universally available.

So what does all this mean for rural broadband users?

It means that the urban/rural digital divide widens yet again.

By definition, rural people do not qualify for any connection subsidy.

For many rural users, their high speed broadband connection charge will amount to thousands of dollars.  For example, those signing up to Vodafone’s Rural Broadband service face a standard installation cost of $698 for a level and quality of service substantially beneath what fibre will provide.

But the real question is, just how much extra should rural people have to pay for their broadband services over what urban people pay?