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Copper debate: What's it all about?

Sarah Putt, Comms and Policy Lead at IITP. 18 September 2013, 3:48 pm
Copper debate: What's it all about?

The government is facing a storm of protest over telecommunications policy, and in particular its approach to the rollout of the Ultra Fast Broadband network.

The UFB is a signature policy for the National Government. Along with partial asset sales, this is Prime Minister John Key's legacy. Which is possibly why he has waded into the debate over copper network charges, when other PM's may have steered clear of publicly debating the nuances of Unbundled Bitstream Access (the telco term for the wholesale copper service).

Fibre cabinet.jpg

Recap

In December the Commerce Commission recommended a steep cut to wholesale copper pricing of around 25 percent. Chorus complained, the share market was spooked and a few months later the government came back with a "regulatory review discussion paper" that effectively overrules the Commission and proposes that wholesale copper prices instead be brought in line with the fibre network.

Last week, on the eve of submissions to the discussion paper, the Coalition for Fair Internet Pricing was launched. It claimed that New Zealanders would pay $600 million if the government's review becomes law and overrides the Commission's draft pricing - they're calling this a "copper tax".

The Coalition is made up of InternetNZ, TUANZ, Consumer NZ, a couple of ISPs, and consumer groups including Rural Women, the Federation of Maori Authorities and Greypower. It also includes National Party stalwart David Farrar from Kiwiblog.

Cross talk

Submissions to the government's discussion paper were due on Friday and in the past couple of days organisations and individuals have been sharing their contributions with the media. Vodafone, which didn't join the Coalition, but appears to hold similar views, says in its submission that the government should stop meddling in copper pricing.  "This intervention is quite simply a stealth copper tax on all consumers with no justification".

Chorus meanwhile has employed the services of former Telecommunications Commissioner Ross Patterson, who argues in a report with its submission that the current regulatory regime isn't fit for purpose. "The Government has made it clear that it does not intend to provide a demand side subsidy to incentivise migration to fibre. Under those circumstances the only practical option is to adjust copper pricing along the lines proposed in the (government's) Discussion Document."

Another submission to emerge is from KLR International. It is written by Tex Edwards, the founder and former employee of 2degrees, and while he remains a shareholder in the mobile company, he says the submission does not represent 2degrees' views. Edwards' submission takes issue with the quality with the work carried out by the Commission and the Ministry of Business, Innovation and Employment, and he asks why in a review of telecommunications regulation, mobile telecommunications is almost ignored.

MBIE is expected to make public all the submissions to the review on its website soon.

Content debate

The goverment is apparently concerned that if copper services are cheaper than fibre, consumers won't make the switch, and the business case for the Ultra Fast Broadband will fail. However, it's arguable that people will migrate to fibre if it is a better experience and will be prepared to pay more for the service. If great content, such as sports matches and high quality drama, is available online then consumers will fork out for fibre.

In the US, the big trend in in new media is content and "bingeing" on programmes. That is, viewing every episode of one series back-to-back. For example, in February the dominant online content company Netflix (which isn't available in NZ) funded a drama series called 'House of Cards' and screened the entire series in one day.

Of course this approach to content plays merry hell with a traditional broadcaster's business model.

In New Zealand there are concerns around the market dominance of Sky TV and whether this could be inhibiting competition in the online content market. The Commerce Commission is investigating Sky TV's contracts with ISPs, but this investigation been underway since May 2012.

TSO and 4G next

Finally, the UFB isn't the only telco hot potato, the government is also undertaking a review of the Telecommunications Service Obligation. The TSO was created when Telecom was sold, and ensures rural households pay the same as those living in urban areas for a phone service, despite it costing telcos more to deliver that service.

There is also the 700MHz spectrum auction, which becomes free with the digital switchover, and is often referred to as the '4G spectrum' because it enables the next generation of mobile broadband services. Depending on how that auction plays out, it will have a significant effect on how competitive the mobile market is for the next two decades.

I'm told the telco branch of MBIE grows has swelled in numbers, but in the end it won't be the bureaucrats and the consultants that pay the price if they're advice is ripped apart in the mainstream media - it will be the PM himself.

Sarah Putt is Communications and Policy Lead at the Institute of IT Professionals NZ. If you have a contribution to Newsline please email [email protected].


Comments

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Bob Doran 18 September 2013, 4:27 pm

Interesting that Aus is facing the same dilemma. Their new govt is going with allowing use of copper. It is so much cheaper in situations like already-wired apartment buildings and users a long way from the street. Also, even faster connections over copper to a fibre backbone are coming down the pike.


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