Last week, I back-grounded how the government have short-changed rural New Zealand’s access to ultra fast broadband.  Their reason for doing this - bugetary constraints - is understandable, but to accept that reality too easily, is to construct a rural/urban digital divide for generations to come.

In an egalitarian society, a digital divide enforced because of economic constraints must not be accepted.

In arguing for equality of broadband access, Rural Connect does not seek fibre to every farm.  Clearly an affordability line needs to be drawn somewhere.  When it comes to ultra fast broadband, my views differ from the government’s only to the extent of where that line should be drawn - Mr Joyce draws the line at 25% of the population, I draw it at closer to 5% of the population.

The issue is the capital funds required to offer equal services up to the point where that affordability line is drawn.  At a total cost of around $3Bn to provide fibre to the home for the 75% of New Zealanders living in urban communities, it will likely cost at least that again to provide the same level of access to the rest of the country. This is because the cost of laying fibre cable in rural areas is much greater per connection than in urban areas.  

Rural Connect offers a solution to this funding issue.

The government are about to earn significant opportunistic revenues from the sale of radio spectrum to telecom service providers.

This will come from the auctioning of the 700MHz ‘digital dividend’ spectrum that becomes available following the switch over to digital TV late in 2012.  

Last week, I proposed that this ‘digital dividend’ spectrum be dedicated to fixed rural broadband services.  The rationale for this proposal is that this spectrum has a very good penetration of obstructions (house walls, trees) and covers long distances. It offers an economic means of providing fixed broadband compared to other frequency bands.

The three mobile phone service providers, will between them, want exclusive access to that spectrum to provide better mobile broadband services.  A technical constraint limits the spectrum allocation to satisfy the wants of only two operators, so competition between the three operators will likely drive a very high price unless spectral efficiency is degraded.

There are alternative frequencies available to mobile operators.  The coming mobile broadband technologies, 4G and Long Term Evolution (LTE), will operate fine well at frequencies other than the 700MHz band although it will be more expensive to provide.  So mobile service providers do not need the digital dividend spectrum.

The government have shown a preference for mobile services in their discussion paper on how to allocate the spectrum.  They see greater value, a higher price at auction, from mobile broadband than from fixed rural broadband services.  And given the lower costs and higher revenues for mobile operators using this spectrum, its value will be higher in monetary terms than in its use for fixed broadband.  So it is unlikely that the 700MHz band will be dedicated to fixed rural broadband services.

As a solution, Rural Connect proposes that the proceeds from auctioning the digital dividend spectrum be used to extend fibre to the farm connectivity throughout rural New Zealand.  If the spectrum earns $1Bn, then rural fibre to the farm services would be subsidised to that amount.  Telecom Chorus already have the contract to roll out fibre to rural schools as a part of the government’s $285M rural broadband initiative.  That $1Bn would go a long way towards eliminating the urban/rural digital divide.