Firebomb Telecom

By Chris Keall

Friday 24th March 2006

Please report to the headmaster's office: Telecom failed to hit its promised target of 250,000 residential broadband accounts by the end of last year (one-third of which were supposed to be wholesale; that is, sold through internet service providers other than Xtra, such as Ihug or Slingshot).

The promise was originally made to stave off a 2003 government threat to unbundle the local loop (that is, to allow competitors to install gear at Telecom's local phone exchanges that would let them offer their own fast internet services, rather than reselling Telecom's DSL). Only around two-thirds of the wholesale residential broadband target was achieved. And that's with Telecom cheating a little by counting 128Kbit/s as broadband, when most tech companies set the bar at 256Kbit/s or higher. Now, in a 'dog ate my homework' excuse, Telecom denies ever making the promise.

Competitors are calling for local loop unbundling, or even a dismantling of Telecom into separate wholesale and retail operations.

As an Xtra subscriber with a broadband DSL account, I'm hardly Telecom's number-one fan. Often my connection seems sluggish. And at $79 a month, my mid-range plan isn't cheap by world standards.

So, on an emotional level I'd find it quite satisfying to see Theresa Gattung suffer through a forced unbundling. But it's hard to see how opening the local loop would work on a practical or legal level. And, as we'll get to shortly, it's not the technological answer either.

As Telecom's critics note, in most Western countries where the dominant state telephone company has been privatised, the local loop has been unbundled. But the key thing is that the unbundling happened at the time of privatisation. This is no small detail. The likes of Slingshot and Ihug putting their own DSL switches into Telecom's local phone exchanges would involve extremely icky questions of invasion of private property. Certainly, enough for Telecom's lawyers to stall things for years - which would be contrary to the government's aim of getting more broadband to more people as soon as possible.

Do expect threats from IT Minister David Cunliffe that will lead to Telecom giving rival ISPs a slightly better wholesale deal (as this column went to press, Telecom made its opening gambit, offering no-charge upgrades to 3.5Mbit/s, and new entry-level plans from $29.95/month. The government's initial reaction was unimpressed, with the PM herself poised to weigh in).

Doomsayers also point out we've slid down the OECD's broadband ranking. We're 22nd among the 30 most developed countries and only 10% of our homes have fast internet. But unbundling wouldn't change this dramatically.

The local loop is the lines from your suburb's local phone exchange, and most of them are bung old copper cables - crucially, the ones that reach that little bit to your front door. For residential customers who want broadband, Telecom uses DSL (digital subscriber line) technology to pump a fast internet connection down the line. But DSL can only jazz up those old copper wires so much. However much David leans on Theresa, my home's copper wires will still be suffering under my subsiding driveway, and there's no physical way around the fact I live about 3km from my local exchange (signal strength fades with distance, and with each kink and bend). In countries with higher broadband uptake, it's delivered through fibre-optic cable, with satellite options usually in the mix too.

Happily, New Zealand has a world-class selection of DSL alternatives, here and coming. This is where the real broadband solution lies.

Auckland and Wellington's CBDs already have some nice fibre options, as do some capital city suburbs, albeit via TelstraClear's pug-ugly (but cheap) solution of draping cables on top of phone lines. It would be good to see more residential fibre action, and the government is already stirring here. Cunliffe says the Broadband Challenge Fund, which is offering $24 million in first-round funding for companies wanting to build urban fibre networks (as well as in under-resourced rural areas), has already attracted 13 applicants ahead of its May 16 deadline.

Beyond cable, wireless options are proliferating. Sure, Woosh's current strategy is to nag Stephen Tindall for more pocket money. But a new crop of service providers are experimenting with a rival wireless fast internet technology called WiMax, which is being bankrolled by Intel and other tech giants. Promising WiMax trials are being held all around the world, including one at Gulf Harbour, north of Auckland, funded by CallPlus. Natcom, now trialling its Airthenet WiMax service in Auckland, is following suit.

Then there's the coming upgrade to Vodafone's 3G network, which will see HSDPA technology replace the current UMTS over the next couple of years. In English, that means much, much faster wireless internet cards for your notebook. Telecom's own T3G will also get revved up.

For rural areas, Iconz has teamed with Thai telco Shin to launch what's called the X-Terrestrial service. This involves buying a 1.2m satellite dish that you install on your roof, which provides you with a broadband connection to the world via the iPSTAR 1 satellite. You can receive a signal anywhere you can see the sky; the service costs from $99 a month; and, as with CallPlus's WiMax, there are video-call options. Give it two years, and we'll be dripping in broadband, no re-regulation required.

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