Everything you wanted to know about the Chorus deal …

Written By: - Date published: 9:19 am, November 6th, 2013 - 103 comments
Categories: capitalism, Economy, infrastructure, john key, national, same old national, telecommunications - Tags:

Socialism for the rich capitlism for the rest

The Chorus fibre roll out deal with the Government is one of those issues that promises to embarrass the Government deeply, more deeply than us lefties may think.  Because amongst the ranks of this Government’s supporters are those who hold close to principles.  They may not be our principles such as help for the poor, gender equality, support for the treaty, racial tolerance and environmental protection.  They are quite different but nevertheless from the view of the right are just as if not more principled than our views.  One of the most important is the sanctity of the market.  This is why National’s treatment of Chorus for some of its supporters is the equivalent of Labour deciding that gender equality is a bad thing.

To explain the situation I thought that I should pose a series of questions and answers.  Feel free to agree or disagree.  Blogs should be about open debate.  Anyway here goes:

  1. What is Chorus?
    It is basically an offshoot from Telecom that looks after New Zealand’s telecommunications network infrastructure.
  2. What is its role in the fibre optic roll out?
    Well it won the tender to roll out about 70% of the fibre optic network.  Many thought that its tender price was too low and that Chorus was trying to maintain a monopoly.  If this is the case then bailing it out makes no sense at all.
  3. How much is construction of Chorus’s share of the fibre optic network going to cost?
    Chorus originally thought between $1.4 billion and $1.6 billion but has since revised this figure to between $1.7 billion and $1.9 billion.  It claims to need $3 billion for the rollout but I am not sure why.
  4. What do others think?
    Deutsche Bank thought that Chorus underestimated the cost by $500 million, not $300 million.
  5. So what does this mean?
    That Chorus’s tender was going to worsen the company’s position by between $300 million and $500 million.
  6. What would happen to the company if it has to pay this extra cost?
    Well last year it made a net profit of $171 million and so while earnings would take a hit it will still be solvent.  The shareholders would see the value of their shares reduce and dividends would reduce but that is life in the big city.
  7. What else is affecting Chorus’s financial outlook?
    The Government determined that as part of Chorus’s formation it should charge out access to its network on a “cost plus” basis benchmarked against comparable networks overseas.  The Commerce Commission was tasked with setting the price and it was widely expected that the price would reduce.
  8. What did the Commerce Commission initially think?
    That when it applied the statutory test set by the Government in 2011 the cost of copper broadband should reduce by 28%.
  9. What did the Commerce Commission finally decide?
    That the cost of copper broadband should reduce by 23%.
  10. Should Chorus or the Government have been surprised?
    No.  The test was in the legislation that National designed and Parliament passed in 2011.
  11. What does the Government think of the Commerce Commission’s interpretation of the law?
    John Key said that the Commission had misinterpreted the law but Amy Adams said that the Commission had got it right.  If Key is correct then he can only blame himself for passing law that was not fit for purpose.
  12. What options does Chorus have?
    Well it has the right to appeal and the Minister has to conduct a review of the regulatory framework.  Or it could do a quiet deal with the Government.
  13. When Chorus says that the Government has to make a decision really quickly is this true?
    Well no, because the change in pricing does not come into force until December 2014.
  14. What is the Government planning?
    John Key has not ruled out the nationalisation of Chorus.  Amy Adams has proposed that the Government Chorus should sit down with Chorus to look at the numbers and come back with some options.  This is crazy talk as Key has admitted that the Government is not good at analysing business.
  15. What do others think?
    National Party cheerleader David Farrar has said that the Government should make a decision based on the best independent data there is, not on the basis of a press release from a monopoly provider.  I could not agree more.
  16. Who should the Government blame?
    Whoever designed the statutory test and whoever agreed to accept the tender.  Stephen Joyce and Amy Adams apparently were involved.
  17. Could Chorus go broke?
    It has made some very concerning statements and its share price dipped 8%.  But it still looks very solid.
  18. Why do I agree with Matthew Hooton?
    Because he said “that is just a risk they took as a commercial enterprise so I don’t know why the govt has any further interest. Business is about taking risks. And if you manage your risks well you make great profits. And if you don’t you don’t.”
  19. Why do David Farrar, Matthew Hooton, Chris Barton and a cast of thousands from the left to the right of the blogosphere care about this issue?
    Because the Internet is the new commons.  Access should be free, or at least as cheap as possible.
  20. What should happen?
    If one of the largest companies in the country, stacked with the best talent that money can buy makes commercial decisions that with the benefit of hindsight may not have the been the best, it and its directors and shareholders should wear these decisions.
  21. Why this is so embarrassing for the Government?
    Because at the same time it is selling valuable highly strategic assets that belong to all of is it is thinking about nationalising a private company which has mucked up it sums AND because the Government designed the legislation which it is now saying is faulty AND because the Government accepted a tender where the price was obviously undercooked.

103 comments on “Everything you wanted to know about the Chorus deal …”

  1. Rogue Trooper 1

    The Herald Editorial, Gettin’ in Tune
    Bite The Bullet Amy

    • toad 1.1

      The comments thread for that Herald editorial is fascinating – so far around 30 comments and no commenter is supporting any of the Nat government’s proposed options.

  2. phil 2

    So many probing questions. This government is the captain of its own Titanic, of which we are mere captive passengers. It will be interesting to see how much the poor taxpayer will have to bail them out of gaol again. Even Tories are starting to resent being stolen from. JK is laughing at us, it only looks like a smile. He knows when to depart, before the sinking.

  3. ghostwhowalksnz 3

    You forgot one last thing :

    Too big to fail !

    • Zorr 3.1

      “To big to fail” should equal “just the right size to nationalise” 🙂

    • aerobubble 3.2

      How about the Key socialist policy of the quarter acre policy. The market wants apartments, wants up as well as out, and Key is firmly socialist in the leveling of all to this one choice in housing. Labour is far more capitalistic than National. Recently Labour supported investors by disclosing its power policy, that would have driven down the asset price of energy companies and so raise the up take, but did National for one moment recognize the market friendliness, No.

      National are not a party of left or right, they are a get into power and pork party.

  4. At the moment Chorus is a private monopoly which the NACTs propose to subsidise via a gov’t tax on consumers to satisfy the NACTs crony mates. Calling this Soviet style nationalisation is bullshit. Its state monopoly capitalism.

    Labour should get over neoliberalism and the rubbish that legislated and regulated competition over prices for a single copper wire network or single fibre optic network can be anything but a cartel. That is state monopoly capitalism behind figleaf of non-existent competition.

    Chorus is a monopoly, it should be a monopoly, but not a state capitalist monopoly run by cronies but a state owned not-for-profit monopoly run by the people to deliver free internet to the people.

    • Akldnut 4.1

      Chorus is a monopoly, it should be a monopoly, but not a state capitalist monopoly run by cronies but a state owned not-for-profit monopoly run by the people to deliver free internet to the people.

      +1
      Nice – couldn’t agree more

    • Ennui 4.2

      Not for profit cool, but there are costs so who pays for the “free” internet?

      • Enough is Enough 4.2.1

        Firstly Chorus does not provide the internet. It provides the copper and fibre optic which the internet swims through.

        And secondly, the users will pay for the internet. However they won’t be paying for some rich dudes profits.

        Moron

        • Ennui 4.2.1.1

          Fully aware of Chorus role, and agree that it would be good not to pay profits to the rich….so the answer is users still pay some cost…..

          Nuff said to Nuff,
          Mr Moron to you..

          • Francis 4.2.1.1.1

            Alternative would be running it like we do the hospitals, schools, roading, etc (and in some cities, water, stormwater, and wastewater), where everyone pays collectively for the infrastructure via taxation. We’re at a stage where telecommunications and internet access are a necessity, not a luxury. Therefore collective funding would allow everyone to have access, while also allowing the services to be delivered at a lower cost, due to not having to deal with individualised billing…

      • Rogue Trooper 4.2.2

        over the hump (of the week) now.

    • Draco T Bastard 4.3

      +1

      That’s it exactly.

  5. Pete 5

    Who should the Government blame?
    Whoever designed the statutory test and whoever agreed to accept the tender. Stephen Joyce and Amy Adams apparently were involved.

    Good news for Judith Collins, then. UFB is one of National’s flagship policies. If Joyce mucked it up, that will be a black mark for him in a post-Key contest.

  6. Mary 7

    “Because the Internet is the new commons. Access should be free, or at least as cheap as possible.”

    Just like water and electricity? And look what’s happened to these? If we can’t get these right what chance is there to get anything right?

    • ghostwhowalksnz 7.1

      A better example is not the electricity companies but the lines companies like Transpower and the regionals.

      Water , so far is the hands of local councils, but watch it get stolen like a thief in the night

      • Mary 7.1.1

        I can do without water. I can do without electricity. But I can’t do without my internet.

        • ghostwhowalksnz 7.1.1.1

          Heard of wirless ?
          WiFi or even 3G broadband. Im a fan of 3G broadband as there is no data hogs slowing it down to a crawl at night

          • Mary 7.1.1.1.1

            Too busy saving for solar power panels.

          • politikiwi 7.1.1.1.2

            Somewhat off topic, but….
            I’ve record 70Mbps throughput on my 4G cell phone, compared with my current 10Mbps (if I’m lucky) on my home cable internet, and the 100Mbps on “ultra fast” broadband.

            If we can get that much throughput on wireless, remind me again why we need fibre to deliver similar speeds to the home? (I realise that fibre’s maximum throughput is vastly higher than 100Mbps, but I would expect wireless technology to keep evolving and offering even faster speeds. Even 70Mbps over the air blows my mind.)

            (None of that says anything for latency, of course, but for the majority of people that won’t be an issue – when streaming HD movies, an extra few milliseconds of latency will mean nothing.)

            • tc 7.1.1.1.2.1

              Good points, ask that techno genius Joyce why LTE/4G/Wimax services aren’t in the schemes from someone outside the incumbent mobile phone duopoly.

              DC apparently had them as options as part of the original Labour gov’t scheme and one reason why rural has been screwed over by not having them.

              • Draco T Bastard

                Probably because it wouldn’t be any cheaper to roll out. You’d still need the backbone.

                • tc

                  eliminates the need to go from cabinet/trench/overhead to property termination point, all the permissions etc multiplied by all the dwellings required.

                  Yes you do the backbone once anyway but if you can see that tower you’re on…..like a UHF HD signal. Call provider, get kit, done no waiting on service tech’s civil etc piss easy to use a squealer to locate the beam for the dish.

                  • politikiwi

                    ^ This.

                    It can’t be accurate to say that rolling out a fibre backbone to cell sites would cost anywhere near the same amount as rolling out fibre along every street in the country. That just doesn’t compute.

                    As I understand it, Vodafone have been rolling fibre out to all their cell sites for quite some time now. To implement 4G they just need a new bit of kit at the cell tower, jam it into the fibre backbone and you’re away.

                    I concede that the rural rollout is a bit of a different animal, but I wonder whether it’s fair for people living in rural areas to expect broadband at the same speeds as those who live in urban areas? All that fresh air and open space can’t come with absolutely no degradation in living circumstances. They don’t have a supermarket two minutes up the road, either. Should millions be invested to “fix” that?

                    • tc

                      With decent wireless technology, no worries but the playing field has to be level and allow it. Niche rural operators are doing it already just ask Farmside how many of their sat services have been terminated.

                      Joyce has given us the weakest link model…telecom/vodafone who’se backhaul probably isn’t up to being a heavy ISP on top of voice, sms, pic’s etc.

                      It doesn’t take millions KP it takes a level playing field.

                    • Rogue Trooper

                      Well thought of politikiwi

              • infused

                There are tons of these providers around.

                Again, latency. They are not suitable for business that have latency critical applications, IE cloud.

                So it’s a waste of time imo.

                • politikiwi

                  Regarding latency, a couple of things:
                  1: The vast majority of people will be using these services for household use. There’s no reason why a composite network of ultra-high speed / low latency fibre in CBDs for corporates couldn’t be coupled with the latest wireless technologies to residential homes.

                  2: Latency isn’t actually as a big of a deal as people think. For things like Remote Desktop or Citrix clients, a latency difference of 20ms doesn’t actually impact user experience all that much. (Yes, I was surprised, too.)

                  3: There’s “cloud” and there’s “cloud” – whether latency will kill you depends on exactly what you’re doing with it (eg if you’re accessing virtualised servers in the cloud via RDP then a small latency hit won’t kill you, but if you’ve got a direct interface to a server using a really chatty protocol you’ll be in trouble). To imply that “anything in the cloud is impacted by latency to the point of becoming unreasonably slow” is simply not true. Applications delivered in “the cloud” via a web browser will be *almost* as responsive on 4G wireless as they would be on fibre. The question is: is the difference worth the cost?

            • Draco T Bastard 7.1.1.1.2.2

              I’m actually getting pissed off with them offering only 100Mbps. They should be offering 1Gbps both ways. Fast enough that a person can run a website from home if they choose.

              • politikiwi

                What kind of website do you want to run that needs 1Gbps?!

                …actually, I’m pretty sure I don’t want to know….

                (I concur the 100Mbps offering is pathetic given the capabilities of fibre.)

                • Colonial Viper

                  lol

                • infused

                  because it will clog everything up with filesharing. 1gbps gear is not cheap. The backhaul required for everyone having 1gbps connections would cost millions.

                  That’s only within New Zealand. As soon as your traffic hits the international gateway, then what? You’re fucked.

            • infused 7.1.1.1.2.3

              Because wireless has huge latency. So it’s useless for most business functions, but great for browsing the net/downloading.

              The reason 4G is so fast now as that the network has very few people on it.

            • Paul Campbell 7.1.1.1.2.4

              Remember that you’re sharing a cell tower – sure you can get 70Mb on a 4G tower – but, unlike fibre, if we all try to do that at the same time from the same tower you just won’t get it – you can’t have everyone in your neighbourhood watching a different HD stream through one cell tower.

              Wireless is limited in bandwidth just like fibre by the available spectrum in the underlying media (Nyquist’s sampling theorem) – but light is inherently a higher freq than radio and so can be modulated with far more bits/sec (Nyquist tells us this, then Shannon’s law kicks in as well) cell towers with giant laser beams would be cool but might take the occasional eye out

          • weka 7.1.1.1.3

            “3G broadband.”

            Ain’t cheap and is not available in many rural places at a reliable level. Mickey’s statement about the commons is nice, but internet in NZ has never been cheap and it’s been a while since it was equitably accessible.

            • Mary 7.1.1.1.3.1

              I agree, but this government doesn’t regard even electricity as being in that category which is something most of us need to run the internet. So everyone will have their free or near-free internet connections sitting there ready to use while cooking snarlers on the open fire because they couldn’t pay the power bill. Great for some. I wish I could afford to move off the grid.

  7. SpaceMonkey 8

    FWIW… a quick check: Chorus Limited wholly owns Chorus NZ Ltd while in turn being over 55% owned by the Government in the form of NZ Central Securities (RBNZ) (39.69%) and Crown Fibre Holdings (15.86%). Crown Fibre Holdings’ share allocation is 50/50 between the Minister of Finance and the Minister of State Owned Enterprises.

    The remainder of the ownership is the usual suspects: JP Morgan, National Nominees (that’s NAB), Forsyth Barr, Citicorp, HSBC, etc at around 3% and downwards.

    • Rogue Trooper 8.1

      so, just how much more of a take-over are National proposing! Give us strength!, freakin’ Totalitarians 😉

    • bad12 8.2

      SpaceMonkey, the Reserve Bank’s NZ Central Securities i believe is a ‘private’ holding company which ‘blindly’ holds shares on behalf of other entities or people in companies registered on the NZ Stock-exchange,

      The Chinese Government, or a company owned by the Chinese Government owns something like 5%,(or more), of Fletcher Building which is said to be held by NZ Central Securities Ltd who are on the Fletcher Building shareholder list shown as ‘the owner’,

      NZ Central Securities does not divulge the name of any entity or person who it holds ‘blind shareholdings’ for so the 39.69% of Chorus listed as being ‘held’ by that organization are there on ‘behalf’ of the true owners who do not wish to be seen to openly hold such a shareholding…

      • SpaceMonkey 8.2.1

        Cheers for that Bad… I was wondering as I have heard comments along the lines of “RBNZ is a Rothschild entity” even though it is listed as being 100% owned by the Government..

        • bad12 8.2.1.1

          Yeah, the Reserve Bank is 100% a Government entity,(i stand ready to be corrected there lolz), but the NZ Central Securities arm is a private company 100% owned by the reserve Bank,

          So much for the open and transparent NZ Stock-exchange right, NZ Central Securities being a private company is not subject to the Parliaments scrutiny nor the scrutiny of the NZSX,

          If you want to invite and foster corruption in a country then the Reserve Bank’s little firm is what you set up to handle the profits of such corruption, HOWEVER, Lolz, as i and you have been repeatedly informed, there is no corruption in New Zealand and there is even less because we simply don’t look for it…

          • bad12 8.2.1.1.1

            As an addition to this, and i am being naughty here because this is simply the sum total of a completely unverified RUMOR,

            It has been suggested that the little firm owned by the Reserve Bank keeps ALL the information on it’s little firm, NZ Central Securities on one floppy disc and should the Parliament on one night when the light is truly shining pass under urgency an amendment to the Law effectively allowing the Parliament a good perv at just ‘who’ the little firm is holding ‘blind’ shareholdings for the information will be destroyed…

            • Colonial Viper 8.2.1.1.1.1

              allowing the Parliament a good perv at just ‘who’ the little firm is holding ‘blind’ shareholdings for the information will be destroyed…

              I’m sure the Companies Office or the NZX could have a little something to say about that.

          • SpaceMonkey 8.2.1.1.2

            “NZ Central Securities being a private company is not subject to the Parliaments scrutiny of the NZSX”

            Nor will it be OIA-able then. Corrupt indeed… it’s a bloody racket!!

      • Draco T Bastard 8.2.2

        Which should be illegal.

  8. bad12 9

    Stuff Godwin’s Law, this is simply National Socialism where the State uses the resources of the people to bolster the profits of a business and the people receive no real benefit,

    The option, for the Government to simply hand over to Chorus the 300 to 500 million dollars that Chorus is said to have deliberately underbid on the fiber-optic roll-out while accepting from Chorus a share tranche of the same value would in effect mean ‘the people’ are not disadvantaged by ‘a deal’ of this nature being struck,

    Why then is Slippery the Prime Minister voicing His displeasure at such a deal where all the players including ‘the people’ gain a win out of what is an obvious piece of stupidity on the part of Chorus,

    In my view, IF Chorus is in trouble financially because it tendered far too low on the fiber-optic contract, and last years earnings statement would deny this as being true then the only logical option for the Government to take is the one it least favors in accepting shares in return for a cash payment to cover the shortfall in Chorus’s original contract price,

    The other option of course, the option which the normal business paradigm would demand is that the Government simply tell Chorus ”Fuck Off” a contract is a contract, roll out the fiber-optic network as per the conditions of that contract and if you don’t the penalty clauses in said contract will be invoked…

  9. phil 10

    The guv should make them a ‘competitive’ offer and buy back at a bargain price. It’s not normally the role of government to top up struggling businesses. Maybe this is a new, softer, socialist approach from National? Is Farrar going to lurch to the right on this one and join Labour? On principle alone he has no choice.

    • bad12 10.1

      Beg to differ, if Slippery’s Government simply Legislate away the Commerce Commission’s set price for copper wire internet provision there is no gain for ‘the people’ so scratch any Socialist intent by the Government,

      If Slippery’s Government simply hands over money to Chorus to cover the losses it says it will incur from the fiber-optic broadband roll-out without taking an equal valued amount of Chorus shares there is no benefit to ‘the people’ simply the propping up of Chorus’s profits and share-price, that ain’t Socialism,

      The whole intent of Slippery’s National Government is that once completed the price of the access to the fiber-optic network is comparable to that of the copper-wire network, which the Commerce Commission says is over-priced hence the price setting by the Commission,

      In effect this Government is demanding that those who remain on the copper wire network after the role-out of fiber-optic subsidize those who switch to fiber-optic while many with access to the copper-wire network will not have access to fiber-optic and this begs the question who the fuck are they to Dictate to ‘the people’ what network they chose to have their internet connected to…

  10. captain hook 11

    Heard this morning on RNZ that National the party of free enterprise and anti subsidy is busy subsidising the prospecting and investigation of waterways for damming and agricultural intensification.
    this nonsense has got to stop.
    their is no justification for this burning up the whole eco system and environment just for the temporary gratification of the few who would be just as satisfied with a new electric train set or the money in hand.
    key and his cronies are real thickos.

    • KJT 11.1

      “National the party of free enterprise ”

      This would be funny if it wasn’t so serious.

      For far too long now, National has been the party of stealing ordinary New Zealander’s wealth, including our tax dollars, by any means possible, to benefit their corporate funders, and ensure lucrative directorships for them-selves, on retirement..

      A party of either true believers in voodoo economics, or thieves!

  11. dv 12

    One way that Chorus could get more on UFB is to throttle the copper speeds.

    • ghostwhowalksnz 12.1

      Dont even have to ‘throttle’ the cooper, just let the natural growth cripple the speeds at peak times.
      Its already happening

      • dv 12.1.1

        Currently in Tokyo in an apartment on wifi connect to fibre in building download about 16mb.

    • bad12 12.2

      i am more interested in the question of just how much faster than the copper-wire network can the fiber-optic network get,

      Has anyone seen anything from overseas that shows any real benefit in speed between the two networks???,

      Or are we simply being sold more lies where ‘the people’ will see little gain from being connected to the fiber-optic network while the big players and users in the market will get all the benefit from having a net-work with a vastly increased carrying capacity,

      i still see digging a myriad of trenches up and down the country as pretty much the actions of a bunch of primitives, i connect via the local cell phone tower leaving me with no need for even the copper wire network…

      • tc 12.2.1

        Copper will continue to deteriorate physically and the VDSL technology is struggling now with that loss of signal quality thus the huge range of speed ‘potential’ that telecom quote.

        Fibre is like formula 1 V vespa’s if done properly….there see what I did. ‘Properly’, we have alot of fibre all over NZ already. One of the reasons Voda wanted Tclear is because of all that fibre they’d laid.

        You have a point about the trenches, Joyce locked us into old technology instead of the more recent high speed wireless technologies, rural got screwed big time and the big boys got an RBI one off gift.

        They’ll probably give away the old analogue TV spectrum to their mates to plunder that with newer technologies.

        • Ennui 12.2.1.1

          Copper…look out the window and see all that lovely copper hanging there, going into every building, all those posts that serve as an alternative to trenches / ducts.

          Imagine running that to every house. From every exchange where the fibre is currently terminated. Big job I reckon. Cost a lot too!

          So for all that “speed” what more can it do for me than I am already doing tolerably well today?

          • Colonial Viper 12.2.1.1.1

            And that is the question that people are ducking…maybe have 6 different Skype conversations in HD at a time?

            • Draco T Bastard 12.2.1.1.1.1

              Maybe a Classic Rock band formed by people in Auckland, Wellington, Christchurch and Dunedin.

              Animators getting together to network their computers for the final render of a full length movie.

              Architects getting together to design a building etc, etc

              Going to need both the teleconferencing and the high speed data capabilities that come with high bandwidth.

              and, no, wireless won’t cut it.

              • joe90

                Architects getting together to design a building etc, etc

                Indeed DtB, my brother left the city and commutes every fortnight anticipates a fibre connection will cut the his visits down to less than once a month.

                • Rogue Trooper

                  that is interesting; one could not be closer, and indeed, not in more than one place at a time. 😉

              • Colonial Viper

                Those are all great applications, and ones which might involve a few percent of internet users.

      • Paul Campbell 12.2.2

        I have VDSL at the moment – I’m sure if I were next to the cabinet a couple of blocks away I’d get the promised 40Mb/sec – but I’m not, instead I get about half that on a good day, and it stops completely sometimes when it rains

        I’ll be standing there at the curb with a shovel the day the fibre finally goes past, but Chorus has put the installation date for my neighbourhood from next year, to 2015, and now maybe by 2016.

        Have you tried getting in touch with Chorus to talk to them about installation – they closed their Dunedin office, I can’t go there, all those guys around town in Chorus vans were laid off and are now contractors, they can’t speak for the company or even tell me who I can talk to. Chorus isn’t in the phone book, their web page doesn’t have a phone directory, just an 800 number, when you call that and ask to talk to the person in charge of installing fibre in Dunedin they refuse to put you through, you have to know their phone number first – why? pure catch22 – because we’re not the customer, we are their monopoly product product being sold to their customers

  12. Philgwellington Wellington 13

    Xox.
    I’ve been told by a knowledgeable sort that 3 or 4g cannot deliver UFB speeds and quantity for many folk. It’s basically physics. So 4g Internet won’t and cannot be an alternative to UFB for the masses. So the future is fibre, the question remains “How will people take up fibre if the current service is adequate and cheaper?” The answer is that ‘ great new content’ will entice the public to pay the premium. Trouble is SKY has control of much of that. Just ask Kim Dotcom about that bottleneck. SKY could find themselves on a losing horse once their control of content is broken. Current shareholders are warned.

    • Draco T Bastard 13.1

      Higher speeds to home can, and will, allow content to be created and delivered from home. Basically, in time you can kiss Sky goodbye as their economic model gets replaced by real competition.

      • infused 13.1.1

        Not really. Since they own all the content licenses.

        That’s the issue now.

        • Draco T Bastard 13.1.1.1

          Not everyone is going to selling their content to Sky. In fact, I’d say that most people won’t be.

  13. Philgwellington Wellington 14

    Xox
    Before the fire sale of Telecom, a fibre optic spine was laid adjacent to the main trunk railway lines, ready for the digital future. Nekminit… Sold! I wonder what happened to that? It’s still in the ground… waiting. Perhaps they forgot about it.

    • Ennui 14.1

      The way I heard it the fibre on the main trunk was an older generation and could not handle the environmental conditions….so it did not last, and required replacement. Whether that happened I don’t know.

    • lprent 14.2

      ? That is what all of the local copper connects to when you want to make national (and international) calls. The copper networks are ‘local’ and aren’t used for long-distance. Even though analog voice only requires a 32kb/sec link over copper, our long distance copper lines would have been clogged with just the collective use by them of grandmothers trying to coo with their remote grandkids on hour long “conversations”….

      Not to mention my (more intelligent) communications with dumb servers all around the country.

      The long distance voice and data calls are done over those fibre spines and their upgraded children. Has been for decades

      • Peter 14.2.1

        Mostly on microwave spines actually. Landlines are actually airwaves.

        • lprent 14.2.1.1

          Doesn’t surprise me for the limbs. Easier to maintain and set up alternate routings with. But I’d have expected that they are still using the fibre optic spine because microwaves are relay boosters and have a significiant lag based on the numbers of relays that go through (not to mention the weather).

          • Colonial Viper 14.2.1.1.1

            built up urban areas are bad for microwave transmission due to reflections off structures…and the systems always need a clear line of sight.

      • Ennui 14.2.2

        Lyn, I had some involvement with some people who wanted to buy and leverage the original rail fibre years back…the reason it was laid for signalling etc, core railway functions, not for “telco” purposes. Bit like the telemetry and control systems for electricity etc.

        I have watched a lot of parties try and get ” spare bandwidth” for internet purposes, things like the twelve “down” cable on pylons, BCL microwave and fibres etc….the common thing is that the interested parties want a “share” of what is perceived to be “surplus” bandwidth. So it does not happen.

        I am currently expanding a private commercial IP service that runs through Chorus and Vodafone, have been building these things for a couple of decades. I know the inside of the exchanges, the many layers of the physical provision intimately. The commercial game is still the same, its called bandwidth leverage and it works on contention ratios. And the physical infrastructure costs heaps still (which is why I always ask what do you really need it for, and who is paying for that)?

        The cost thing…I think people think it is feasible to have fibre to the home and not just the exchange. I see it as desirable but hellish expensive, and again I question its utility…. we cant overcome without huge cost the bandwidth limitations of being in NZ (even with light spectrum multiplexing etc) on the off shore cables, we will never overcome the laws of physics in terms of latency across these links….and we will always on the internet be up against the slowest or most contended link or server. All fun.

    • joe90 14.3

      I wonder what happened to that?

      In use by Kiwirail and part of an expanded fibre network

      Further advances followed from an initial trial run of 2 MB fibre-optic cable between Paekakariki and Paraparaumu in the early 1980s, the first fibre-optic telecommunications link to be commissioned in New Zealand. Fibre-optic technology improvements reduced cable costs and increased transmission efficiency, until currently 480 high speed channels are available on a 34-MB system over the full length of the North Island Main Trunk line. These have opened up a staggering potential for all aspects of train control and system management. These ‘on-line’ advancements have been further enhanced by radio and even satellite communication systems.

      http://www.railheritage.org.nz/Register/Category.aspx?c=29

      https://koordinates.com/layer/4032-telstraclear-fibre-optic-network/

      • Peter 14.3.1

        Leased and sold to Clear Communications, now Telstra Clear I think, during the privatised years. Another fantastic decision by our so-called leaders…

        Fibre optic was used at the time of electrification because existing track circuits (direct and alternating current) would suffer from interference from the AC electrification.

        Transpower still own two fibre optic cables under Cook Strait, which are leased out to various operators, probably Chorus I think. These are a critical part of the SCADA system that operates our national grid.

  14. geoff 15

    So either Chorus shareholders will take a bath or NZ will.

    Who will John help…?

  15. Tracey 16

    Dont aucklanders pay a ceo 500k to preside over our water supply monopoly?

    • KJT 16.1

      And Port Lyttelton gave their CEO a 600k bonus. No one knows what for.
      For all the extra effort the blokes on the wharf put in after the quakes, while he was playing golf, maybe?

    • karol 16.2

      Probably, I was quite shocked at the salary for the CEO of Auckland Council, announced today by Len Brown.

      His annual salary of $630,000, fixed for the first two years, easily tops Prime Minister John Key’s salary of $419,300.

      Mr Town is currently NZTA’s Auckland

      But NRT -I/S reckons this is actually a cut of $150,000 a year – presumably in comparison with what the outgoing CEO has been paid.

  16. phil 17

    So wise, so unlikely.

  17. dave 18

    the whole unified fibre from the start was a bailout of of private interests because of lack of investment by telecom over 2 decades lets not forget telecom sucked 17 billion dollars out of this economy over this time classic asset stripping stock pumping. chorus is what remains of a run down inferstructure and taxpayer gets slamed with the loss while slipperys pals shot through with the profits.

  18. photonz 19

    It’s funny that the ideologically driven and financially ignorant here are happy for Chorus to fail, when it’s costing you – the taxpayer – much LESS per house to install fibre under the Chorus contract than it is for the companies rolling out the other 30% of the network.

    • McFlock 19.1

      … because they subsidised their bid with a rort on copper line use. Costs us all more in the long run. But a financially literate guru like yourself (or, indeed, anyone who could simply read the post and following comments) would already know that.

      • photonz 19.1.1

        So profits from current power users pay for new power generation, charges and taxes on current road users pay for new roads, profits on Cook Strait ferry users pay for new ferries, profits from current phones users pay for new mobile networks………..but if you do exactly the same thing (as EVERY business does) with the internet, it suddenly changes to being a rort.

        In the real world, the broadband network will be paid for by broadband users, or taxpayers. Though some people are so delusional they think they should get it for free and expect investors to be some kind of charity.

        • McFlock 19.1.1.1

          Now who’s financially illiterate? The Chorus fibre network was planned to be paid for in part by copper-line customers who need to use Chorus because of its dominant position in the market place.

          And if you think that’s okay, the commerce commission might disagree with you.

          Oh wait, they did.

          Which is why Chorus is whinging that their fibre rollout would be endangered if they had to cut their copper fees by 23% (also known as “robbing Peter to pay Paul”).

          Which you’d know if you’d bothered reading the post.

          • photonz 19.1.1.1.1

            The Commerce Commission has done an appalling job. They haven’t even done so much as look at what it costs in NZ for Chorus to run the copper network.

            Read that again – they haven’t even looked at what it costs Chorus to run the network.

            All they’ve done is take a different network in a different country with different rules, different competition, and a different market with different consumers, and said Chorus should be able to do the same price.

            That’s so stupid it’s funny.

            If comcom did the same with fuel, the price would have to go UP by 50%.

            So they’ve come up with a price that has nothing to do with the actual cost of running the network.

            TOTAL after tax profit for Chorus next year is predicted to be $131m, $105m in 2015, and $96m in 2016. Comcom are so out of touch they think Chorus can cut $142m off that, which means immediately Chorus is losing money, to a greater extent every year.

            • mickysavage 19.1.1.1.1.1

              Photonz the Comcom has benchmarked against a different network in a different country because that is exactly, precisely what it was told to do by the legislation which Joyce had passed. It is not meant to make huge profits from the network. It was put on a cost plus basis because a well functioning market would allow third parties to be able to access and compete with Chorus rather than be subservient to it.

              A cut to Chorus’s gross income does not come off its bottom line. It reduces the amount of tax to be paid so the analysis is not correct. Also no doubt the value of the assets would reduce and with it the allowance for depreciation.

              • photonz

                The Comcom is required by law (Telecommunications Act 2001) to take account of
                – high cost capital investments for new services,
                – that there should be incentives for companies for these new innovations.
                – the long term benefits of these innovations should be promoted
                – the risks faces by these investors.

                It has failed in all of the above.

                mickeysavage says “A cut to Chorus’s gross income does not come off its bottom line.”

                Of course it does. Regardless of the price Chorus gets to access the copper network, the costs to run it doesn’t change.

                In fact as people shift to fibre, the cost per customer for copper goes UP – not down.

            • McFlock 19.1.1.1.1.2

              Oh, I’m sorry, when I go to the supermarket I really give a damn how much it costs them to run the place. /sarc

              As for chorus net profits, I’m intrigued: 171mil this year, 131m next, 105m, 96m…
              That doesn’t bode well for their profitability in any case.

              Although it might answer why they lowballed the tender so badly in the first place. Stave of the inevitable a little while longer.

              • photonz

                At over $3000 per house, it’s not financially feasible for ANYONE to build a fibre optic network.

                That’s why the taxpayer is subsidising it.

                For the 70% that Chorus is building, the subsidy will ALL be paid back to taxpayers.

                People here are so stupid they want the Chorus plan to fail, leaving plan b – the companies who are building the other 30% which costs the taxpayer MUCH MORE.

                They are so ideologically blinkered about the Chorus situation, that they want someone else to come in, build the network and charge them hundred of millions more than Chorus would.

                • Tat Loo (CV)

                  So if the private sector can’t get its shit together, why doesn’t the Government do it itself, and cut out the money going to foreign shareholders and over-paid executives?

                  • photonz

                    The government could do it. They just need to cut $3 billion from benefits or education or health then it’s a great idea.

                    Any ideas where we cut the money from?

                    Or taxpayers stump up with the money.

                    Or they could go into a partnership and let the private sector do it. But the problem with that, as seen here, is that internet users are screaming blue murder because they don’t want to pay for internet service.

                    If the same thing happened in other sectors we wouldn’t have enough electricity generation, we’d have a third world roading system (not that it’s that much better now), and we wouldn’t have a mobile network.

  19. Philgwellington Wellington 20

    Xox
    There are many ways to value a business. They are not be consistent Tendering for the UFB, Telecom, was successful in winning the majority of the rollout. The effect downstream on the existing copper line costings were botched. It’s the old grey areas where the lawyers earn their keep. Will the government play hard ball or find an agreeable
    solution for the taxpayer, or the consumer?

Links to post

Recent Comments

Recent Posts

  • Swiss tax agreement tightens net
    Opportunities to dodge tax are shrinking with the completion of a new tax agreement with Switzerland, Revenue Minister Stuart Nash announced today. Mr Nash and the Swiss Ambassador David Vogelsanger have today signed documents to update the double tax agreement (DTA). The previous DTA was signed in 1980. “Double tax ...
    2 weeks ago