NBN vs. the world: The New Zealand experience

New Zealand has taken a different approach to Australia when it comes to rolling out high-speed broadband, with the country already housing fibre-to-the-node infrastructure.

Australia has had a longstanding rivalry with New Zealand, and now the two countries are competing on a new front, with the rollout of high speed broadband networks occurring in both.

However, each country is taking a different path on the road to implementing high speed broadband for its citizens.

This story is part of a series on how other countries have dealt with their own broadband networks and what Australia could learn from their experiences. Read about the American experience and the Korean experience.

The New Zealand approach has been spearheaded by two initiatives: The Ultra-Fast Broadband (UFB) initiative and the Rural Broadband Initiative (RBI).

A UFB working party was established in 2010, with broadband to be rolled out to 75 per cent of New Zealanders over 10 years via fibre-to-the-home. In the first six years, schools, health services and businesses would be prioritised, along with greenfield developments and some residential areas.

New Zealand’s fibre network will be capable of achieving 100Mbps speeds, with uplink speeds of at least 50Mbps.

However, unlike Australia, New Zealand already has an extensive fibre-to-the-node network, with the UFB initiative building on that network to extend fibre to premises.

Telecom's structural separation

Telecom New Zealand, the country’s equivalent of Telstra, has been a main player in the UFB initiative. Like Telstra, the company was required to undergo a structural separation, which it carried out in November last year, to be eligible for work with the project.

“The previous regulatory regime which started in 2006 [already] had us operationally separated [and] we were already a long way towards being fundamentally split into two companies anyway,” says Ian Bonnar, head of communications at Telecom New Zealand.

Bonnar says the option was to either structurally separate or not get involved with UFB and “have the risk of having your assets get overbuilt”.

The company was eventually separated into Chorus, which owns the country’s copper network and will help build the new fibre network, and the retained Telecom brand, which carries out retail and mobile operations.

However, Paul Budde, telecommunications analyst, says in the beginning Telecom was reluctant to co-operate with a structural separation. “It took longer for Telecom to come around than [Telstra]," Budde says. "In the end the government really had to put the legislation in place before Telecom accepted that, and obviously [it] had to play ball from that moment onwards."

Three other partnerships are deploying UFB, along with Chorus, which is providing most of the UFB coverage (69.4 per cent) — Enable Services; Waikato Networks; and Northpower. Eventually, the Chorus UFB network will pass by more than 800,000 premises by 2019, according to a report by BuddeComm.

While Australia’s National Broadband Network (NBN) will cost around $36 billion, New Zealand's UFB is considerably less, with the government investing NZ$1.5 billion (A$1.2 billion), managed by Crown Fibre Holdings (CFH). Private investment is also expected to make up some of the funding, but it is still unclear what role it will play.

Australia is also grappling with funding models, with a recent joint committee on the NBN calling on NBN Co to provide details on how and when it plans on transitioning to a funding model which uses private equity.

However, unlike NBN Co, which has stated the NBN is being built for the public good and not to maximise profit, CFH has stated it will provide a commercial return on the Crown’s investment. The UFB would also be operated as a business under the direction of the government’s ministers and the minister for communications and information technology.

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The Rural Broadband Initiative

The NZ$300 million (A$234.7 million) Rural Broadband Initiative (RBI) will cover around 252,000 rural premises with differing levels of quality and speed, with Chorus and Vodafone deploying the network. All rural public hospitals, schools and some public libraries will be connected to high speed broadband via fibre.

The RBI objective is to deliver fixed wireless and improved landline broadband to 86 per cent of rural New Zealanders by 2016. Around 49,000 rural premises already have access to the RBI wireless broadband service. The deployment of 4G in the country will also provide an upgrade path for high speed broadband.

However, the BuddeComm report is critical of the level of funding granted to the RBI, stating the $300 million budget “has been insufficient from the beginning … [and now] many other industry bodies [are] agreeing that the figure is insufficient to provide the extensive coverage of the rural landscape”.

Politics and pricing

Budde says New Zealand’s broadband network started to evolve from a falling out between the government and Telecom “where basically Telecom started to bully the government about telecommunications policies and basically trying to maintain a monopolistic position in the market.

“Then the government stepped in [around four or five years ago] and said … ‘we don’t want you to set the policies — we set the policies’.”

The BuddeComm report also states the NZ government has been following a political and business agenda with the initiatives.

“The political agenda forces it to come up with plans and promises as quickly as possible, while remaining commercially prudent and conservative,” it says.

There has also been further controversy recently. Nearly 70,000 premises have been passed by UFB fibre at 30 June this year. However, only 1000 premises (1.4 per cent) are actively using it.

The New Zealand Economic Development Group, Ministry of Business, Innovation and Employment (MBIE), says this low uptake is indicative of the early stage of fibre deployment, with some areas still undergoing trials in laboratory settings and with customers.

“The rate of uptake reflects the time it takes to deploy the network, work through implementation issues and develop products and provide content which encourage consumers to switch to fibre,” said a spokesperson from MBIE.

“All retail service providers are targeting the first half of 2013 for full commercial launches of products for the UFB network, when a reasonable portion of the network build has been completed.”

Orcon is the only telco so far to release prices for UFB, with plans starting at $75 for 30GB at 30/10Mbps and topping at $234 for 1TB at 100/50Mbps, with the Ministry of Economic Development stating retail fibre prices for consumers is expected to be the same or lower than copper services, estimating prices will start at NZ$40 or less per month and up to NZ$60 per month for 100Mbps services.

While the MBIE is forecasting around 40 per cent to 45 per cent of customers will have migrated to fibre by late 2019, uncertainty around product pricing could also hinder uptake rates - Budde says in countries where high speed broadband has been delivered at high prices, uptake has been slow.

“[There are] people [who] only want to buy broadband and they don’t give a damn if it’s fibre or wireless or if you bring it in a wheelbarrow – they want affordable broadband, and that is the problem that still is the uncertainty in New Zealand about affordability and having access to the fibre network,” Budde says.

“If that affordability is not there, then you will never be able to get that target of switching over to fibre or getting high penetrations on fibre if the prices are too high.”

While New Zealand continues to grapple with its own issues such as low uptake rates and pricing uncertainty, Budde says Australia can still learn from the country’s experience. Ultimately, he says Australia could learn from a number of experiences around the world.

“I think there really is a lot of interconnection going on between the top 10 countries that are involved with this and trying to learn from each other. Each country will have interesting details that you say ‘wow, I didn’t think of that’ and you can learn from that,” he says.

Follow Stephanie McDonald on Twitter: @stephmcdonald0

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