condition of irregularity caused when the system gets too dry
and muscle contractions become slow or sluggish. This can lead
to irritability and obstruction. Causes include dehydration,
lack of physical activity, aging and insufficient fibre, leading
to problems with internal functioning. This can be cured by
changing dietary habits, using laxatives, taking on more fibre,
an enema or in rare cases surgery.
By Keith Newman
The government, pressured from all sides to open up faster and more
affordable internet access, has administered the first of a series of
enemas to Telecom in the hope of relieving New Zealand’s communications
No-one could say Telecom wasn’t warned. Its endless tactics to keep
broadband internet prices high and access speeds low, and its rapid
response to defend its patch by placing obstacles in the way of
competitors, are legend.
It has been a long held belief in the industry that New Zealand’s
$5.3 billion telecommunications market, up from $3.6 billion in 1997,
should be experiencing more robust growth. The main obstruction is
Telecom’s failure to take its foot off the broadband hose.
As it is Telecom makes about $2.4 billion from local service and
calling revenue and only a few entrepreneurial players, including
service and equipment providers, get to share the rest of the pie. Even
its competitors, TelstraClear being the largest of these, end up as its
New Zealand squandered the enormous advantage it once had as the
first nation in the world to fully deregulate its telephone industry. In
1987, a year ahead of deregulation, the government restructured and
modernized the old Post Office monopoly which it promptly renamed
Telecom and sold it to the highest bidder.
North American carriers Ameritech and Bell Atlantic snapped up the
carrier in 1990 for a mere $4.25 billion and soon the media were full of
their hype about on-line shopping, hundreds of movie channels,
interactive services and the important edge we would gain in the
Take the money and run
Investment soon slowed to a trickle, as thousands of staff were sacked,
our largest company was trimmed down to the bones. Some very broad
assumptions were also made by the new owners; from the outset there was
no clarity about who owned the copper in the ground, the telephone lines
or the phone numbers. That debate still goes on.
In 1997, after Ameritech and Bell Atlantic had siphoned the bulk of
profits offshore and learned enough about deregulation to gain the edge
in their soon to be deregulated home patch, they exited stage left.
Under new ownership and management the litigious environment, created
around protecting the incumbent’s hold in the now allegedly free market,
continued with true competition, particularly in data services, further
The persistence of Clear Communications (later TelstraClear), saw
over time a highly competitive voice market evolve and through Vodafone,
dominance in the cellular market was wrested from the giant carrier. By
the late 1990s the focus turned to the high cost of internet-based
services which had become critical for business and increasingly
attractive to domestic users.
Again we had an opportunity to lead the world but because of ‘light
handed’ regulation Telecom continued to monopolise the ‘last mile’ of
copper connections into businesses and homes, keeping competition at
Reinvestment in Telecom remained at a low ebb, in fact the focus
seemed to turn offshore with the 1999 loss-making acquisition of AAPT
which remains to this day the oddest of all investments when its home
turf was in desperate need of attention.
Until recently Telecom, dictated connection speeds and imposed data
caps, preventing anyone other than itself from delivering internet
performance greater than 2Mbit/sec for downloading and 128kbit/sec for
sending. It stated on many occasions it would only increase speeds when
the market demanded, but even under a deafening roar of protest, it
continued to drip feed services as saw sees fit.
after all these years
Keith Newman has been writing about technology for 20-years,
with a particular focus on telecommunications, the internet and
the shift toward interactive multimedia. He has been an ardent
internet user since the bulletin board days of the late 1980s. A
decade of painfully slow dial-up modem speeds forced him to
subscribe, first to an ihug satellite-based service, then in the
late-90s to Telecom’s Jetstream ‘full speed’ service.
He was promised at least 2Mbit/sec - 5Mbit/sec download
speeds with a 600Mb data cap for $59 a month. It was expensive
but he could be on the Internet and use his phone at the same
time. Working in the publishing industry however meant he often
went over his data cap dealing with large files, graphics and
photographs. One month he and his son experimented with
international radio stations and song downloads resulting in a
$500 excess charge. Seeking a higher data cap he was informed
his ‘full speed’ account had been grandfathered’ after Telecom
divided its Jetstream offerings into lower speed 128Mbit/sec,
256Mbit/sec and 2Mbit/sec accounts. Even recently could go for a
3.5Mbit/sec account with a 10Gb cap, and pay .95 cents more but
for a slower account than he had. He stubbornly resists, waiting
for true competition to deliver a saner option.
Footnote: The author finally conceded the lesser of two
evils after maxing out his 600Mb cap too many times and in July
2006 settled on a 3.5Mbit/sec account with 128kbit/sec upload
through Xtra. This noticeably curbed the download speed and
markedly slowed the upload speed for larger emails. The
concession at least he has 10Gb of data to work with now and can
view video and audio streams without too much fear of breaking
Gamekeeper and poacher
Successive governments, either intimidated by our biggest company or
blinkered by the contradiction of ‘hands-off’ regulation, in effect
protected Telecom’s right to maintain the bandwidth bottleneck. Telecom
continued to play gamekeeper and poacher, all but ignoring ministerial
threats to play fair or face legislative changes.
Most recently Telecom CEO Theresa Gattung called communications
minister David Cunliffe’s bluff when he threatened regulation.
Addressing analysts in Sydney in March, she said the government was far
too smart to "do anything dumb" like unbundling; suggesting the
broadband issue was just a "manufactured grievance" created by
It was during that unfortunate outburst that she also implied
telecommunications companies regularly used confusion as a marketing
tool to keep prices up, and that customers knew at some level they were
not being straight up.
When you fail to take your foot off a high pressure hose its
inevitable there will be a leak. That leak, delivered by rogue
Parliamentary messenger Michael Ryan into the
hands of a senior Telecom employee on May 3rd proved the
government was indeed serious. A budget announcement was planned to
bring New Zealand in line with 26 other OECD nations by legislating for
local loop unbundling (LLU).
Once the news got out, it shaved an instant billion dollars off
Telecom’s share index and while those shares are slowly bouncing back,
Telecom now has to rethink what it means to operate in the unconstrained
market promised to the country for nearly 20-years. Strong intervention
in the telecommunications market would, for first the first time,
literally kick start a new era of competition.
Telecom would be required by law to allow its rivals to install their
equipment at its exchanges. Their latest generation DSL2+ DSLAMs are
capable of delivering download speeds up to 24Mbit/sec. The government
says the existing 128kbit/sec cap on upload speeds will have to go.
Telecom will have to open up its books and technology roadmap, and
separate out its wholesale and retail divisions so the Commerce
Commission can monitor its compliance.
The government would renegotiate the Kiwi share (Telecommunications
Service Obligation), put in place when it sold Telecom, as an incentive
to improve broadband access in rural areas. There may also be action to
prevent Telecom starting price wars to keep its customers.
Devil in the details
As several players have pointed out, the ‘devil is in the details’
and it is imperative for the industry and broadband customers that the
technical and commercial framework of the legislation is rock solid and
At least 26 OECD countries have been there and done that, and have
frameworks and legislation in place. How difficult would it be to cut
and paste, then refine that framework based on local requirements,
rather than attempting an entire rewrite of the law?
Unbundling has been spoken about for many years but was first raised
as a serious option in late 2003. Despite industry pressure the Commerce
Commission, and newly appointed Telecommunications Commissioner Douglas
Webb, favoured giving Telecom another chance.
However, Telecom though continued ‘marketing deceptions’, inflating
its broadband figures by including 128kbit/sec speeds when the global
consensus was a minimum of 256kbit/sec and in some cases 2Mbit/sec or
10Mbit/sec. It took until mid-2004 for Telecom to revise its minimum to
256kbit/sec after an ultimatum from the Commerce Commission to connect
250,000 new broadband customers by the end of 2005. A third of those
customers (83,333) had to be connected by wholesaling to other internet
service providers (ISPs).
Telecom failed to deliver, lamely arguing it believed its target was
50,000 wholesale connections, or a third of its total growth over the
period. Telecom had not only made it uneconomical for competitors to
wholesale services from its network, it had kept such tight data caps on
accounts that ISPs and their customers they had to pay a huge premium if
they were to stream or download any significant music, film or rich
Less than a year ago most ISPs couldn’t get 2Mbit/sec download speeds
from Telecom and were restricted to upload speeds of 128kbit/sec. By May
2006 New Zealand had an estimated 300,000 broadband subscribers, or
around 8 percent of the population, including 100,000 customers outside
of Telecom’s Xtra network.
All of this made a mockery of the ambitious talk that New Zealand
could gain a top place in the OECD broadband figures by 2007, and in its
Digital Strategy goals or most residential homes to have 5Mbit/s
broadband that year. The further suggestion that this might reach
50Mbit/sec by 2010 seemed impossibly optimistic.
Ahead of the LLU announcement, government pressure forced reluctant
concessions from Telecom after TelstraClear won a Commerce Commission
ruling. In December 2005 it was determined it should be allowed
unconstrained access to the full speed of Telecom’s network at average
retail prices less a suitable margin. That should have given Telecom’s
largest competitor access to 7.6 Mbit/sec speed services at $20.47 per
customer. However Telecom contested this, and rather than prolong the
debate TelstraClear caved in to a 3.5Mbit/sec compromise.
The new deal was immediately passed on to Telecom high end account
holders who were recently upgraded from 2Mbit/sec to 3.5Mbit/sec
download speeds. The controversial upload speed remained at 128kbit/sec
unless you were a premium account holder paying $80-$100 a month, in
which case you would get 512kbit/sec upload speeds.
The new tougher regulatory environment will be outlined in the
Telecommunications Amendment Bill, expected to be introduced into the
House possibly before August, with the legislative process continuing
through into 2007. The Commerce Commission would then need to be given
new powers and rules to enforce the Act, which in itself could take
time. Full consumer benefits may not be evident until election year
Hopeful competitors are promising internet surfing will power up to
between 10-24Mbit/sec, finally bringing the country in line with the
streamlined services enjoyed in many other countries. Meanwhile the
pressure is now on to revisit the TelstraClear determination, forcing
Telecom to lift its boot even further off the broadband hose ahead of
local loop legislation.
At the end of May, CallPlus and ihug were leading the charge for
unconstrained bitstream (UBS) access believing the Commerce Commission
would now deliver on its original promise of 7.5Mbit/sec. This they
believed could happen as early as October opening the way for faster
sub-$30 broadband accounts.
In the broadband basement
New Zealand remains a digital ditherer, down with the
sluggards in the bottom quarter of the OECD broadband
penetration statistics at 22nd place for the third
year running, a dire position confirmed in an independent survey
While our internet access cost was considered reasonable,
restrictive data caps limited the effectiveness of our high
speed access. We were only saved from being the compost at the
bottom of the heap by the recent move to free up wholesale
3.5Mbit/sec speeds currently being implemented by many ISPs.
A total of 2586 residential and business broadband packages
from 388 ISPs over the 26 countries were analysed in the
InternetNZ survey, with data from early May confirming we were
indeed ranked at 22nd place. We had more data caps
than any other country and less choice for broadband access than
Australia, Ireland and Britain. Our low upload speeds also came
in for criticism.
As an ITC nation the annual IDC Information Society Index
ranked us at number 17 of 53 countries in 2005 but when our low
levels of broadband were taken into account we slipped back to
position 28. Australia was at 7th place, the US 13th
and the UK placed at 19th.
The Information Society Index takes into account computer,
telecommunications, internet and social aspects, and combines a
country’s ranking in these areas. The internet index was based
on the number of web users, e-commerce maturity, home and mobile
web users. Again the not so magic number; we were placed at 22nd.
Earlier in May the 2006
Scoreboard of 61 national and regional economies saw New Zealand
fall from place 16 to, you guessed it. 22nd place
with the the footnote ‘must improve broadband’.
All of this makes a sham of the government goal to have us in
the top half of the OECD figures by 2007 and the Digital
Strategy promises to have 5Mbit/sec DSL available across the
country that year, possibly soaring to 50Mbit/sec by 2010. Under
the old regime at least, those goals were impossibly optimistic.
Communications minister David Cunnliffe agrees we are at a
real risk of being left behind. "No broadband means no play. Do
not pass ‘go’. Do not collect a first world income. Do not
expect the next generation of the best and brightest to live in
There’s no question we are a highly technically literate and
innovative nation, with reams of ideas and inventions to share
with the world. We are ideally placed, as we have been told so
many times, to take our place in the information economy with
only a high business tax rates, crippling compliance costs and
access to premium broadband services impeding our progress.
Telecom in top shape
Despite market set backs; its market value was $12 billion last year
down to $8.8 billion at one valuation in May 2006, Telecom is in the
perfect position for a quick recovery.
It made $806 million tax paid profit for 2005-2006 year and invested
$585 million back into its network and systems in the 2004-2005 year,
and expects to spend $610 in the current year. This is part of an
ongoing $1.4 billion investment in its next generation (NGN) network
platform designed for more efficient delivery of voice, data and all
forms of multimedia content, which further confirms it is highly geared
for long term profitability.
Now Telecom is clearly trying to reinvent itself, or at least its
public persona, as the nice, friendly, helpful telephone company. In a
recent address to the Telecommunications Users Association (TUANZ)
Theresa Gattung insisted Telecom was committed to a fair game, and not
going to be obstructive, attempt to turn back time, mount rear guard
action or hide behind legalistic actions.
It would act swiftly, she said, to come up with invigorating
wholesale arrangements, and true to Telecom’s glossy charter would
provide a consistent service delivery experience for everyone concerned,
launch new intermediate products and offer greater transparency and
A team of Telecom executives is evaluating a faster roll-out of
interactive ‘next generation’ broadband services based on ADSL2+ and
simpler, easy-to-use services reflecting the convergence of fixed and
mobile services. This would include voice over Internet (VoIP)
technology to deliver more affordable phone services to business and
New networks in wings
So who’s going to benefit from unbundling? Certainly TelstraClear, ihug,
Slingshot and CallPlus, Orcon, Maxnet, Quicksilver, Iconz and the dozens
of smaller Internet service providers who are eager to deliver new
speeds and services to their customers. Because of the high cost of
creating national coverage there are widespread plans to co-operate by
‘port sharing’ or ‘credit swapping’ on each others equipment.
One consortium of investors, which wants to remain under the radar for
the moment, is planning to create an independent wholesale network by
installing its equipment at Telecom’s exchanges. Other bandwidth
wholesalers with independent city and regional networks; Broadcast
Communications (BCL), TelstraClear, CityNet, Vector, Inspire and FXnet
and others, will also look at alliances so their customers also get
direct nationwide access to the loop.
Also expect a new round of acquisitions and partnerships as the bigger
players seek to consolidate their position, their customer base and
their skill sets anticipating this new era of completion. You need deep
pockets to create a national overlay network.
TelstraClear has to date spent $1.5 billion in furthering the network
and business it acquired from Clear Communications and Saturn
Communications in Christchurch and Wellington. It has 1400 staff, and
been battling for a decade to get equitable access to New Zealand homes
After the false hope of 2001 when it promised a major expansion of
its cable network to reach 65 per cent of New Zealand homes and 80 per
cent of businesses within five years, it can now finish the job by
co-locating its DSLAMS on Telecom’s network.
TelstraClear spokesman Matthew Bolland admits it’s been a ‘pretty
ugly’ environment for investment, and many other players, he’s waiting
for the rules of the new game to firm up before announcing any financial
commitment. "When you’ve been fighting every inch of the way as we have,
you are very aware the only reason these things are happening is because
the government has intervened."
Caution over three d’s
One of the options available to consumers is to cut the wires
altogether. Vodafone and Telecom are both pushing 3G mobile phone
services which deliver higher speeds for data and even
videoconferencing. While mobile is a major global trend the local cost
is still outrageously high for internet surfing. Wireless access however
remains an attractive local loop alternative. Woosh, which has been in
the game since 2001 when it was a fixed wire replacement, now has
mobility as well through plug-in cards and is offering voice. Its speeds
are about to ramp up from 1.6Mbit/sec to 3Mbit/sec and another
technology upgrade promises 14Mbit/sec speeds by the end of 2007.
Woosh CEO Bob Smith admits unbundling is a challenge to his business
but while they’re sorting out local loop legislation over the next
couple of years he’ll be aggressively expanding coverage beyond the
major cities. When the details are sorted out he’s keen to put in copper
access equipment at Telecom exchanges to compliment the Woosh wireless
network or partner with others to get broader coverage.
Unbundling has also come a little late for CallPlus Director Malcolm
Dick who’s chosen high speed WiMax wireless technology as a direct
challenge to Telecom’s copper. Ideally though he’d like a mix and match,
so he’s tagged some of his initial $200 million investment to access the
Telecom ‘last mile’.
He remains cautious, recalling his experience trying to interconnect
a competing telco in Australia where Telstra publicly described his
operation as "a germ invading the nooks and crannies of their tariff".
He says incumbents typically use the three ds, ‘defer, deny, delay’.
Meanwhile Orcon has announced it plans to spend over $30 million over
the next five years building a new wholesale ADSL2+ network, to deliver
voice services and IPTV with over 50 channels which it claims it’ll be
able to launch in late 2007. Ihug CEO Mark Rushworth is prepared to
spend $200 million over the next two years on rolling out an alternative
network which he could wholesale to other smaller ISPs. Like Orcon, he’s
keen on ‘port sharing’ to quickly get the widest coverage.
Rushworth however believes only two or three players who can afford
to createg their own networks. He says the ‘credit swapping’ model
became the defacto way of doing things in Australia when Telstra refused
to allow more than one provider into its exchanges at a time. "Optus
would go into one exchange and someone else would put five cabinets in
another and sell on that capacity. It certainly forced the industry to
Rushworth is hopeful CallPlus, TelstraClear and ihug for example can
operate similarly. "It makes a the roll out a lot quicker - we’re
certainly keen to work that way so we don’t end up jumping on each
Internet service provider Iconz was forced to back off a plan to get
into the digital video-on-demand business by Telecom’s ‘absurdly
expensive’ access charges. If the market had opted for unbundling back
then it would probably be delivering a service by now.
While the technology and the business case were there, John Russell
who was research and development manager at the time, said no-one would
develop "interesting, new and innovative content when they can’t push it
out to the customers or let the customers interact with it at a
for triple play services
So why all this fuss about Internet speeds?
Well the local loop is the onramp for the information
superhighway which was the focus of so much hype a decade ago,
and what travels down that digital highway is changing business,
industry, communities, governments and our home entertainment
For telecommunications carriers plain old internet access and
phone calls is no longer enough – to grow revenue they must add
value for their subscribers to keep them loyal. Local loop
unbundling stimulates competition between carriers, and service
and content providers, leading to increased investment.
The smart ISPs are already reinventing themselves. They’ve
added new billing systems and server technology so identify,
deliver and charge for a wide range of rich content and services
such as on-demand movies or TV programming.
The number of broadband subscribers throughout the OECD
continued to increase during 2005 from 136 million in June to
158 million by December with growth holding steady at 15 percent
compared to New Zealand’s dire 8 percent.
An April 2006 analysis of 87 providers in the 30 OECD
countries found bundled video, voice and internet access were
available from 48 providers in 23 countries by September 2005.
So-called ‘quad-play’ (including mobile voice) was available in
10 OECD countries.
Broadband boom leaves Kiwis waiting
The challenge for developed nations has been to create a
legal framework for local loop unbundling (LLU) without getting
in the way of innovation or disadvantaging competitors.
In 2006 New Zealand remained one of the few OECD nations,
alongside Mexico and Switzerland, yet to legislate for
unbundling. Most European Union states had introduced regulatory
frameworks, although Switzerland has faced a legal challenge
which held this back to 2007. While the US hasn’t technically
unbundled, the Federal Communications Commission (FCC) does
require incumbents to lease local loops to competitors at
pre-set wholesale prices.
British Telecom is often held up as a poster child for LLU
but had to be slapped into line by the government before it
conceded that it too must share access to the last mile. In
November 1999, the regulator Oftel stated that LLU was necessary
to introduce competition for higher bandwidth services such as
DSL and video on demand and that this must happen on cost-based
prices. As at February 2006, BT had unbundled 300,000 local loop
connections. Ofcom had been hopeful a million connections could
have been unbundled by June 2006.
Meanwhile BT is countering the competitive threat to its own
business by upgrading 5300 exchanges and upping the speed of its
service to existing DSL customers to a maximum of 8Mbit/sec for
those close to exchanges and 4-6Mbit/sec for those further out.
Currently BT offers a 2Mbit/sec service with a 10Gb cap for
about $NZ60. If you pay another 10 pounds the cap is removed.
Since unbundling its revenues are up 6 percent and its profits
up 5 percent.
New Zealand-based TelstraClear is in a unique position having
been on both sides of the fence. Its Australian parent Telstra
was late to the deregulation game and is still smarting from the
changes. Almost half it shares were sold off when the market was
opened up in 1997. Since 2000, when unbundling was decreed,
around 150 competitors have homed in on various aspects of its
monopoly reducing market share from 80 per cent to 62 percent.
The pressure is mounting for Telstra to reinvent itself as a
more streamlined and aggressive player – it’s in the midst of
shaving 12,000 jobs from the payroll and integrating its voice
and data networks into a single IP-based infrastructure. This
puts the Australian Federal Government in an invidious position.
It’s pushing for greater competition in the market while
preparing to sell off its majority (51.8 percent) grip on
Telstra before the end of 2006, and in the process watching the
share value diminish drastically.
Competing carriers Optus, iiNet, Primus and others mostly
have their own cabinets and racks of DSLAMs within Telstra
exchanges or have struck on partnerships with other providers to
share access for the broadest possible coverage. There’s
definitely a healthier competitive market at the result of
unbundling but for some that’s still not enough.
Australian-based telecommunications analyst Paul Budde
suggested Telecom should take a lesson from Telstra which also
faced the wrath of the government, the regulator and the share
market when it took an ‘over my dead body’ attitude in a bid to
maintain its monopoly.
Budde says it’ll be interesting to see how Telstra responds
to trans-Tasman regulatory harmonisation, suggesting there’ll
need to be far-reaching changes to its behaviour and attitudes
in Australia. "While Telstra continues to fight against
operational separation in Australia I would not be surprised if
Telecom were to take the future into its own hands rather than
waiting for government-initiated solutions." He says Telecom
needs to show it can win in a competitive environment as opposed
to a monopoly.
Although Australia significantly increased its ranking in the
OECD for broadband penetration (from 21st place a
year ago to 17th place) in the most recent figures,
James Packer the executive chairman of Publishing & Broadcasting
Ltd, recently slagged the country’s internet speeds, and
Telstra's pricing plans and download restrictions, as
He told a digital marketing summit in Sydney that the Federal
government and regulators needed to step in quickly because
Australian media companies in particular needed faster speeds to
meet the ‘surging demand’ for video downloads of news and
entertainment, including episodes of TV shows.
It’s clear Telstra still begrudgingly shares its network and
flexing its muscle to let competitors know it’s still the big
boy on the block; recently it pushed up its line charges to
wholesalers from $22 to $30 per line per month clawing back some
of the profit competitors are taking from its infrastructure.
The internet is providing richer services such as Google
Earth, which allows you to look at satellite images and ground
maps down to street level. Increasingly software is hosted away
from the computer and accessed via the web. For true
interactivity, powerful real time gaming experiences, video
conferencing and professional level VoIP or voice-based services
you need high speed, robust access and quality of service (QoS),
something only Telecom can provide in New Zealand currently.
With affordable true broadband, resources and applications could
be shared across the country with huge savings for the health
system for example, eliminating paperwork and duplication of
effort. People in outlying areas could be remotely diagnosed by
specialists from major hospital, surgeons could consult by
teleconferencing, X-rays could be sent instantly and waiting
lists reduced significantly.
The same principals could be applied to education,
government, science and research, industry and commerce, arts
and creativity. By leveraging improved speeds, the tyranny of
distance, the greatest obstacle to our global competitiveness,
is removed. Free and open communications using the latest
interactive design and collaboration tools can open the door for
amazing new partnerships.
One way or another broadband touches every industry and
household. There are now thousands of sites where music, movies,
and TV programmes can be legally downloaded, and a host of niche
channels that can be streamed to your computer and or modern
flat screen TV.
Free Internet in France has come up with a business model
that has a feel of the future about it. Providing its own
equipment on France Telecom’s local loop it is delivering a
20Mbit/sec broadband pipe. Subscribers pay no line rental and
get fast internet, phone services, free calling within France
and 14 other countries plus 100 TV channels, and video on demand
at $4 a pop. This comes with a wireless router with a hard drive
to store content and you can buy a mobile wifi handset for calls
in your home which also works at external wifi hotspots. The
entire bundle has no data cap and cost $NZ57 a month.
HomeCoice in the United Kingdom and Fast Web in Italy offer
similar deals and Yahoo Broadband in Japan delivers tiple play
services at 100Mbit/sec speeds. In Australia ABC and Disney are
offering the latest episodes of Lost and Desperate
Housewives on their web site the next day for $1.99 each,
from May these were free for streaming as you don’t mind the
Programme your own TV
The TV download service is available to anyone, including Kiwi
viewers, and further illustrates just how far behind the game we
are. The only way this kind of service makes any sense however,
is for subscribers to have fast broadband with very high data
caps or flat rate access and that’s the challenge Telecom and
its competitors face over the next few years.
While e-commerce, the business of purchasing goods online,
has been a relatively slow burn, it’s now smoldering at such a
rate that even the on-to-it analysts have been caught off guard.
Ovum analyst Richard Holway was ‘blown away’ by data released in
showing Internet shopping now
accounts for 10 percent of retail sales in the UK. Around $NZ90
billion was expected to be spent online in 2006 - a 56 percent
increase over 2005. Another, $NZ60 billion would be spent online
on insurance and gambling.
A further $NZ90 billion in store sales were being influenced
by research or price comparisons made on the Internet. Holway,
who has a reputation for extrapolating future trends says the
‘mass market phase’ has just begun, and suggests 50 percent of
sales may be made on the internet by 2010. All that on-line
window shopping and skimming through electronic catalogues
requires instant access and fast refresh times.
And while Intel’s government and telecommunication business
development manager Sean Casey, is well aware of all the fancy
new entertainment-based applications enabled by broadband, he’s
more concerned about its impact on our economic development.
He’s part of a team worldwide who lobby governments to lift
their game ‘beyond the processor’ in the global digital playing
field and says LLU is an ideal opportunity to New Zealand to
He says its critical to be digitally connected and broadband
is essential if we are to grow our economy and maintain
competitive advantage. Our biggest threat he suggests is coming
from emerging markets, including third world nations, which are
going straight to leading edge technology.
Rather than struggling through legacy systems they’re part of
‘the leapfrog effect’, jumping straight from ‘greenfields’ into
high-end PCs and broadband. "They recognise the importance
broadband delivers in educating citizens and the place
technology can play in improving their economic outlook and are
embracing this with open arms."
Casey says there are a raft of technologies waiting in the
wings, including new services such as video on demand and IPTV
but it’ll only happen in countries where there’s affordable
broadband. "Soon you’ll be able to watch what you want, when you
want and where you want but broadband needs to become
economically viable or you prevent that becoming reality."
Some people will never use up even a 600Mb data cap. That cap
however acts as a disincentive for the kind of exploring that
might change their experience of the internet and how it can be
used. Accounts with 10Gb or even 20Gb caps are relatively new to
New Zealand and certainly ample for most uses but if we are to
seriously consider video on demand or the regular music or movie
downloads any kind of cap is an impediment.
Now that LLU is looming Telecommunications Commissioner Douglas Webb is
urging Telecom to work openly and accelerate the change process rather
than waiting for the fine print. He believes we’re at an important
‘tipping point’ in moving from a hands-off system to much firmer "hand
on the shoulder" regulation.
The Internet Society of New Zealand (InternetNZ), like other industry
groups, has become more outspoken this year about the broadband
bottleneck. Executive director Keith Davidson remains concerned Telecom
may still take a defensive approach, complying with the letter of the
law but not the "spirit of open access and equivalent wholesale
He says New Zealand needs to have a serious commitment to reform that
goes way beyond local loop unbundling if it is to address the deficit.
"If New Zealand does not resolve this broadband uptake problem, our
economy will slide leaving us down the bottom of the developed world
with Mexico, Turkey and Eastern Europe. That will be a loss for
business, a loss for consumers and a loss for New Zealand."
Those who are long enough in the tooth to recall even half the
promises made about telecommunications since 1987 will be forgiven for
greeting Telecom’s alleged attitude adjustment with some skepticism.
Will there suddenly be a claim that there’s no room in Telecom
cabinets for co-location of DSLAMs and related equipment? If alternative
cabinets are required will Telecom oppose this through the Resource
Management Act? Will local authorities allow the RMA to become an
Will competitors need a separate door to Telecom exchanges? Can they
have access without a Telecom person being present? Does the exchange
need a partition between competing cabinets? Do ISPs need to provide
their own power and air conditioning? If the latest DSLAMs only cost $45
per port would it be fair for Telecom to charge $150 installation fees?
Will Telecom avoid doing anything to help its competitors until
legislation forces its hand or will it begin offering more attractive
deals in the interim to prevent customer churn before LLU ground zero,
sometime in 2008?
There’s also the connection ratio – in other words how many users can
share a single broadband link. British Telecom has a ratio of 50:1 for
home users and 20:1 for business lines. It is alleged Telecom’s ratio
may be as high as 140:1 which may mean the speed and quality of service
competitors are hoping may not be possible. If wholesale prices are set
too close to LLU costs new investors may also be deterred.
No-one can know for sure until the
real turf wars begin, access is opened to the last mile and full
disclosure is provided to Telecom’s new wholesale customer-competitors.
Another obstacle facing new players is a significant shortage of
technicians, engineers and customer service people who have skills in
installation and maintenance and network repairs. Telecom has exclusive
contracts with Downer and Transfield and TelstraClear has a deal with
Cabletalk to look after their networks. The other major player GDC
recently went belly up. In the meantime, there’s not been a lot of
industry training and many of our best engineers and technicians have
been lured overseas by lucrative contracts, further reducing the skills
The only way forward is for the new players to find a common third
party to handle all their installations and maintenance or sub-contract
Telecom’s contractors, which may defeat the purpose of unbundling.
More fibre in diet
Today the core telephone network out to Telecom’s exchanges, or the
cabinets that deliver DSL services, uses fibre optics cabling to
transmits data over lightwaves. The next leg of the journey - the last
mile or local loop – typically uses copper wires to carry phone and
internet services to home and business.
Nortel New Zealand managing director Rob Spray says in the new
environment a lot of telcos are by passing the exchange completely and
taking fibre direct to small street cabinets on the curb and shortening
the copper loops. This he says makes unbundling the loop physically
Already there’s a major regulatory argument brewing across the
Tasman, and in other parts of the world, with new network investors
fearing they’ll be cut out of the loop if fibre gets any closer.
"They’re saying unbundling the local loop from the exchange is
yesterday’s argument. They’re taking fibre to the curb, to the business
and eventually to homes and you don’t unbundle that unless you start
unbundling wavelengths," says Spray.
In Australia those investing in fibre want a safe harbour for the
next 10-years, and a promise their competitors won’t be given access.
They’re threatening to cut back their investment unless the regulator
acts in their favour.
However Mark Rushworth, chief executive of ihug is skeptical of
suggestions Telecom is trying to by pass the copper loop with its next
generation network (NGN). "What is happening in some built up areas and
new subdivisions is not necessarily an indication of what will happen
out in the suburbs of most cities and towns. A lot of those next
generation cabinets will still be situated in existing exchanges – it
just doesn’t make economic sense unless Telecom uses this tactic as a
defensive blocking strategy."
Rushworth’s ‘market intelligence’ is that even if the current 440 or
so Telecom exchanges are reduced to 200 over the next year or so,
Telecom’s NGN will still give 70 percent coverage for local loop
investors. However don’t expect instant changes, the benefits are likely
to filter down with most activity occurring at first in the high density
areas where the business case; read ‘the quickest profits’, makes most
sense to he new networks.
Attitude adjustment pivotal
We shouldn’t be surprised that Telecom has prioritised high shareholder
returns over reinvestment in its network and getting us into the top
third of the OECD broadband elite. It’s the nature of business to make
profit but if your service is lousy, your goods imperfect or the
competitor is offering a better deal there is a price to pay.
Telecom’s goal, up until now at least, has been to drive costs down
and keep margins up. Its good corporate citizen face has been more about
marketing and high profile tax write-offs, even if they are worthy
charitable causes and arts and theatre sponsorship.
The market however is about to be sold a new-look Telecom under new
chairman Wayne Boyd with rumours of other management and ownership
changes ahead. There’s a major challenge ahead to win back public trust
and confidence. It must act rapidly to improve its service levels and
the wait time on its help desk. One recent report showed there were more
customer complaints about faults in 2006 than any time in the previous
three years and it was taking two weeks and more to sort them out. Many
complaints resulted from winter dampness when old or decaying copper
particularly in suburban and outlying areas again proved it was well
past its use-by date.
Most ISPs, and others keen to invest in the new network environment, are
watching one thing, Telecom’s attitude. Curiously, almost as if a divine
hand had moved, within days of the government LLU announcement Telecom’s
Xtra network faced a series of ‘intermittent internet and email
The fault was blamed on ‘a fault with power supply’ then ‘a faulty
load balancer’ and other unstated issues which prevented customers from
access websites and email. Despite claims all customers were now back
on-line the fact was many were still having problems.
Outage shows true colours
A customer service spokesperson explained outages were a fact of
life on the internet, which was itself ‘a best efforts’ service. "ISPs
can’t guarantee a continuous un-interrupted service," said customer
services manager, Kelly Moore. That statement alone would have raised a
By the end of May Telecom’s gracious offer to refund effected
customers with the equivalent of four days access or a measly $3.25 was
turned into another bah humbug move. It sent an email to all its 600,000
Xtra broadband and dial up customers apologising for the outage but said
they now needed to prove they were eligible for the refund.
A spokesman estimated about 90,000 customers might qualify griping
that this had the potential to cost it around $300,000. There was no
mention of the thousands of dollars in lost business and the major
inconvenience some customers were still facing weeks after the so-called
‘four day’ outage.
Then days after the LLU announcement ISPs received notification from
Telecom that it would be enforcing "an average aggregate data limit per
customer" and charging a premium if overall upload traffic exceeded a
specified monthly data cap. While this provision has been in the small
print since 2004 it hadn’t previously been enforced. Ihug, which had
been offering free upload speeds on most of its accounts, would have to
add upload cost to customer’s download data caps from July 1st.
It has asked to government to exclude such charges in the new
Maybe the billion dollar share shake-up is a good thing, especially
if the new wave of investors are prepared to take a longer term view,
sorting out shortcomings in mainstream New Zealand before hyping up
grandiose futuristic plans in wealthier areas or trying to compete
offshore. An optimist might also suggest the new legislation will force
a culture shift away from the fortress mentality, to a more
co-operative, creative mindset that works for the good of the nation.
Telecom has been ‘squeezing the sponge’ as one commentator so aptly
put it, but the sponge and the patience of competitors and customers
with its anti-competitive attitude have run dry.
Internet Service Providers
Association (ISPANZ) vice president Scott Bartlett is warning ISPs to
sort out all their issues, complaints, questions and technology
requirements, before the new legislation is drafted and implemented or
the process could take two to three years.
"It could be disastrous, let’s be honest Telecom outguns us on the
regulatory front 10-1. They’re basically a law firm that happen to own a
network." Things have been gummed up for too long, unless there’s
evidence of the new attitude beyond the sweet talk, it may be time for
another dose of ‘government issue’ laxatives.
trial of ADSL technology, which involves the transmission of
high-speed data services over copper wire, is underway in
suburban Wellington. We are also studying the future role of
fibre to the curb. Overseas experience is indicating that the
cost of deploying these technologies is likely to be lower than
hybrid fibre/coax cable; in particular, fibre to the curb holds
out the promise of significant reductions in maintenance costs
in the longer term…it has become apparent that fast data is
likely to show stronger growth in the immediate future than
video, which is consistent with our projections at the time the
HFC rollout was planned. In view of this, FirstMedia is to be
restructured, with a focus on servicing existing customers,"
Telecom chief executive Rod Deane, in Telecom's First Quarter
shareholder report, September 1997.
Toying with the futureNew Zealanders are thoroughly
fed up with being sold souped up superhighway scenarios when the
reality in many cases is closer to coaxing tired horses along
While ‘the Xtraordinaries’ beam in at gigabyte
speeds in their sci-fi wagon, pushing a neutered internet
service at maximum speeds of 3.5Mbit/sec, many in rural and
outlying areas still struggle with dial up and low end broadband
or can’t get an efficient service at all.
In 1990 Telecom claimed a 'broadband"
ISDN (integrated services digital network) could be available to
all homes and businesses by 1995. It never happened.
In 1995 it promised its First
Media fibre-coaxial cable network, would deliver movies and fast
internet to 300,000 New Zealand homes. After passing 65,000
homes in Auckland and Wellington at a cost of around $200
million, it was abandoned and much of the cable pulled from the
Some say it was stunt to undermine Kiwi cable,
later acquired by TelstraClear, or that Telecom’s North American
majority owners wanted to tidy up the books before pulling out.
Regardless Telecom had discovered DSL, claiming this was the
medium over which it would now deliver movies and TV. After
initial trials this was downgraded to internet only.
In 2003, Telecom undertook a three month, 100
home trial called JetVideo. Participants watched a range of
movies and music videos on their PCs over full speed DSL ‘to
gauge user reaction’. Telecom says it learned people don’t want
to watch TV on a PC. Ralph Brayham, in charge of the project at
the time, said the trial showed Telecom had the technology and
the bandwidth deliver this content but the equipment was still
too expensive for most Kiwi households.
In the past three years however a major shift
has occurred in the affordability of high end PCs and LCD
(liquid crystal display) and Plasma flat screens. In fact
products like Microsoft Media Centre actively promote a
‘download’ scenario for home entertainment, with an interface
geared to manage and serve up music, movies, videos and
photographs from a PC hard drive or stream content direct from
Currently Telecom is testing Microsoft’s new
direct to home video framework known as IPTV. It’s working with
Alcatel, Microsoft’s agent for IPTV, to ensure latest generation
ADSL2+ MiniDSLAM multiplexers can deliver at least 15Mbit/sec
speeds over copper.
In-house tests have been conducted with at least
20 people using in conjunction with Sky and others, as well as
developing a hybrid PVR (personal video recorder) to manage and
deliver a range of video-based services.
Alcatel’s Australian-based director innovation
and marketing development manager, Geoff Heydon, stated in 2005
that it wasn’t impossible to deliver 50Mbit/sec to the home by
2010, suggesting New Zealand would only confirm itself as a
laggard if it didn’t achieve that lofty goal. In fact he
believed the maturity of IPTV, would force the issue, even
pushing home connections out to 1Gb by 2020.
The first commercial customers of IPTV are
likely to be in the new suburb of Flatbush on the outskirts of
Manukau City, where smart houses, wired with gigabit connections
are being built. Manukau is so confident in the digital future
it has adopted a policy that all new housing developments must
be wired for broadband.
More than 500 customers in the Flatbush
subdivision, and the nearby Highbrook business park, will be
early trialists of Telecom’s next generation network (NGN).
Telecom’s $10 million investment in ‘fibre to the premises’ here
will determine how effectively it might bypass its current
‘fibre to the curb’ stance for a direct to the home model.
Flatbush will also be one of the first real life tests for its
$1.4 billion next generation broadband network being built by
Alcatel. The technology will ensure guaranteed quality of
service (QoS) for bundled voice, data and video, full broadcast
or on-demand video. The robust new network will replace the
existing PSTN by 2012 with the first customers migrating during
Reality check. The futuristic suburb of Flatbush
hardly exists yet. And the homes Telecom will service? Well
they’re still in the planning stages.
loop unbundling. Where the incumbent or dominant carrier must
let competing carriers site their equipment in their exchanges
or roadside cabinets to access to the ‘last mile’ into homes and
local loop is the portion of a carrier’s network that runs from
the exchange or roadside cabinet into homes and businesses, or
an estimated 1.7 million fixed copper lines. For DSL technology
to work the length should typically be no longer than 5km and is
increasingly being reduced to hundreds of metres or less in
build up and newer areas.
Asynchronous digital subscriber line. Operates over the twisted
pair telephone lines to homes and businesses. The download path
is much greater than the maximum download. For example Telecom’s
current network is capable of at least 7Mbit/sec download and
256 or greater upload speeds.
International Telecommunications Union standard that has the
potential to deliver speed of up to 24 Mbit/sec downstream and
3.5 Mbit/sec upstream. Equipment to enable this is now being
rolled out around New Zealand and has been operational in many
countries for some time.
high bit rate DSL supporting throughput sufficient for extremely
high throughput such as video on demand and high definition TV.
It can be both symmetric and asymmetric and provides up to 52
Mbit/sec of bandwidth
||In many countries
there’s a growing interest in symmetrical internet connections
that allow the same speed both ways. A recent International
Telecommunications Union (ITU) recommendation for VDSL2 (very
fast DSL) provides for connectivity over existing copper lines
at 100 Mbit/s symmetrically.
Naked DSL (shared spectrum)
engineering term is shared spectrum. Customers can purchase DSL
services from one company and phone services from another.
Currently Telecom’s best deals are only available to those who
also have a call plan with it.
Unconstrained DSL or UBS
Unconstrained bitstream access. Raw DSL speeds offered at the
maximum speeds possible to wholesalers and those who place their
DSLAMs on Telecom’s network
Subscriber Line Access Multiplexer. A network device, usually at
a telephone exchange or roadside cabinet, that separates the
voice-frequency signals from the high-speed data traffic and
controls and routes digital subscriber line (xDSL) traffic
between the customer and the main carrier network.
||The return path on
DSL used to send data from your email or in gaming or
interactive applications. This becomes increasingly important
for applications such as VoIP (voice over IP) which needs high
speeds both ways. Calls can be interrupted if the upload path
isn’t sufficient. Telecom restricted this to 128kbit/sec with
most accounts and only recently lifted it to 256kbit/sec.
256Mbit/sec or 528Mbit/sec until about a year ago unless you
were with Telecom or a provider that had its own infrastructure.
TRhe speed was bumped up to 2Mbit/sec last year and a
determination struck in December 2005 means speed of 3.5Mbit/sec
are now available. LLU is expected to boost access to 7Mbit/sec
in the short term and with DSL2 technology now commonplace new
carriers are proposing 8-24Mbit/sec services by 2008.
||The restriction on
the amount of data subscribers can download (or upload) each
month. This can vary from 600Mb to 1Gb as a standard offering
but on higher end accounts through some ISPs is now 10Gb and
more. If you exceed your data cap you are charged a per Mb fee
and/or the speed of access is drastically reduced.
of presence, server or access point delivering email and
suggestion by the Government that Telecom may need to separate
out it wholesaling and retailing divisions so it’s wholesaling
activities can be more closely monitored by the Commerce
|TV or video
||Needs at least
2Mbit/s speeds. That’s 256kb of data per second or roughly 15.4
Mb per minute of video or TV viewing. A subscriber with a 2Gb
cap would run over their allotment after only 129 minutes.
|MP3 music files
||While these vary in
size depending on the length of the song they’re typically 1Mb
per minute, eg a 3 minute song is 3Mb
||Depending on size, a
3 minute music video, 10 minute short film, 30 minute TV clip or
full length feature. A three minute video clip can use between
5-20Mb depending on the quality (resolution) and the screen size
you are using. A 30 minute clip could use up to 200Mb.