“UFB is a piece of ...”
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ICT lawyer Michael Wigley, speaking in front of 480 business users at the CIO Summit, was brutally honest in expressing his views on the current state of the government-assisted ultra-fast broadband (UFB) plan.
“UFB is a piece of shit. It’s a classic example of an ICT project which is going badly and also an initiative by the public sector which is going poorly.”
He says the UFB was inadequately thought-out at the beginning, particularly in light of its significance for the country. “This is a huge initiative, worth many billions of dollars directly and the [indirect] impact on the economy is massive. You only have to look at what’s happening with Telecom to see the ramifications.”
Wigley is a prominent ICT lawyer whose clients have included international and domestic telcos, ISPs, IT companies, ICT users, public sector agencies, and regulators.
He says potential suppliers were notified of a change to the UFB model in July, from providing only Layer 1 (dark-fibre) services to also providing Layer 2 (lit fibre). “The vendors have been given four weeks to respond. This is a massively complex thing to do – four weeks is ridiculous,” he says.
It will affect not only the vendors but the wholesale customers – “your providers”, Wigley reminded the Summit audience. Some of those companies, trying to plan around the changing model and likely price levels “are going to go out of business”, leaving end-users stranded, he suggests.
In a statement emailed to Computerworld Crown Fibre Holdings denies potential participants in the UFB have been taken by surprise, as some were already considering Layer 2 and it was an option under the original ITP. “In fact, these changes are a direct response to feedback from the ITP [Invitation to Participate] respondents and other industry participants earlier in the year,” the emailed statement reads.
Like Kordia CEO Geoff Hunt (Computerworld, July 8), Wigley is concerned about pricing relativity between the layers. “Layer 2 is built on Layer 1; you’d think that Layer 1 would be cheaper; but no, the word on the street is that it’s going to be more expensive; so what does that do to people who want to set up competing wholesale products? It will be quite unsettling for them, quite unsettling for you as customers.
“Of course the future is uncertain, things may become clearer as Crown Fibre Holdings clarifies the way they’re going,” Wigley concedes.
CFH says it’s meeting its objectives, has made progress with briefing stakeholders and has received a lot of positive feedback. However, it has not met with Wigley and “would welcome some form of elaboration on his remarks.”
Wigley, contacted after the Summit, declined to comment, saying he is now acting for a client in this matter. He refused to name his client, but he has represented Kordia in the past.
Scott Bartlett, CEO of Kordia subsidiary Orcon, confirms that his company is interested in Layer 1 access. This is a logical step up the “ladder of investment”, he says – a model according to which providers progress from reselling to direct provision and from copper to fibre, funding each stage from the previous stage’s profits.
If Layer 1 access were priced higher than Layer 2 it would be “perverse”, Bartlett says, cementing the LFCs as “one big nasty monopoly per region”.
CFH says it is premature to comment on pricing relativity, as the bid process is still under way. “CFH is working hard with the industry to make prices attractive for end users and that is the intent of the government’s policy.”
Wigley’s pessimistic view contrasted, as Summit delegates were quick to point out through Twitter, with the relatively upbeat presentation given immediately before by Rosalie Nelson of IDC.
Faced with an anomalous pricing structure, large user companies, such as banks, might find it the best course to go into the wholesale market themselves, Wigley says.
“If you’re a big bank you’ll be wondering do you need to go through a wholesale provider – an ISP or a telco – to get access to this [network]; maybe I can do it myself. Why don’t I set up a captive ISP? Why not club in with the other banks and do it? There will be all sorts of options.”
Corporate users will get the opportunity to meet with CFH at three TUANZ functions this month. These will be closed events in which “Chatham House Rules” will apply.
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Posted by Anonymous at 9:06:20 on August 6, 2010
Posted by Lawrence D'Oliveiro at 14:58:59 on August 4, 2010
The analogy to their arguement is that the price for an airplane should be cheaper than a seat on the plane. Once you've sold layer 1 the whole asset is sold and it cannot be resold by the fibre company. If the fibre company sells layer 2, the asset has the potential to be resold with another layer 2 service to the same location at a later time. This fosters competition at that site as all resellers have equal opportunity of reselling a service to that location. If Layer 1 is sold to one provider in many cases the next provider will need to buy an expensive build of more fibre into that premisis which can result in a barrier to sale killing competition.
Posted by Anonymous at 14:22:14 on August 5, 2010