Editorial: Why are the big telcos fibre shy?
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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.
Posted by Anonymous at 14:06:50 on September 27, 2012
For instance do the maths...
There are at least 6 variants of the UFB product that the fibre companies sell RSP's... you multiple that by the 4 LFC's (if you are a nationwide provider which TNZ and VF are) and you get a shedload of complexity...
On top of that you have new buying processes (how you buy), new provisioning processes, new SLA and management processes...
Add to that the old voice stack changed
Added to that Telecom is seperating from Chorus system wise
Added to that VF is going to merge with TCL....
If it was simple, everyone would have done it...
Posted by Paul at 11:33:23 on September 25, 2012
As we speak, the Commerce Commission is deciding about the Vodafone application to buy TelstraClear. There has been almost zero commentary about this - uncharacteristically consumer advocates have been AWOL.
You need look only to food prices to see the outcome when a sleepy regulator allowed a duopoly of two level-peggers to emerge. The two - in this case supermarket chains - worked out instantly that there is more profit in living with their current market share and increasing margins, than in competing on price in pursuit of a few percent increased sales. Hence we all live with the absurdity of a food-producing country with some of the world's highest retail food prices.
Your editorial shows the even greater danger a Vodafone/Telstra merger would pose for consumers. The duopolists will bank the government's fibre money, then manipulate the price structure so as to sweat the copper assets for the next several years. The fibre will become a white elephant. And all the tax money we have sunk into UFB will disappear to the offshore owners as profit.
Telecom 50, Vodstra 50, New Zealand nil.
Who is making the consumers' case? Where is the pro-active regulator we once had? I despair. Massive, irreparable damage is about to be done.
Posted by Anonymous at 20:27:37 on September 24, 2012
The supermarket comparison is useful and valid.
Oftentimes there is a need for regulation.
The deregulation that commenced world wide in the 1980s has lead to the current protracted GFC.
These regulations were put in place in the 1930s to prevent such an event as the Great depression occurring again. Now 25% unemployment in Spain as with the 1930s. Deja vu all over agsin.
Look at what we have now. The 4 big banks in NZ (who don't make so much as a bran muffin) earn more profit than all our listed companies put together - by a long shot.
Under regulation Real Estate agents were limited to 3% of the house value. Now it is 4% for most of them.
The consumer/citizen gets nailed.
Thanks for highlighting this, Sarah
Posted by Steve at 18:22:31 on September 26, 2012
Posted by govt employee at 12:20:37 on September 26, 2012
Posted by Anonymous at 12:51:16 on September 24, 2012
Posted by Anonymous at 12:52:03 on September 24, 2012
Until UFB is past a lot more front gates there is no point for a large Telco to release plans which the majority of its customers can not have. Why drive the demand and create false expectations within your customer base then when you can't deliver?
I think it's a sensible decision on their part to wait for the product to mature and to iron out the teething problems first before opening the floodgates.
I would have thought that IT reporters would be aware of the issues involved and could be a little more positive about what is being acheived here, rather that expecting everything to be done by Christmas because of a few "Squeaky Wheels"
Posted by Oil Can at 12:40:48 on September 24, 2012
Posted by Keith at 11:51:45 on September 24, 2012
Google them, you'll find their phone numbers :-)
Posted by Anonymous at 12:03:40 on September 27, 2012