The Commerce Commission held its “Future Broadband” Conference in Auckland early this week.  The conference is part of the Commission’s study in to the demand-side issues that may be barriers to the uptake of high speed broadband in New Zealand.

The study is important because the viability of the much vaunted Ultra Fast Broadband (UFB) program is at risk.

 This relates to the way that the UFB initiative is funded.  The government allocated $1.5Bn of taxpayer’s money on the basis that it would be used in the fibre roll-out and then paid back once households were connected. By this means, the financial risk of there being low demand for high speed broadband moves from Chorus to the taxpayer.   

If take-up is insufficient, then the taxpayer money is not paid back and therefore, is not available for re-allocation to another part of the roll-out.  So either the UFB roll-out will fail, or the government will be required to allocate more money to ensure continuance of the program.

This may account for why rural issues got so little consideration at the conference.  The Rural Broadband Initiative (RBI) is paid for by a $52 Million payment to the winner of the RBI plus annual grants from a levy on the telcos to a total of $300M.  So there is no imperative to connect people to the RBI system. The money will be spent whether people connect or not.

The conference discussion has been around content and connectivity as being the drivers for high speed broadband.  In the end, whether someone signs up for high speed broadband is a simple cost-benefit decision.  

The cost side is reasonably well know - around $100 per month for 100Mbps, lots of data and including a telephone line and perhaps some toll calls.  What is missing is the benefit side of the equation.  

For businesses, the benefits are around selling goods on-line, collaboration through video-conferencing and using cloud-based services such as accounting, stock control or project management.  If the benefits justify the cost, businesses will move to fibre-based services.  

For consumers, the benefits will be around video downloads, on-line gaming and social networking using video.  

The issue here, and one that took a large amount of conference time, is that video content is pretty well captured by Sky Television who distribute it over broadcast channels and through existing copper-base broadband service providers.  Sky have most of the distribution channels already sewn up.  Any new entrant will have to secure new content to make a difference which is unlikely given that content owners are reported to be unwilling to sign new distribution contracts until high speed broadband is widely available in the country.  A classic chicken and egg situation!

So there is little incentive for households to move from their existing broadband service to the coming high speed broadband over fibre services.

In the middle of the conference, the ‘Stephen Fry’ controversy erupted.  Mr Fry, who is living in Wellington whilst filming “The Hobbit” exceeded the data-cap of the Telecom-provided broadband service at his accommodation.  He let loose a twitter storm about how abysmal New Zealand’s broadband service is.  

There are three thing about Mr Fry’s poor broadband experience:  it affects only one person, it was his fault and he had the where with-all to solve the problem himself.  Contrast that with the rural broadband issues we face: they affect 1 million people who must accept whatever the government decides and are not in a position to do a lot about it themselves.  

If all the time spent by so many people in that twitter storm were focused on rural broadband needs, then I am think a solution would have been found.