Editorial: Why are the big telcos fibre shy?

Why are the two largest telcos delaying the release of Ultra Fast Fibre broadband plans?

Vodafone CEO Russell Stanners has told several technology journalists, including this one, that his company will not be launching Ultra Fast Broadband network plans for the foreseeable.

This, on the eve of Vodafone gobbling up TelstraClear (Commerce Commission approval permitting) and giving the company almost 30 percent of the fixed line market.

Stanners says in the UFB trials Vodafone has found the customer experience onerous, and he’s also not happy about the unresolved connection fee issue with Chorus (that is, Chorus only pays for up to 15 metres of the connection from the kerb to house, and who pays beyond that is being hotly debated.)

Of course Stanners is right to be concerned about the customer experience and the Chorus connection debacle, but I can’t help wondering if there isn’t a third reason for Vodafone being fibre shy.

Academic Bronwyn Howell wrote in July that a beefed-up Vodafone will have a substantial investment in the copper network (Vodafone has unbundled 51 exchanges, mostly in the Auckland area and TelstraClear has unbundled 61), and this will give it plenty of incentive to sweat the copper assets for as long as it can. Supersized Vodafone may even be tempted to embark on sub-loop unbundling (putting equipment into roadside cabinets).

Sub-loop unbundling is a much harder business case because there are only around 300 connections in a roadside cabinet, as opposed to thousands connected to an exchange. Howell’s argument is that when Vodafone and TelstraClear were foes, they were competing for business, but together their customer numbers for sub-loop unbundling start to add up.

Howells suggests the only way to push fibre over copper would be for the telecommunications commissioner to “increase the copper access price in order to discourage investment in sub-loop unbundling in the first place, or to accelerate substitution to fibre after the fact.”

However, Howell points out that the commissioner’s “primary regulatory responsibility is the promotion of competition on the copper network.”

The other major player in the fixed line market is Telecom with 50 percent of the fixed line market. It is apparently going to launch UFB plans next year. That’s according to Chris Quin, who told media this in the final days of his short sojourn as acting Telecom CEO.

Beyond a brief sighting at the financial results the new Telecom CEO Simon Moutter has made no public appearances and he’s held no press conferences. Nothing has been heard from this man, it’s possible he may decide to change the company’s mind on UFB. Although the appointment of Quin to head of Telecom Retail could be seen as a sign that at the executive table there will be a voice in favour of fibre plans.

If he did, that would mean almost 80 percent of the fixed line broadband market would not be served by fibre plans. An opportunity for smaller players? Maybe, but the rollout itself is proceeding at glacial speeds – Chorus, which as 70 percent of the build, said last month it had only connected 200 premises.

Meanwhile, the dearth of activity on the demand side is concerning. Who outside the ICT industry really knows what UFB is all about? Is there an information campaign on the wiring new homes to get them fibre-ready? Do community leaders understand what the potential for fibre can do for the work and education opportunities in their areas and how best to exploit them?

OK, so I’m an impatient person, but the rhetoric from Stanners on UFB and invisibility of Moutter is concerning. In a perfect world they should be embracing the opportunity to provide their customers with fast fibre connections. Scrapping with each other over who can provide the best deal. And maybe they would if their customers were clamouring to be fibre-connected.

In the copper age the telco mantra all around the world was “sweat the asset”.

With $1.5 billion of taxpayer investment in fibre infrastructure, in these uncertain economic times, the National government had better hope that Telecom and Vodafone can be persuaded to embrace a new, fibre-friendly, business model.