Editorial: Inquiry crucial to clarify fast broadband use

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Opinion

New Zealanders have been quick to take up some of the electronic advances of recent decades but there seems to be mounting concern that we might not make worthwhile use of the $1.35 billion ultra-fast broadband network the Government is determined to provide to 75 per cent of New Zealand within 10 years. The Commerce Commission has initiated a study of possible impediments to its use and a report by the New Zealand Institute last week predicted the network will be wasted on home entertainment unless business and public services gear up for it.

The institute cited a study for the World Economic Forum that placed this country 18th of 138 in its capacity to use the technology to boost economic competitiveness and improve social services. Director Rick Boven mentioned public transport, health and education as services that should be making much more use of internet connections in preparation for the next step in capacity. On present trends, he said, "we run the risk of spending a lot of money to provide very high quality entertainment".

It is not encouraging that the Commerce Commission's study may revive a campaign by television broadcasters against the Sky subscription service whose ability to outbid them may enable it to dominate the provision of content for internet television.

TVNZ and MediaWorks, owners of TV3, hoped Sky might be reined in by a review of broadcasting regulation for the Ministry of Culture and Heritage in the dying days of the previous Government. But when National came to office at the end of 2008 it soon canned the review and Telecommunications Minister Steven Joyce remains confident Sky will face competition on the new broadband network.

The Commerce Commission may not be as confident. It has published draft terms of reference for its study of potential impediments that appear sufficiently broad to cover Sky's position and practices. The inquiry, expected to produce its final report in December, will be watched with interest.

The main impediment to ultra-fast broadband use, however, may be its price. Experience in the United States, Japan and other countries that have laid the latest fibre suggests that not enough potential subscribers find it worth the cost.

No wonder governments, rather than telecommunications companies, are taking the lead in installing the latest wire and wireless technology. Governments can rush in where angels fear to tread because governments do not have to show a profit on any investment.

But ultimately it is the economy that suffers if they build infrastructure that cannot recover its cost in the prices it needs to charge. They have to weigh that risk against the fearful prospect of falling behind the pace of communications worldwide.

Governments can not do much about the price to subscribers short of regulating it, which would ensure the investment is uneconomic. Thankfully, no power to regulate the price of New Zealand's new network is provided in its legislation, now before a select committee of Parliament. The best the Government can do is ensure there are no barriers to competition among possible providers of services and content.

Mr Joyce's confidence on that score may be well placed but the Commerce Commission is right to hold an inquiry. Its responsibility is to see that competition produces the best possible service to consumers. A dominant provider of any sort of content can satisfy that standard but the value of this inquiry is much wider. If ultra-fast broadband is worth its cost to households and business it surely will be for services besides movies and sport.