Chris Barton: Broadband bungle same as it ever was

Copper networks are the reality for most of us in New Zealand for the immediate future. Photo / Thinkstock

On May 4 the Commerce Commission will release revised prices for Chorus's unbundled copper network which will once again highlight the pig's ear the government has made of telecommunications here. I know what you're thinking. Who cares about copper when the future is fibre and ultra fast broadband (UFB)?

But the truth is most of us are going to be on copper - for the so called "last mile" to our homes for years to come. I've just checked the areas Chorus has designated will have footpaths dug up for ultra-fast broadband deployment over the year beginning in July and found my suburb (Devonport) isn't one of them. So that means it's probably 2014 before I can even consider an ultra-fast future.

But even if I could get fibre now, I wonder whether I would. I'm currently on a relatively fast digital subscriber line (DSL) service over copper with a 60GB cap, which, with phone, voicemail and call waiting, costs $102 a month. I haven't been able to see for myself, but my current download speeds suggest I wouldn't get a significant improvement moving to an entry-level 30Mbps down/10Mbps up fibre service. To get any real advantage on fibre I'd have to opt for a 100Mbps down/50Mbps up service which is going to cost around $124 a month with 60GB cap.

But at that speed I reckon a 60GB cap will be woefully inadequate - given that I already routinely bust through my existing data cap each month. So I imagine I would end up buying a service with more headroom which is going to set me back quite a bit more - on current price lists around $150-200 a month. In the current economic climate, I'm not sure I can justify the extra spend.

Then there are the extra setup costs - a new router, possibly new wiring in the house and maybe an uninterruptible power supply to ensure you still have a phone line when the power goes out. If your house is more than 15m from the road you could also be in for further connection costs, as Chorus and some internet providers are still arguing about who pays for what in getting the fibre from the road to your house.

Given that Chorus gets paid $1,118 of tax payer's money by Crown Fibre Holdings for every dwelling it passes by with fibre, the idea of stinging those houses set back a little further from the street than others seems like double dipping to me.

There are also a few horror stories like this report from Palmerston North about the parking mayhem and disruption that can happen in your street when the Chorus contractors arrive.

But, if you're in one of the areas such as Whangarei getting serviced in fibre by companies other than Chorus, initial reports indicate much better prices and benefits especially for business users.

Which is surely what ultra fast broadband should be about - providing a low cost infrastructure for businesses to engage in creating big data services, products, content and collaborations that can be exported anywhere in the world in a blink of an eye.

The only good news for the bulk of us stuck on copper is that come Friday our connections should be on track to become a little cheaper - although whether it actually happens, or whether users get a reduction in their broadband bill, remains to be seen. If the Commission is doing its job, it should reduce the unbundled copper local loop price - that is the wholesale price competitors pay Chorus for the use of the copper line.

Currently for urban exchanges the de-averaged monthly price is $19.41. For non-urban lines its $35.83. In its wisdom the Commission decided to put them all together resulting in a geographically averaged monthly price of $23.93.

As competitors have rightly argued, the price should come down because these days thanks to Chorus's "cabinetisation" of exchanges, the average length of copper to homes is much shorter - an average of 877m compared to the 2.5 km in 2007 according to some estimates. By anyone's logic, shorter copper loop lengths should lead to lower loop prices. Competitors suggest around $14 would now be a more realistic price. But this is New Zealand where we have a Commission that long ago lost sight of what it's supposed to do - look after the long term interests of New Zealand consumers. So don't hold your breath.

The problem goes back to the days before ultra fast broadband and before Telecom was properly split into the lines company Chorus and the services company Telecom. Back then, the monopoly was doing everything it could to stop the unbundling legislation that had finally passed. Its cunning plan to prevent competitors taking its lines customers away was to "cabinetise" exchanges - that is move the lines closer to the customer in roadside cabinets.

At one level the plan made sense because the shorter the copper loop the faster you can deliver DSL broadband. Fair enough, but you would have thought Telecom might have designed the cabinets with the future in mind - that is with the ability to deliver fibre to the home also. But it didn't and the cabinets can't be upgraded.

Which is why you're now seeing a new breed of Chorus roadside cabinet popping up -smaller microduct cabinets each capable of deploying fibre to 200 homes in the immediate vicinity. With the prospect of reduced local loop prices, both Chorus and the government find themselves in something of a pickle. Lower copper loop prices reduces the monopoly rents Chorus can extract from consumers and therefore reduces Chorus's revenue. It also widens the price gap between fibre and copper services, meaning consumers may be less inclined to move to ultra fast broadband, which could end up turning the government's $1.5 billion investment into something of a white elephant.

It's also a key reason why Chorus should never have been let anywhere near the ultra fast broadband project. That's because it makes sense for Chorus to keep customers on its legacy copper network for as long as it can, moving them over to fibre only when it sees more profit to be made. And all the while taking a $929 million government handout.

In a perfect competitive world, lower cost copper services would drive down the cost of entry-level fibre services. But this is New Zealand where exorbitantly priced telecommunications services delivering obscene profits to overseas shareholders are the norm. There's little sign that's going to change any time soon.