Broadband appeal not obvious to all

By BRONWYN HOWELL*

New Zealand is about to embark on a new phase of telecommunications investment.

Successful tenderers for the provision of high-speed internet connections in Southland have been announced and decisions are imminent in Northland and Wairarapa.

These decisions herald the so-called "new age of internet connectivity" for country people.

Many believe high-speed internet connections in the regions will liberate rural communities and close both digital and economic divides.

Communities, central and local government are actively supporting these links, believing that the demand for such services is substantial.

In short, there is an enormous faith in the premise of "build it and users (and uses) will come".

But is this faith that users and uses will materialise justifiable? A glance at broadband usage statistics here and elsewhere suggests that much of this faith may be based on shaky ground.

Worldwide, actual demand for broadband services has been far lower than predicted.

United States commentators such as Charles Ferguson of the Brookings Institution report regularly on low levels of United States broadband uptake as "the US broadband problem".

The fate of firms such as Global Crossing and WorldCom is as much a story about the failure of broadband sales to match predictions as it is about the chicanery of accountants and directors.

Furthermore, failures to meet expectations are measured not just in the number of subscribers who connect to broadband services, but the volume of information that they move through the new "pipes".

In OECD terms, New Zealand is comparatively well served by broadband. Widespread commercial broadband services have been available since 1999, and at the beginning of this year, 80 per cent of the nation's telephones were connected to ADSL-capable exchanges (Australia and the US both sat at 50 per cent in this statistic in 2001).

Furthermore, our residential DSL prices are the second lowest in the OECD (with, until April this year, an unlimited megabyte package available), and our commercial services (within megabyte limits) second and third cheapest.

Yet our connection rates remain extremely low. While we are seventh in the OECD in the number of computers connected to the internet per capita, only 5 per cent of our ISP accounts are broadband accounts.

Despite wide availability and low prices, our residential broadband connection rate languishes at 0.5 per cent per capita.

Commercial ADSL uptake sits a little better at 5 per cent of businesses, and in April 2001 passed the target of 3 per cent of businesses using broadband that Australia has determined to reach by 2003.

But the inevitable fact remains: most users persist with dial-up modems. The number of new dial-up accounts a month outnumbers new broadband accounts by 11 to 1, despite the effective difference in price for residential consumers between dial-up and DSL (presuming a second telephone line has been purchased for dial-up internet access) being only $10 a month.

Moreover, the importance of the internet for business to business transactions may well be overrated because most data transfers are on private networks.

Does this pose a problem for those "betting the farm" on rural broadband uptake?

Rural New Zealand may have some "secret demand" that will catapult New Zealand broadband uptake and usage into stellar regions not experienced in Australia, the US or world leader Korea.

For the sake of our economy, I hope that the business plans supporting rural broadband have more substance than the "think big" plans of the 1970s.

* Bronwyn Howell is a researcher at Victoria University's centre for the study of competition and regulation.