InternetNZ comments on Ultra-Fast Broadband Plan

InternetNZ comments on Ultra-Fast Broadband Initiative

Media Release 16 September 2009

Following from a media release earlier today, InternetNZ (Internet New Zealand Inc) has now considered the government's Ultra-Fast Broadband Initiative in more detail and provides comment below

InternetNZ spokesperson Jordan Carter says: “The announcement today will lead to significant changes to the telecommunications environment in New Zealand – we join all those who have sought these changes in celebrating this announcement.”

Architecture “InternetNZ’s priority was that the architecture of the fibre optic networks would be consistent with open access principles, allowing effective competition. The Government has agreed with this – their open access requirements specify that individual lines must be able to be unbundled. While InternetNZ would have preferred a mandated point-to-point architecture, the cost savings that other architectures allow may be worth pursuing so long as real, cost-effective unbundling at layer 1 is possible.

Layer 2 Services “InternetNZ strongly submitted that LFCs should be able to provide layer 2 services – lit fibre wholesale services – to avoid any re-monopolisation at the lit fibre level. This may also make investment in the infrastructure more viable. We are pleased the Government has maintained this option. The Government has stated that only the private funds the investment partner brings can finance the deployment of layer 2 services – Crown funds will build infrastructure only. This would appear to be an elegant solution.

Overbuild “InternetNZ, along with most, welcomed the set of principles the Initiative is based on but we note tensions between these principles. The document released today notes the same tensions and highlights that avoiding overbuild is a key area of contention. The practicalities of building a viable network will require some degree of overbuild, and the paper is right to highlight this. Where commercial deals cannot be done with other infrastructure owners to provide for the open access that the Government is seeking, overbuild is inevitable – and rightly so.

The Telecom elephant in the room “InternetNZ strongly supports the model of regional fibre companies, but notes that the Government has left the door ajar for a national deal. It is clear that a situation where Telecom competed directly with the new fibre networks would not be an ideal outcome for New Zealand.

InternetNZ notes that it has always supported the structural separation of Telecom as an ideal outcome for the New Zealand market: by completely severing any links between the network and the services operations, structural separation is the strongest guarantee possible of fair and equal treatment of all service providers by the network.

“If Telecom wants to make a serious pitch for taking part in this Initiative, then it should look at what is happening over the Tasman and consider the voluntary structural separation of Chorus from the rest of the Telecom group. Such a step could lead to Chorus being a viable investment partner in rolling out the high speed fibre New Zealand needs.

Control of LFCs “InternetNZ reiterates its earlier submission that those with large retail interests should not be able to control LFCs. The Initiative as released today allows this where the investment partner does not control the Board or appoint the Chair of the LFC. We still regard this as not really being able to prevent material control being exercised over the LFC by a partner with a large retail operation. The best solution to this would be for Telecom to structurally separate, as noted above.

Regulation “InternetNZ submitted earlier in the year that price regulation should be part of the initial rollout of the services. We note the Government’s view that this is not required, and welcome the requirement on prospective LFC partners to specify the prices they would charge for an initial period. Eventually, these networks will be the major fixed line telecommunications networks with the typical market power problems all such networks exhibit. At some point, regulation is almost inevitable.

“The fact that the Telecommunications Act regime does apply to these networks puts a very important responsibility onto Telecommunications Commissioner Ross Patterson. He will need to guarantee that any emerging issues around price- or non-price terms and conditions can be dealt with through the Act’s processes in a timely way. That will require the Commission to actively oversee the market, something we are confident they will do diligently and well.

Standards “InternetNZ was concerned that the regional model could allow for wildly different service and technical standards that would make life difficult for consumers, and for interoperability of services between different networks. The strong role set out for Crown Fibre Holdings and the Ministry of Economic Development in requiring technical and operational standards across all the networks to deliver a functional outcome are very welcome.

Backhaul “InternetNZ notes the Government is encouraged by developments in the international backhaul space, and that regional backhaul issues should be subject to further consultation. There is no point building fibre optic networks in New Zealand without ensuring that people can get high-speed access to overseas-hosted content such as YouTube. We look forward to submitting on the regional backhaul consultation when it emerges and will continue to carefully monitor the international situation,” Carter says.

ENDS

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