Govt needs to get real about digital investment

Sluggish uptake of ultra fast broadband is because suppliers can't meet pent up demand in a timely manner. Photo / NZ Herald

Let the trumpets sound. Budget 2015 set aside some further money to advance speedy internet in God's Own Country: up to $210 million to expand the $1.35 billion ultrafast broadband (UFB) fibre coverage from 76 per cent to 80 per cent of New Zealand's population; and a further $150 million to fund improvements to the $300 million rural broadband initiative (RBI), including fixing mobile blackspots.

All up that's $2 billion since National first came up with this transformative idea as an election promise in 2008. Why then, some seven years on, is the fanfare striking such a flat, if not bum, note?

The overall problem I think is that the government is trying to do something admirable on the cheap. There's no doubt this is a praiseworthy investment in the future, but the mode of investment - public-private partnerships (largely with Chorus) for the UFB and taxing telcos for the RBI has some serious shortcomings.

The numbers tell some of the story. Currently the UFB is 46 per cent complete with 618,533 premises able to connect to fibre but only 85,544 having done so. That's an uptake of 13.8 per cent. Slow and steady, some might say. The government thinks it can get faster uptake by artificially raising the price of copper services.

But by now it should have realised the sluggish uptake is because the suppliers simply can't meet the pent up demand in a timely manner.

For rural broadband the story is similarly dismal. Some 239,150 household are now covered by 308 upgraded and 113 new mobile towers in rural areas. How many are taking advantage of the rather underwhelming peak speeds of at least 5Mbps? Unfortunately, the government doesn't seem to know - no one seems to be collecting those numbers - or whether the service is delivering on it 5Mbps target.

Then there's the way the RBI is funded. Most of the funding for the RBI, which began in 2011 when Vodafone and Telecom were awarded the $300 million contract to serve 252,000 customers, was raised from an industry levy, with the government directly investing only $48 million. The extra $150 million announced in the budget is also coming from the Telecommunications Development Levy. In other words, a Claytons - the investment when you're not having an investment.

Already some providers have said the levy cost will be passed on to consumers . It's also caused a Forbes commentator to muse on "New Zealand's Weird Idea to Tax Broadband to Provide Broadband." He writes: "If something is worth subsidising then it's worth subsidising.

If something's worth taxing then it's worth taxing. But to subsidise and tax the same thing is to start that descent into madness." Not surprisingly Labour is calling for an inquiry into the fiasco.

As for performance and value for money, New Zealand is very much in the middle of the pack. With an average download speed for fixed broadband of 27.4 Mbps, Ookla ranks us 42nd in the world. Our average upload speed of 13.2 Mbps puts us at 35th. Broadband pricing is at, or above the OECD average, and most connections have a fixed data cap.

Overall, we're very much a "C" on the report card. But then there's the anecdotal evidence of just how awful service can be. Examples include:

• Tourists outraged at having to pay extra for spotty Wifi at hotels and other accommodation when elsewhere in the world it's free.

• The inordinate time it takes to get connected to fibre - especially when it's Chorus and when you're living in an apartment or other multi-unit dwelling. Instead of fixing its haphazard service delivery systems, Chorus is as usual bleating and calling for changes to the Resource Management Act.

• The poor connectivity process is driving people like Dean Hall, creator of zombie survival game DayZ mad, causing him to move a multimillion-dollar project offshore. Hall tweeted at the time that Dunedin, the so called Gigatown, was a "total joke" and that he got "better internet on the plane to Iceland three weeks ago."

• Phil Dorn is going crazy too. He's just built a new house in Mangere Bridge Auckland. He wrote to Communications Minister Amy Adams: "For three months now I have been trying to get an internet connection and finally have been told that to get a connection it will cost me $2600 and it may take up to three months to complete the job." He also found out the fibre rollout in his area is three years away.

There's no doubt the UFB and RBI are well intentioned and clearly vital to moving New Zealand out of the dark ages. But to make these vital pieces if infrastructure work, the government has to stop being such a cheapskate and get real about the level of investment needed - especially in our digitally impoverished rural frontier. It also needs to get real about oversight - to ensure its private partnerships are properly delivering on their contracted outcomes.