The mood was pessimistic at Paul Budde’s “Telecoms in New Zealand” round-table earlier this week.

Paul heads an Australian-based international telecommunications research consultancy, covering telecoms issues in 190 countries.  He has held discussions in the White House and with government officials in New Zealand, Australia and Holland and has advised the ITU/UNESCO Broadband Commission for Digital Development and is the lead author of a report that was presented to the UN Assembly.

Paul’s main message is around how cross-sector applications in e-Health, smart grids and interactive video, form the clear justification for fibre to the home to deliver high speed broadband.

In this year’s round-table, Paul reviewed what is happening with Australia’s NBN (National Broadband Network) and New Zealand’s UFB (urban Ultra Fast broadband) and RBI (Rural Broadband Initiative) set in the context of global transformation of the telecoms industries.

In Australia, NBN Co (equivalent to New Zealand’s CFH (Crown Fibre Holdings)) was established to own the new infrastructure.  NBN Co will operate as a wholesaler only and, as a utility infrastructure company will earn a 5%-6% return on funds invested.  Telecom NZ, as a public company, will be looking for a return of around 20% on its infrastructure investments.  NBN Co will be receiving around $27Bn of new taxpayer funding and from that will pay Telstra for access to its existing fibre network.  It will also pay Telstra to migrate customers from its legacy copper network to the new fibre NBN, and eventually dig up and recover the buries copper.  

NBN Co, which will cover all installation costs to a property’s Optical Network Termination (ONT) unit and has set a wholesale cost of an NBN Internet connection at A$30 per month for the pilot installations, is expected to earn a profit within five years.

At this entry price, domestic uptake rates, varying from less than 30% to more than 60% in the NBN pilot sites, are surprisingly low.

Importantly, NBN Co has partnered with other national organisations to ensure the demand for high speed broadband is developed to the benefit of the country.  An example is eHealth - primary health care delivered in the home via the Internet.  Australia is expecting savings of $10Bn per year from the health budget, from the ability to monitor patient recover and provide elder care through the Internet. A pilot that delivers remote health care directly into the homes of people aged over 65 with chronic medical conditions, via high-quality video-conferencing links has commenced.

In total, the NBN program is expecting to achieve better than 93% coverage of the population (the target was 90% within its 10 year life.  Pilot programs are already being rolled out.  The NBN program is integrated with the government’s $1Bn “one laptop per child” program.

The Australian government last week passed legislation that provided for the separation of Telstra, a move which enables the roll out of the entire NBN plan.

So what is happening in New Zealand?  At the moment, not a lot.  There is no overarching strategy document, little industry involvement in policy setting and little demand-side activity especially in the applications that will use the new network.  

What we have seen recently is legislation introduced to the House to enshrine a regulatory holiday for fibre companies with Commerce Commission oversight precluded.  

Today the government announced the long overdue conclusion of negotiations between Crown Fibre Holdings and two Local Fibre Companies under the UFB program.  That the first installations are expected to start before Christmas appears to be more about the political need to be seen to be making progress on election promises.

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