Fibre to the Home Report

InternetNZ released today the first ever comprehensive costing of options for achieiving ultra high speed broadband to at least 75% of New Zealanders. This was defined as a minimum 100 Mb/s for residences and 1 Gb/s for businesses.

The report is 150 pages of detailed models and costings. It was done by Network Strategies, who are an independent leading firm of telecommunication economists.

There are lots of technical details on whether one should build just layer zero or layer one infrastructure, whether it should be GPON or Ethernet or even peer to peer. The techos will find that part interesting.

But the real “big news” in the report is that it may be billions of dollars cheaper to build a fibre network through existing utility (electricity lines) companies, than through expanding current telco networks.

The major cost of fibre deployment is the cost of placing it. And lines companies already have networks of ducts plus overhead cables, and very importantly resource consents. If 50% of fibre deployment can be done using existing utility infrastructure (and some estimate as much as 70% could be done this way), then the total cost is projected to reduce from $5 billion to $3 billion and the cost to the Government from almost $4 billion to under $2 billion.

Now this is only one report, but hopefully a useful contributor to the debate over how to best achieve the Government’s goal of ultra high-speed broadband to 75% of NZ. But one reason I am quite enthusiatic about the path it suggests, is because it makes vertically integrated monopolies far less likely. You see none of the electricity lines companies offer telco services (such as Internet access, TV, phone). They would operate any fibre network on open access principles to all telco providers at a standard wholesale cost (estimated to be around $40/month). In one sense very similar to how Citylink have operated – they just provide the fibre, and let ISPs offer the services over it.

This actually has the potential to reverse much of the regulation in the telco sector. If there is infrastructure competition or separation, then you probably don’t need Telecom (for example) to be giving competitors access to its networks. Regulation is what I call a necessary evil. If one can get the infrastructure setup in a way so there is less regulation, that is a good thing.

There are literally dozens of big questions facing the industry and the Government, in working out a way foward. This report does not seek to answer them – it is a first step. Issues such as national vs regional, ownership, existing investment plans, the role of Chorus, RMA issues, funding, are all very significant ones.

It is going to be a very exciting time over the next few months, as the Government’s plans get finalised. Some people are sceptics, but I think there will be significant economic and environmental benefits to NZ if we get a fibre network in place ahead of most other countries.