The Commerce Commission is looking at the drivers of high-speed broadband uptake and barriers to consumer buy-in. "Our aim is to promote competition in telecommunications markets for the long-term benefit of end-users..." Telecommunications Commissioner Ross Patterson said in a statement.
In their first of three discussion documents, the Commerce Commission’s focus is on the technical issues that may limit demand for high speed broadband services. Of the telco-internal issues explored, many are seen as not posing a significant problem. However, there are two cost matters included in their technical issues document, that have significant consequences for rural users.
First the issues that are not expected to pose a demand problem. Peering (how competing networks are interconnected); network neutrality (where all data is treated equally, regardless of source or destination); plus national and international transit arrangements are subject to growing competition, and will be studied but are not expected to be problematic.
The two remaining issues identified in ComCom’s discussion document are data caps and non-standard connections. These will definitely affect demand in rural areas.
Data caps are an issue for rural people because they are often dependent on mobile broadband services. However, ComCom may not address the issue because a survey has shown that “most consumers and SMEs are satisfied with their data caps.”
The real issue is less about the size of the data cap, and more about the overage charge applied for data that exceeds the data cap. For example, Telecom’s mobile broadband service with a 4GB data cap costs around $80 per month. Should a user consume just 1GB more, then the overage charge is an additional $100!
Urban users on fixed broadband services do not face overage charges anywhere near this amount.
Non-standard connections are identified as a significant issue by ComCom. But only in an urban context even though the study is not restricted to the government’s 6-year $1.5Bn Ultra Fast Broadband program.
Under that program, urban residential households may have the cost of the fibre drop paid for by the infrastructure provider. Rural Connect understands that a standard connection and thus a ‘free’ fibre drop, applies only to residential households and where the fibre drop is less than 30m for overhead, or 15m for underground, connections to the fibre access point. Connections greater than these distance could cost many hundreds of dollars and thus become a barrier to households connecting to the fibre networks. For example, a rear section with a 35m driveway will have an additional cost to the householder of around $400. There is no data available on how many urban households may require a non-standard connection.
The significant issue here is that every rural household, by definition, is a non-standard connection. They will get no subsidy to their fibre drop costs and with longer distance to cover, their costs will often be in the thousands of dollars range. Many, when faced with costs of that magnitude, will choose to not connect to fibre and so not have the opportunity to access the economic and social benefits that high speed broadband would bring.
Whether ComCom see the rural aspect as being an issue for them to address, remains to be seen.