ICT Minister responds to critics of Telecom/Vodafone RBI decision

Steven Joyce addresses readers' concerns

ICT Minister Steven Joyce has responded to questions based on comments left on the Computerworld website today, following his announcment that the government is negotiating with Telecom and Vodafone to roll out the Rural Broadband Initiative.

CW: It’s not a popular decision judging by the comments on our website, and others. Are you concerned about that?

Joyce: No I’m not concerned. Some of the noisy ones include unsuccessful bidders and that’s entirely understandable. There are others who have this theory about how the world should develop. My concern is providing the best possible broadband to rural areas as soon as I possibly can and the assessment that the MED has made and I’ve supported is that this is the best possible option. And I think the people that are on 56Kbps modems in rural areas won’t be too worried about the niceties of everybody’s favourite bid, they’ll be more concerned about getting the speeds they believe they deserve.

One concern is that the government has just entrenched a duopoly.

Which is highly amusing given that as far as I’m aware there’s none of this happening in rural areas currently. So it’s just a joke to suggest that we’ve entrenched a duopoly in broadband in rural areas because it’s just not there currently.

Second point is that it’s been done on an Open Access and equivalence basis so I’m confident that they’ll be much more significant retail competition in rural areas then would otherwise be possible and we give opportunities to a number of providers to be able to provide broadband services where they cannot currently.

Going back to that duopoly point – our mobile market is a duopoly between Vodafone and Telecom.

No it’s actually a three-way argument between Vodafone, Telecom and 2degrees.

Although 2degrees has less than five percent market share.

I think it’s growing. But irrespective of that...Vodafone are proposing to build towers that have got room and sufficient height for co-location and they will be offering co-location and they will be providing it at the same time as they’re providing it to themselves.

If you contrast that with the Opengate proposal their towers were insufficiently tall to allow for co-location. So in some ways criticising the Telecom/Vodafone deal for that is a bit tough given that they’re actually going through that exercise of ensuring that infrastructure can provide for mobile competition from other players.

So we are going to have very tall towers in the rural areas, is that going to require some sort of Resource Management Act change to allow that to occur?

There will be RMA consents required but then again you can’t have successful rural telecommunications coverage without cellphone towers so it’s a little bit chicken and egg. I’m sure that the communities involved that are looking for this improvement in broadband will be supportive of what’s being proposed.

Is there room for everybody on the towers or are Vodafone and Telecom going to get the best spots?

The towers are tall enough to accommodate at least three mobile operators plus a raft of wireless operators and we’ll have extremely competitive colocation pricing through the grant component of what the government is providing. There will be at least six months notice on when the towers are being built, so that all operators can colocate from day one if they chose to.

The UFB pricing is going to get a regulatory holiday for ten years, it’s all being negotiated by Crown Fibre Holdings. Is it a similar thing here with the RBI – will prices be nailed down in the negotiation stage?

Pricing will be agreed in the negotiating stage but no, we’re not applying the UFB approach to the RBI. It will be subject to Commerce Commission and also to Telecommunications Act oversight.

Let’s look at that pricing – Vodafone/Telecom bid offers end users 5Mbps for $100 a month, Opengate was going to offer 10Mbps for $60 a month. Is that correct?

These figures, I am reliably informed, are way out of wack. We aren’t announcing the pricing at this time as the detail is still subject to negotiation. But I can and I will tell you that Vodafone and Telecom provided competitive prices at levels that were encouraging. Price is obviously a factor in choosing the successful bidder.

What about the contention that this will not deliver the speeds that rural people require, that it’s basically giving rural people in six years what we’ve got in the city here now.

That would be a great start for rural households who are currently dealing with 56Kbps dial-up speeds. So here you have somebody having a theoretical discussion that they want to go faster further etc etc but some of the basic infrastructure to achieve fast speeds against ultra fast broadband speeds is simply not available in rural areas.

For fibre backhaul which is open access, for the towers – these are all the infrastructure that is required to enable you to do those things. Now there are other differences between rural and urban areas which we can get into but I think the first point to make is that for somebody sitting on a dial up with 56Kbps, 5Mbps will be a different planet.

But it might be a completely different planet again in six years time when people in urban areas are on 100Mbps.

There will be further technology developments over that period including LTE, which is not available in primary bands at this point. And it will be once the digital dividend has been achieved from the turn off of analogue television. That is going to greatly improve mobile broadband speeds. Obviously these are upgradable to 4G and my understanding is that depending on the technology used, there’s talk of it being upgradeable at the change of a card.

So the reality is technology is going to evolve but there are a couple of things that aren’t going to change. You’ve got far lower population areas in rural areas than urban areas so the cost of laying fibre is 16 times the price, that’s challenging.

Secondly, is this what you are really chasing in rural areas? In many cases mobile application is more of an issue. Just stringing a bit of fibre up to somebody’s house won’t provide the sort of gains that you’re looking for.

Third issue is that contention is not the issue in rural areas that it is in urban areas. One of the big criticisms of the current broadband speeds in urban areas is the level of fluctuation and that’s caused by contention over copper lines. Now the reality is that (because of) the population densities in rural areas, contention is nowhere near the issue it is in urban areas and that will also apply to cellphone technologies.

Does this put Vodafone and Telecom in the front running for that 4G spectrum?

No it doesn’t. They will have to bid for that spectrum in the same way as anybody else.

Is the Vodafone/Telecom bid the most attractive because they’re paying the most money? They’re paying the bulk of the levy?

No, it has no bearing on it. If there was a better deal on the table then that would attract the funding. The funding is neutral, it’s oblivious who actually provides the money, it’s more about who can provide the best deal.

Did the government not think that OpenGate or Torotoro Waea had enough capital to roll it out?

There’s a number of factors that were considered and obviously that capability is amongst those. We laid out a series of criteria at the outset and we have followed those criteria meticulously.

So, yes, you did have concerns over capital?

No what I said is that there was a range of issues and across all of them the Vodafone/Telecom bid came out on top.

Not necessarily on every single one, but across a range of criteria they came ahead.

It’s not really answering the question on whether the other two had enough capital is it?

No that’s right.

And you’re not going to answer it.

I said there was a number of factors.

OK let’s move on. How is this going to affect the North Island iwi’s plans to roll out a broadband network which was announced on Friday. Do you think this announcement will affect those plans.

I don’t think it will because ultimately they’re depending on that backhaul being provided and as I understand it, and I haven’t read the details of their plans, is that they’re planning to leverage off the RBI.

I think this is a key point. Nobody was volunteering to lay this stuff out, right. Nobody. There were no plans in this country for the sort of large scale rural broadband infrastructure until the government came along and said ‘hey we’re going to fund some of this stuff, partly through capital and partly through the telecommunications levy’.

UPDATEDThurs10 Feb: Devil’s in the detail when comparing RBI bids; We look at Telecom/Vodafone and OpenGate proposals