Hamish Fletcher

Business reporter for the NZ Herald

Broadband rollout set to send us speeding into the future

Vodafone CEO Russell Stanners and Chorus CEO Mark Ratcliffe at  the announcement of the group approach to rural broadband. Photo / Greg Bowker
Vodafone CEO Russell Stanners and Chorus CEO Mark Ratcliffe at the announcement of the group approach to rural broadband. Photo / Greg Bowker

One of the Government's flagship election policies - the ultra-fast broadband scheme - aims to thrust New Zealand into the 21st century by vastly improving the speed at which information can be sent and received on the country's internet networks.

Three years after the multibillion-dollar project was first conceived, the plans have been signed off, work has begun and thousands of kilometres of fibre optic cables are set to be rolled out in 33 towns and cities around the country.

The broadband scheme is expected to deliver internet speeds of 100 megabits per second, around 20 times the average rate recorded by the Commerce Commission last year.

Schools and hospitals are first in line to get a fibre connection and are due to be connected by 2015.

By this time, the Government hopes 90 per cent of businesses will also be hooked up to the ultra-fast network.

Households and remainder of businesses in the UFB zone are all set to have a fibre line by the end of 2019.

Once the project is complete, around 75 per cent of New Zealand will have access to the new network.

While consumers will benefit from faster browsing speeds at home, the Government claims the scheme will transform the health and education sector and change the way New Zealand companies do business.

The architect and official in charge of the of the initiative, Communications Minister Steven Joyce, believes the UFB programme will help step-change the New Zealand economy.

Although he admits that Treasury has no financial analysis on the benefits of UFB, he backs up his case by citing a New Zealand Institute report, which estimated a ubiquitous fibre scheme could be worth more than $2 billion a year.

"We've also looked at all the international studies and although they have different assessment [criteria], they're all positive," Joyce says.

"The productivity benefits of much faster broadband services for businesses are huge ... there's obvious things it will improve like facilitating cloud computing, but also high definition video and the potential for [video conferencing]," he said.

In the health space, ultra-fast broadband will allow large medical documents, like MRI scans, to be sent via email rather than by courier, and allow doctors to monitor more patients remotely.

"Tele-health technologies will allow patients to self-monitor their health at home with appropriate medical oversight - including the ability for doctors to inspect [patients] visually with high-definition, two-way teleconferencing," said Health Minister Tony Ryall. This will help unclog hospitals and allow patients to be discharged sooner.

In education, faster broadband will give schools the ability to share resources more easily and reliably.

"[Through video-conferencing] you can have an expert teacher in one school teaching students at another. This is where speed becomes really important, because you can't run an effective video conference and can't transfer multi-media on low speeds," Director of e-learning at CORE Education, Derek Wenmouth, said.

This is particularly useful for remote schools which do not have staff who can teach all subjects.

Fibre also has the potential to allow students who are off sick from school to keep up to date with their schoolwork via an internet-link at home.

WHAT IS FIBRE?
Fibre offers significant advantages over the copper cables that currently provide the majority of New Zealanders with internet access.

Fibre optic cables are made of thin strands of glass pipe that have been coated in layers of plastic. The glass is extremely pure and works by transferring information that has been converted into light.

The glass acts as a mirror and can reflect light down several kilometres of cabling, even if it is curved or bent.

Fibre is regarded as the fastest cable-based material to send data down and can also be upgraded more easily than its copper counterpart when faster internet speeds are required.

THE PLAYERS INVOLVED
Four private companies have joined with the Government to rollout the ultra-fast network.

Telecom's network-arm Chorus won broadband contracts for 24 candidate areas, including Auckland and Wellington, and will build almost 70 per cent of the network.

WEL Networks and its subsidiary Ultrafast Fibre is responsible for the rollout in Hamilton, Cambridge, Te Awamutu, Tauranga, Tokoroa, New Plymouth, Hawera and Wanganui.

Northpower and Enable Network will build the fibre scheme in Whangarei and Christchurch. The scheme is being funded by a mixture of public and private investment, with Government putting in $1.35 billion and its partners an additional $2.15 billion.

The taxpayer investment in the scheme is being managed by Crown Fibre Holdings, which is working with the Government's private partners to co-ordinate the broadband build.

Crown Fibre is tasked with ensuring the build happens in a timely and efficient manner.

RURAL BROADBAND
Despite the billions of dollars being put into the ultra-fast broadband the project is only being rolled out in urban areas. But the population living outside towns and cities will not miss out on an internet upgrade and are being covered by a separate scheme, the rural broadband initiative (RBI).

While this will drastically improve internet speeds the network will be far slower than what is being rolled out to urban centres.

Under the RBI, 86 per cent of rural households will receive internet speeds of five megabits per second and 93 per cent of rural schools will get internet speeds of 100 megabits a second.

The project is a joint-venture between Vodafone and Telecom.

Vodafone will build more than 154 new cellphone towers giving rural households access to wireless broadband.

Telecom will lay fibre internet to rural schools and will link cell towers to the main network.

Telecom will also improve its copper internet services, offering faster speeds to customers who choose that service.

Almost two-thirds of these schools wil get fast speeds within a year, giving them quicker internet than the majority of urban schools. Any households close to the fibre cables running to schools will be able to directly tap into the network.

The RBI will give the rural sector access to technology that is taking the guesswork out of agriculture.

More farmers will be able to use devices like GPS collars to track their stock and keep detailed information on each of their animals using radio tags.

David Walker, rural market manager at Gen-i and a former dairy farmer from Taranaki, says those who can gather data and use it to make productivity gains will be the sector's most successful in the coming years.

"The modern No 8 wire is data and how it can be converted into meaningful information, how it can be twisted and bent and used," he says.

Both Telecom and Vodafone will invest more than $100 million in the initiative to augment the $285 million industry levy funding the scheme.

The rural internet network is open-access and is being built on the premise that all retail providers will be able to put their own equipment on Vodafone's cell towers - a concept called co-location.

This will allow other service providers to offer services to rural customers and compete with Vodafone and Telecom.

THE INTERNATIONAL LINK
The Government's broadband scheme only covers the "last-mile" of fibre - the cables running up the street to customers' houses.

However, there are plans in other legs of the network as well, particularly in the international market.

Pacific Fibre is a private company planning New Zealand's second overseas internet cable and says there is little point in having ultra-fast broadband in New Zealand if the overseas link is not sorted out.

The cable will run between Auckland, Sydney and Los Angeles.

The trans-Tasman cable, linking Australia and New Zealand, will be 2150km long and the trans-Pacific cable, linking New Zealand to California, will be 10,600km long.

The project has big names behind it, including Sir Stephen Tindall, Sam Morgan and Facebook billionaire Peter Thiel.

Pacific Fibre's chief executive Mark Rushworth says the cable is necessary to lower the cost of transporting international internet traffic and bring competition to the market

Southern Cross Cable Systems, operates the only internet pipe running out of the country. Telecom has a 50 per cent stake.

Rushworth says that if the price of international capacity does not fall, internet companies will not be able to offer data packages that will let their customers take full advantage of ultra-fast internet. "It's an economic problem. It is always the case when you've got a single provider that you are paying higher prices than you are in a competitive environment and we've always said that for uptake of UFB to be successful you need a competitive market so that ISPs can increase their data caps without a ten-fold increase in costs."

The company is currently gathering capital for the US$400 million cable and has signed on three foundation customers. The funding from these customers will form part of the debt component of the cable, which is 40 to 45 per cent of the build (US$160m-US$180m).

The remaining funding, being led by Credit Suisse and First NZ Capital, will come from investors.

US cable builder, TE Subcom, will construct the internet pipe if the project goes ahead.

Rushworth says more customer agreements will be announced in the coming weeks.

If all goes to schedule, the cable is due to be operational by the first quarter of 2014, he says.

State-owned transmission company Kordia, is also planning to build a trans-Tasman cable but is still in the process of gathering funds.

- NZ Herald

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