Michael Shirley: Here's why NZ broadband prices are over-inflated

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Michael Shirley general manager of internet service provider Flip says there's no reason why New Zealanders should be paying so much for broadband
Michael Shirley, GM of Flip, says focus should be on investing in new and innovative services that will drive the digital economy.
Michael Shirley, GM of Flip, says focus should be on investing in new and innovative services that will drive the digital economy.

It is entirely possible for New Zealanders to pay far less for broadband than the over-inflated price it currently costs.

Which is why, Flip, one of the fastest growing internet providers in New Zealand, supports the Internet Party's policy to slash the price Kiwis pay for broadband by half.

Although, let's get one thing straight - Flip is not backing the Internet Party. But love or hate Kim Dotcom's political foray, no one can argue with the party's bold broadband vision.

It's the desire to offer cheaper, more affordable broadband that Flip was founded on just over a year ago and in that time it's notched up more than 10,000 customers. The high uptake is a result of being the only ISP in the country fully utilising the CallPlus Wholesale LLU network, which significantly lowers input costs. Flip passes those savings onto our customers.

So how do all New Zealanders have a shot at paying less for broadband?

For starters, the largest portion of the costs that contribute to providing a broadband service in this country are the super sized profits being paid to companies with foreign owned investors such as Chorus.

Then there's the fact another competing fibre cable to the USA supported by the government could significantly reduce the price of international bandwidth to a degree that maybe all ISP's could be able to remove data caps.

Ultimately, the end of data caps would bring about dramatic change for New Zealand's broadband users. Not only would it mean more options for consumers and encourage uptake, but also drive innovative new services and help lift New Zealand's mediocre OECD broadband ranking.

Currently New Zealand ranks 15th out of 34 countries in terms of broadband services - and price-wise many Kiwis are paying for some of the most expensive broadband plans in the world.

Although the Commerce Commission's new UBA pricing will bring costs closer to the actual cost of supplying the service, it still provides Chorus with a large profit margin.

Kim Dotcom at the launch of his Internet Party. Flip is not backing the Internet Party but supports the party's policy to halve the cost of broadband in New Zealand. Photo / Brett Phibbs
Kim Dotcom at the launch of his Internet Party. Flip is not backing the Internet Party but supports the party's policy to halve the cost of broadband in New Zealand. Photo / Brett Phibbs

Unfortunately the regulatory has not yet initiated a review of other broadband components, such as the ability of ISPs to unbundle cabinets, which will improve the level of service and competition throughout New Zealand even further.

A review of the UFB project is also critical to ensure priority is given to completing the fibre roll out to every street in New Zealand as soon as possible rather than concentrating on connecting fibre to a handful of privileged households.

Only then will competition ensure the most effective means of access to each household, whether it be fibre, enhanced copper or wireless.

It's all about focusing on driving prices down while improving the quality and speed of services customers can get in this great little country of ours.

Yes, that might sound too good to be true, but it is achievable.
And importantly, focus should also be on investing in the new and innovative services that will ultimately drive the digital economy.

Michael Shirley is General Manager of Flip.

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