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Another one bites the dust

Written By: - Date published: 10:34 am, April 28th, 2009 - 51 comments
Categories: bill english, budget 2009, interweb, john key, national/act government - Tags:

And so another of John Key’s “big ideas” is shown to have been costed by monkeys. Treasury study suggests fibre plan will fall short:

A study commissioned by the Treasury has warned it would cost between $5.3 billion and $10.4b to connect three-quarters of New Zealand homes with fibre-optic cable using the Government’s preferred active Ethernet technology.

Former Telecom chief technology officer Murray Milner, who carried out the study, says the $1.5 billion the Government has allocated to its ultrafast broadband plan would not be sufficient to connect that number of homes. That is even if matching investment from the private sector was forthcoming and cheaper, “passive” fibre technology was used.

No doubt Bill English will soon be along to quietly kill the initiative.

51 comments on “Another one bites the dust”

  1. infused 1

    It should be rolled out in any city with a population over 10k. Link it to a national backbone. Businesses have a lot to gain using this technology.

    • BLiP 1.1

      More corporate welfare?

      • cocamc 1.1.1

        BLiP – why do you say this is corporate welfare when it is clearly targetted at the overall economic growth of the country

      • infused 1.1.2

        How the hell is it corporate welfare? If we actually had some decent connections here, we might be able to sell services overseas a lot easier. Try laying the cable for yourself and see how much it costs. We have finally got fiber where I am and it’s hellishly expensive. Still much cheaper to host everything over seas.

        Citylink are the only ones laying cable on a big scale.

        • Kevin Welsh 1.1.2.1

          Its corporate welfare because the money being thrown at this is money Telecom should have been spending to upgrade and improve services all along.

          The have ripped off the people of this country for the last 20 or so years with poor service, exported their profits to their shareholders, added small improvements to placate the masses when the volume of complaints gets too loud and basically done as little as possible for as long as possible to maximise their return.

          And then when the playing field looks like its being levelled, they expect the taxpayer to stump up the cash to drag our telecommunications into the 21st century.

          They are the worst kind of arrogant corporate that this country has.

          • Tigger 1.1.2.1.1

            Kevin – agree with you. Business is often terrible at keeping up infrastructure, instead preferring to do as little as possible (ie. Toll and railways).

            I am dubious about fibre to the home anyway. If this will benefit businesses then let’s roll it out to businesses. Home businesses who can demonstrate a need could also have rollout. The rest of us might like faster porn at home but it doesn’t look we can afford it at the moment.

      • The Baron 1.1.3

        You’re an idiot, BLiP. “Run for the hills, Ma – evil corporates is a-comin!”

        Though I thought you liked the idea of investing in infrastructure, to protect jobs and stimulate the economy during a recession? Or do you think that road building is basically corporate welfare for evil trucking companies?

        Here’s an idea – once deployed, don’t buy telecommunications services. That will give those evil corporates a kick square in the nuts, plus save us all from your consistently stupid, meaningless, ill-informed comments.

        • Bill 1.1.3.1

          ” targetted at……economic growth” = more business profit.

          “able to sell services overseas a lot easier” = more business profit

          “investing in infrastructure, to…stimulate the economy” = more business profit.

          As opposed to investing our money directly in us and our welfare….trickle, trickle, trickle on down.

          Not corporate welfare? You’re kidding…you have to be.

          • cocamc 1.1.3.1.1

            and so without business profit we cannot hire more people, develop new business lines, improve productivity.
            You’re the one whose kidding.

        • BLiP 1.1.3.2

          Obviously pearls before swine, in your case.

          • Bill 1.1.3.2.1

            cocamc
            Net profit is not only completely unnecessary. It’s a con. Theft.

            It is not a necessary prerequisite when hiring is being considered. It is not necessary for and has no effect whatsoever when it comes to developing new business lines. And it is a drag on productivity.

            Net profit is the leftover portion of gross profit after reinvestment and overheads. Net profit rightfully belongs to workers and should be paid to them as wages. End.

  2. cocamc 2

    so by reckoning that the Labour Party policy was flawed as well. I hope the government pushes ahead with this as this type of investment is needed if we are to compete globally in an ever developing technological landscape

    • Draco T Bastard 2.1

      Yes, very flawed but that’s what you get when the political parties still support a flawed socio-economic system, namely, capitalism.

  3. lprent 3

    The policy they should have followed was the one that the last government was already doing and the telco’s were supporting.

    Fibre to the cabinet (and copper to the user) gets the biggest bang for the buck at an infrastructure level. It increases the overall speed of the network to what you get when you’re right next to the exchange at present, ie 24Mbsec.

    With few exceptions most businesses don’t need very high speeds. Those that do should move to where the resource is – where fibre is already. Alternatively they should pay to draw the fibre into their building.

    Basically this was a election bribe, which was underfunded, and only a few of the new entrants were in favour of. Plus the people who want to download movies.

    The nett effect if this had gone through would be to increase network costs. To date no-one has managed to explain to me where the country got economic benefit from it.

    • cocamc 3.1

      iPrent
      The economic benefit of faster speeds to this country comes in many guises. One such is the capacity for NZ companies to set up global hosting centres which is not achievable presently with current broadband speeds. Now most companies have to host overseas in the US and Europe to reach their customers – wouldn’t it be great to have those hosting opportunities here for companies such as Datacom, Revera and the like. conversely what about attracting multi nationals to base technology centres in NZ where it can be cheaper to operate. We have a burgeoning film industry that needs access to high speeds which brings in much investment to the country, we could expand that. The opportunities are almost limitless.

      • lprent 3.1.1

        Bullshit. Hosting companies do so in areas that are already fibre wired.

        The film industry already locate their post-production in the various areas that have fibre, as do a lot of software companies. Those costs already are being paid by the organisations who get direct benefit. Spreading it wider will simply drive up the costs for all network users.

        So where exactly would the advantages be in spreading fibre past the cabinet?

        If you wanted to achieve more hosting here for export, then you’d increase the bandwidth on the ocean cables. That would get past our effective dependence on the Southern Cross cable and the psuedo-monopoly pricing on it.

        • cocamc 3.1.1.1

          So tell me why a lot of the companies we have here off shore the hosting then of their services. It’s because they are not served well with capacity. I know cause I’ve been one of them to do this. Cost of the bandwidth is another factor.
          The SOE Kordia has been trying to get other international cables in place but doesn’t seem to be going that well because of under-funding – so there are issues all around.
          Also – It’s not just about business – its about the end consumer and changing habits and the opportunities that presents. Take Apple for one moment who now offer Movies off the net through iTunes. Its slow to download movies at the moment and streaming would be a joke. TVNZ, TV3 and Sky TV can create more business lines around online content – pity the speed to the home isn’t there.

          • lprent 3.1.1.1.1

            So tell me why a lot of the companies we have here off shore the hosting then of their services

            For the same reason that I moved The Standard. Despite the fact that 95% plus of our traffic was local to NZ, it costs me 10x as much to have the site hosted here.

            The issue isn’t in the capacity, the issue is in the costs. I can’t see a reason for the costs of hosting almost entirely NZ site here being 10x as much as in a site hosted in the US. There is virtually no differences other than cost. I have slightly better access and tools in the US one, and less restrictions on memory size.

            Local bandwidth should be close to free. Why isn’t it?

            The SOE Kordia has been trying to get other international cables in place but doesn’t seem to be going that well because of under-funding – so there are issues all around.

            The problem is that new international capacity for NZ has an enormous up-front cost, and little immediate benefit for a commercial operation. Take the 1.5 billion and drop it into the aussie/asia link, then use that to start pushing international bandwidth prices down. That would have the benefits you’re after for hosting.

            Take Apple for one moment who now offer Movies off the net through iTunes. Its slow to download movies at the moment and streaming would be a joke.

            It depends where you live. Currently if you’re within a kilometre of the exchange and run at the 8Mbsec (or 24Mbsec) it isn’t a major problem. If you’re further away it is crap.

            That is why fibre to the cabinet is a better option. It means that effectively everyone can get to those speeds because the copper runs are smaller.

            Since I moved I dropped from my usual 8.6Mbsec to 6.1Mbsec (sob)…

  4. Observer 4

    Too many cablers spoil the infrastructure. Privatise Chorus, have the government invest in it by selling 40% of all other SOEs, and deliver over a reasonable period (15 years) based on cabinet to the premises as ordered by the consumer (individual, family or business). Easy.

  5. vidiot 5

    http://www.citynet.nl/upload/pon_vs_active_ethernet.pdf

    A document that details the difference between Active & Passive Ethernet. From my quick glance over, it seems that Active is better suited to high density areas (CBD & larger suburbs), and Passive (PON) for lower density areas.

    And yes agree, Fibre to the Cabinet makes a lot more economical sense – the only downside is that there isn’t any space inside the TCNZ cabinets for any competitors gear. So unless you want to see multiple vendors cabinets popping up in your footpath, FTTH just might push TCNZ to open it up.

  6. BLiP 6

    Haven’t you heard – the government is broke. Less than six months in office and they’ve run out of money thanks to an economic depression, the fundamentals of which were laid down by people like John Key:

    Over the past decade or so the global economy was fuelled by a private sector credit boom made possible by a combination of large macroeconomic imbalances with and between economies, relatively low global inflation, new waves of financial innovation, and huge amounts of leveraging by hedge-funds and other financial institutions

    .

    Still, I imagine that if business is going to benefit from broadband the last thing it wants is the government sloshing around in the development of its own infrastructure?

    • cocamc 6.1

      BLiP
      The first thing I want is the government enabling this investment because the current model hasn’t exactly worked with the telcos protecting their own patch.

      • BLiP 6.1.1

        I happen to agree. I have no objections to corporate welfare per se provided there is a tangible benefit to tax payers and the investment is protected from the international vultures. The National Party model doesn’t exactly do this but, for our sins, they are in power and they did promise. It was the one pre-election promise I thought was not too bad an idea. And now this . . .

  7. infused 7

    BLiP, you should start your own blog.

    • BLiP 7.1

      Thanks. But, so long as The Standard is prepared to indulge me and so long as I piss you off, I’m happy. You’re happy to dish it out but don’t like it back at ya. Excellent. 😉

      • infused 7.1.1

        I’m not dishing anything out. You don’t piss me off, more annoying than anything 😛

  8. Quoth the Raven 8

    With few exceptions most businesses don’t need very high speeds. Those that do should move to where the resource is – where fibre is already. Alternatively they should pay to draw the fibre into their building.

    Exactly Lprent. If businesses want it they should pay for it instead of waiting for the taxpayer to pick up the bill. These businesses ought not to be suckling at the teat of the state.

    • jerry 8.1

      “These businesses ought not to be suckling at the teat of the state.”

      Quite right that position is currently taken by the public service and vast amounts of consultants and other hangers on everyone else should find their own trough to gorge in.

      Unless of course these businesses contribute large amounts of tax dollars which would become even larger mmmmm tax dollars……………..excellent.

    • infused 8.2

      You’re wrong. Fiber is like infrastructure. It’s not some service. What would happen if it was one lane in and out of Wellington? Yeah, same story with Fiber.

  9. roger nome 9

    “so another of John Key’s “big ideas’ is shown to have been costed by monkeys.”

    I didn’t know that LeeC worked for treasury. That’ll be why NAct’s handling of the recession has been so abysmal.

  10. bill brown 10

    This entire strategy is arse about face…

    The vast majority of content that is consumed both by home and business users is located overseas.

    The provisioning of a high bandwidth connection in the last mile, while not addressing the country’s connectivity to the rest of the world, is as useful as having a 6 lane highway as your driveway, with the road that goes past your house being a walking track.

    Whether it’s an Ethernet or Passive Optical network is the difference between having solid yellow no passing lines or not in the middle of your driveway.

    The digging of trenches and laying of cable is therefore about as useful as employing people to move holes around to keep them occupied.

  11. infused 11

    bill brown, how do you know? I move over 5TB a month using my connection. All local content.

    More overseas capacity is there. Also, isn’t Orcon laying cable overseas?

    • bill brown 11.1

      Well Infused, you’re what we in the trade call a corner case.

      Your needs are probably better met by you, rather than cabling up the whole country just on the off chance.

      How ’bout you pay for your own infrastructure instead of sucking off the teat of the state.

      • infused 11.1.1

        Far from it. Most businesses I have on my books push huge data. You just don’t have a clue. Most businesses don’t have the option. Done some replication over DSL? hah yeah right.

        I wish to keep my business in the local town I’m in. Capacity of the fiber will not let me, hence I’m moving it to Wellington. While you may not care, it’s just more money been taken out of this town.

        The council funded getting the fiber here in the first place.

        Get some knowledge please before opening your mouth.

      • BLiP 11.1.2

        Yep – you’re right except Infused is actually more of a basket case.

  12. jarbury 12

    Cool, fibre-optic cables directly to my house! Downloading movies off bitTorrent will be WAY faster when that’s done!

    …. still waiting for other “benefits”

  13. Andrew 13

    infused – “Citylink are the only ones laying cable on a big scale.”

    Are you kidding? I think you should check the government’s broadband map – http://www.broadbandmap.govt.nz which can show all the fibre in NZ.

    City Link have bugger all fibre compared to the likes of Telecom, TelstraClear, Vector, FX Networks and so on. Telecom has over 23,000kms of fibre already out there and already offers fibre ethernets for businesses in most towns while also rolling out fibre-to-the-node cabinets in towns of 500 lines of more right now. Vector are also laying a 500km fibre loop in Auckland which Vodafone are going to use.

    • infused 13.1

      Sorry, I was talking about companies still laying fiber. Don’t FX just piggy back off everyone else?

      I’m talk about fiber to business. Go ask Telecom how much it will cost to use their fiber. Fiber to node doesn’t help people really does it? At the end of the day, you still get some shit dsl service.

      • Andrew 13.1.1

        As I said – look at the govts fibre map – http://www.broadbandmap.govt.nz – it shows you where the networks are including FX Networks… network. City Link are still well behind even Telecom in terms of direct fibre connections to buildings – their own website says they link to about 500 buildings in Wgtn when Telecom links to a thousand and also has ethernets in places like the Kapiti Coast not to mention the direct fibre connections TelstraClear has to buildings like uh Parliament! Its really misleading to say City Link are the only fibre player – theyre only in Auckland and Wellington and are relatively small.

        And as for fibre to the node not helping people – I’d ask someone like Russell Brown what his broadband performance is like since ADSL2+ was rolled out in Pt Chev.

  14. The Voice of Reason 14

    The one thing that beats me is why a National Party government with so many rural voters isn’t doing anything about bringing this interweb thing to the provinces.

    Or does rural NZ not count anymore with the Nat’s leadership except as a reliable block vote?

    • The Baron 14.1

      Their paper acknowledges the rural issues though – and they will solve that via a different process.

      Really, rolling out fibre in the boonies would be a fundamentally stupid idea.

      • BLiP 14.1.1

        ahhh . . . Baron, me ole mate . . . that paper you mention, well, umm . . . see, its gone. In short, the National Party’s position on the roll out of broadband to rural areas is: the farmers can go and get fucked. Maybe you didn’t get the memo, it was a sort of “need to know” thing.

    • infused 14.2

      I don’t think that’s the issue. The issue is, it’s hellishly expensive. I know someone who is providing these areas with wireless and seems to be doing a good job.

  15. Jacob van Hartog 15

    If anybody goes off the main state highways to the minor state highways going through towns no ones heard off ( Onga Onga) the tell tale signs of fibre cabling beside the road are there. But do the locals get to connect or is it just a long distance trunk service. Maybe the $20,000 to connect these very small towns so that there is some sort of decent broadband ( 25Mbs) that city slickers take for granted.

    I also see in the NY Times a US very large ISP with say average downloads of 10GB per customer per month reckons the bandwidth costs are 50c per customer per month. The again thats the US.
    Maybe we are dreaming to get $NZ5 per customer per month with a 150% markup for the retail end

    • vidiot 15.1

      JVH – odd’s on they don’t have to contend with the costs of the SX cable that the local NZ ISP’s have to deal with. The local ISP’s here are trying to pass off wholesale charges of $2 per Gb for International data. And as unfortunately a lot of NZ companies now host offshore (like this site) it all adds up to big $$$$ to be borne by the end user ie you.

      Perhaps the BB strategy should be re-focused, concentrate on FTTP in the immediate CBD, Industrial & Commercial areas and then use VDSL2 for the last mile to residential premises.

  16. “No doubt Bill English will soon be along to quietly kill the initiative.”

    One can only hope.

  17. DeepRed 17

    The big issue with fibre rollout in the provinces is economy of scale. Wireless broadband will never displace cables in the ground, but it can be viable and practical where fibre is not.

  18. Of course the Nats got it wrong, politicians are incredibly incompetent at knowing how to spend other people’s money because their incentives are poor. The beneficiaries of subsidies are small in number and get a lot, those paying for it are high in number and spend a little – so those wanting a lot will shout loudest, while those paying for it tend to just take it, until it reaches a threshold of “enough” once in a while.

    Treasury told Labour the Auckland rail network had at most a net economic value of $20 million, Dr Cullen spent $81 million on it, and TranzRail promptly gave its shareholders a dividend of over half that. Nice.

    We all know about Kiwirail and how the nationalisation of it wont ever return the money being poured into it.

    The question isn’t being asked as to why high volume internet users are special people who need their usage subsidised by everyone else.

    • r0b 18.1

      politicians are incredibly incompetent at knowing how to spend other people’s money because their incentives are poor.

      Mmm yes, pity politicians aren’t as competent as free market bankers eh? Oh – wait…

    • Draco T Bastard 18.2

      Of course the Nats got it wrong, politicians are incredibly incompetent at knowing how to spend other people’s money because their incentives are poor.

      Only if they have a NACT psychological profile – everyone else actually wants to do what’s right for the community and, as such, their incentives are fine.

  19. BLiP 19

    A foreign owned multinational, in its submissions to the government in relation to the roll out of broadband says , in part:

    “Done wrong, there is a risk that infrastructure competition could be crowded out, the mantle of monopoly will pass back from private to public ownership, and the regulatory clock will be reset to 2001 as the grinding process of controlling the new LFC monopolies under the Telecommunications Act reboots.”

    Nothing sounds “wrong” about it to me.

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