With the exception of 0800 numbers used by pizza chains, 111 is probably the most recollected phone number in NZ. It’s a number drummed into children from a young age, and the vast majority of us know it’s the number to call if you need urgent assistance from the police, fire service, or an ambulance. Around 3 million 111 calls are made each year in New Zealand.

One thing many people are unaware of however, is that the 111 service is totally independent of all three emergency services. A call to 111 isn’t answered directly by an emergency services call taker, it is actually answered by a Telecom employee at a Telecom call centre (known as an ICAP – Initial Call Answering Platform) in either Christchurch or Wellington who will establish the service you are after and then forward the call on to the service you have requested – police, fire or ambulance. The call will then be answered by an emergency services call taker in one of six communications centres across New Zealand – three combined Police and Fire communications centres in Christchurch, Wellington and Auckland if you have requested police or fire, or three standalone ambulance communications centres that are also in Christchurch, Wellington or Auckland if you have requested an ambulance. Job details will be collected by en emergency services call taker who will action your call. In this modern era the communications centres in all three cities are linked together, meaning that your call could easily be answered by a call taker in another city if a major incident is occurring that results in large numbers of simultaneous calls swamping the nearest communications centre.

Telecom have provided the 111 service since it’s inception in the 1950’s, and up until the late 1990’s were the logical provider of such a service since they were the only provider of Public Switched Telephone Network (PSTN)landline phone services in the country. Mobile phones were also still still in their infancy, and Telecom were the largest mobile provider in the country. The last decade has seen significant change in the marketplace – we now have Telecom, Vodafone and 2degrees providing mobile services (along with a number of resellers piggy backing on the Telecom and Vodafone networks), and 65% of 111 calls now made from mobile phones. A large number of other telecommunications companies and internet service providers (ISP’s) also now provide phone services, either over copper phone lines in the same way Telecom have historically done, or using Voice over Internet Protocol (VoIP) carried over the internet.

In light of several recent issues on the Telecom network that may have resulted in the inability for some 111 calls to be be connected, the Ministry of Economic Development (MED) commissioned a discussion document looking at the background of the 111 service and whether changes should be made to the service going forward. Public submissions are open, and this is your chance to have a say on how the 111 service is funded and operates.

I’ll briefly touch on a few issues that are worthy of some thought – many are discussed in the MED discussion document, but I thought I’d add a little food for thought for those who may want to send in a submission.

• With a growing number of 111 calls being made from mobile phones, should mobile carriers and emergency services communications centres upgrade their networks to support the ability to track the location of mobile phones while the call is in progress? This service (E911) has been in place in the USA for some time  and requires all phones sold to have a GPS chipset in them and support the E911 service. While we may think such a feature is great to have, who should actually fund the upgrades to support it? Many low end GSM phones don’t support such a feature – would the price of mobile phones increase if such a feature was mandated? Network based triangulation services can also be used to locate a device, but once again this still requires upgrades to support the capability.
• As we move into a VoIP word, a phone is no longer tied by a physical address, and a 111 call could be made from anywhere in the world where an internet connection is available. How do emergency services go about tracking the location of a 111 call if the situation is one of life and death? Some people have chosen to replace their landline phones with VoIP services such as Skype that doesn’t support 111 calls. Should clear warnings have to be displayed by services that don’t support the ability to call 111? The public perception is still that any phone can be used to call 111, in reality this is no longer the case.
• Some providers in New Zealand (2talk being a key example) don’t provide customer address details to the TESA database. This database contains phone numbers and address details and allows emergency services to respond to the address of a 111 non speech or call hangup made from a landline or VoIP phone by doing a reverse lookup on the CallerID. If you call 111 from a phone provided by a provider that doesn’t provide details to the TESA database, emergency services and the 111 call taker will have no idea of your location, and will be unable to respond without the caller providing address details - something that may not be possible in some circumstances. Like the issue above, should providers who don’t supply details for the TESA database be required to clearly warn end users that calling 111 is not supported? Should providers who don’t support 111 calling be required to supply stickers that are required to be fitted to all phones warning that 111 calls are not supported?
• Should Telecom still run the 111 ICAP call centres? These costs approximately $4 million per year to run, and are funded primarily by an interconnect charge each time a 111 call is made. While the 111 service is free for end users, your phone provider is ultimately paying $2.36 for your 111 call. Should 111 be funded through a user pays interconnect fees when 111 is called (as it is now), or funded directly (and possibly even run by) the government? Should running these call centres be put out to tender?
• Currently every 111 call, even those from outside the Telecom network (ie a 111 call from a Vodafone mobile) interconnects with the Telecom network, typically at the closest Telecom point of presence (POP) that offers voice interconnection, of which there are 29 nationwide. The call is then carried within the Telecom network to in the 111 ICAP call centres in Wellington or Christchurch.. As we move forward into a competitive marketplace with a growing number of providers offering phone services, the discussion needs be occur as to whether this is the most logical way of doing things. Up until a few years ago every phone call, even if it didn’t involve a Telecom customer, had to transit the Telecom PSTN network to be connected to the other network. This no longer occurs, with multiple carriers now having their own interconnections, and as we move towards a VoIP world interconnections directly between other providers will become the norm. Should a 111 call from Vodafone (for example) have to interconnect with the Telecom network, or would it be more logical for a provider such as Vodafone to provide their own direct interconnects with the 111 ICAP call centre? With Telecom committed to replacement of it’s legacy PSTN network and a move to VoIP by 2020, is being responsible for the entire 111 system an obligation that Telecom still want to be burdened with?
• With VoIP now becoming mainstream through product offerings such as WxC’s VFX and Orcon Genius many people have a dialtone generated by their residential gateway (RGW) or an analogue telephone adapter (ATA) on their premises. In the PSTN world the dialtone was generated by the legacy Telecom NEAX exchanges that form the core of the PSTN network. These exchanges have both battery backup and generators to ensure they can operate for extended periods of time during is a power cut, but even with the NEAX phone exchanges still functioning after the Christchurch earthquakes, many people found themselves unable to make calls because their cordless phone had no power to operate – non powered analogue phones continued to work fine. As we move into a fibre world with the ultra fast broadband (UFB) rollout the vast majority of homes will find their phone connection moves to a VoIP one, and the optical network terminal (ONT) and/or RGW or ATA within their home require power to provide internet and phone services. Should the installation of a battery backup or uninterrupted power supply (UPS) be mandatory as part of every UFB install? If so, who’s responsibility should it be to maintain this and swap out the batteries every few years to ensure that it stays operational? Even with a UPS or battery backup, the service may still only be able to maintained for upwards of 12 hours. Telecom’s NEAX exchanges and Chorus cabinets can be kept running indefinitely on backup power. Should a large scale event resulting in a loss of power for several days occur in a UFB world, people will find themselves unable to make 111 calls from their landline phone and may struggle to charge their mobile phone. No matter what approach is taken, going forward we’re ultimately going to have a network delivering primary voice lines with uptime figures that won’t necessarily be able to match the 50 year old technology it’s replacing. Power is the Archillies’ heel of our next generation networks.

Telecom have done a magnificent job over the years building and maintaining a robust PSTN network that is still world class. The ability to make an emergency call is a core requirement of any phone network, and failures aren’t just an inconvenience, they could make the difference between life and death. With the split of Telecom into retail and network arms the “Telecom” as we used to know it no longer exists, and it’s a good time to review 111 calling as we enter an era of significant change in the New Zealand telecommunications sector.

The MED have a copy of their consultation document document  and details for sending in a submission on their website: http://www.med.govt.nz/sectors-industries/technology-communication/communications/emergency-call-services/emergency-call-services-111-review

One of the biggest issues affecting Digital Subscriber Line (DSL) broadband is the quality of the copper wiring it is delivered over. The quality of wiring hasn’t caused significant impact in the past with slower first generation ADSL services, but as Chorus along with other providers such as Vodafone, Orcon, and TelstraClear upgrade their networks to support faster ADSL2+ and VDSL2 speeds, wiring quality becomes a major issue.

Overall the quality of the wiring within the Chorus network is typically good, however poor quality wiring in your home or workplace is common, and has the ability to have significant impact on both speeds and the stability of your connection. Many homes have poorly installed wiring or jackpoints, or jackpoints that have suffered corrosion damage over time due to the damp climate in parts of New Zealand. If your home wiring has not been upgraded since the late 1990’s it probably uses older 3 wire jackpoints (with a master and extension unit) which also have the ability that play havoc with DSL signals. Many people have simply blamed their ISP for their speed or stability issues in the past, without understanding that their issues could well be as a result of wiring within the premises.

The SDP is the result of many hours of work spent developing a device that can be installed in a home or business to improve broadband speeds without having to replace all existing wiring within the premises to comply with modern wiring guidelines. The SDP also future proofs the house for a move to Voice Over Internet Protocol (VoIP) based phone services and can also simplify the setup of a home network to PC’s or network devices located in other locations around the house. To really understand why the SDP is so important however, we firstly need to look at the current state of broadband infrastructure in New Zealand.

Right now Chorus are past the halfway mark deploying a Fibre To The Node (FTTN) network in New Zealand consisting of 3600 new roadside cabinets. Previously most DSL based broadband services were provided from phone exchanges that may have been some distance from your home or business. Because the DSL signal degrades the further it has to travel, the further you were located from an exchange, the slower your broadband would be. These new roadside cabinets contain fibre optic cable to link them to the existing exchange, and a piece of equipment known as an Intelligent Service Access Manager (ISAM) or Digital Subscriber Line Access Multiplexer (DSLAM) to deliver your broadband connection directly from the cabinet over the existing copper wiring to your house. By the end of 2011 when this project is complete approximately 80% of New Zealanders will be located within approximately 2km of a phone exchange or roadside cabinet and will have access to broadband connections with a minimum speed of 10Mbps – the vast majority however will find that their speeds are closer to 18Mbps with current ADSL2+ technology, and with the upcoming launch of the VDSL2 technology many could see download speeds in the vicinity of 50Mbps over their existing copper wiring.

While Chorus are upgrading their network, in many cases the broadband speed bottleneck will now be the wiring in your home or business. DSL technologies use frequencies over your copper phone line that are much higher than those used by your normal voice services. To ensure that voice and DSL services can coexist on the same line and do not interfere with each other, filter(s) are required to be installed in your premises to split the two. There are two options available – a professionally installed master filter, or DIY plug in filters that are required for every phone in the home, as as well as other devices plugged into your phone line such as your Sky TV box, fax machine or medical alarm.

Most people choose to use plug in filters because it enables a them to perform a self install of their modem, and avoid the cost of a visit by a technician. Plug in filters are not a the perfect solution however – not only are they cumbersome, but they also don’t eliminate issues such as reflections on the line, nor can they compensate for poor quality wiring, connectors or jackpoints. As I mentioned earlier, damaged wiring or jackpoints, or even the use of older 3 wire jackpoints will cause a significant impact on DSL performance. Installing more than 4 plug in filters on a line can also cause the DSL signal to be degraded. These all have the ability to become a significant bottleneck with faster ADSL2+ and VDSL services which will suffer significant speed degradation or stability issues from any interference caused by your internal wiring.

Poor quality internal house wiring is an issue that is widely known, and is an issue that the industry has strugged to solve. Despite Telecom releasing guidelines in the late 90’s advising that a structured wiring solution be installed in all new homes, many new homes still don’t have one. Around the same time Telecom also advised of a move away from wiring phone jackpoints in a daisy chain configuration, but many electricians and phone installers still continue to this day to install jackpoints in this way. The daisy chain configuration involves connecting jackpoints in a “looped” configuration from one to the other, and causes impedance fluctuations or reflections on the line which in turn impacts on DSL signals, and ultimately broadband speeds.

A professionally installed master filter will split your broadband and voice signals as close as possible to where the cabling enters your house (a location known as the ETP or External Termination Point) and will give you a dedicated jackpoint to plug your DSL modem into. Because the DSL and voice signals are isolated It means that poor quality wiring can’t interfere with the DSL connection and in most cases will deliver faster speeds than what can be obtained using plug in filters. While it’s not possible to put an exact figure on this, for somebody who is connected to new equipment in an exchange or roadside cabinet and already gets good sync speeds  (ie in the 12000kbps – 15000kbps range) it could possibly deliver an increase of around 10%. Somebody connected to a new cabinet or exchange who has very poor quality house wiring could see speed increases of several hundred percent. A master filter is certainly recommend for anybody who uses DSL based broadband, and for VDSL services a professionally installed master filter is essential as existing ADSL plug in filters are unsuitable and can’t be used. Uptake of master filters has been low, in part because many people are unwilling to pay the costs associated with installation.

So on to the SDP. What exactly does it look like?

The SDP in it’s basic form is a very simple patch panel. The faceplate contains a number of RJ45 keystones and inside the unit there is a VDSL rated master splitter and a terminal block for interfacing with a house alarm. Ports 5 and 6 can be fitted and connected to RJ45 faceplates elsewhere in the house using cat5e or cat6 cable for connecting other PC’s or devices to your router to form a home network.

Your incoming phoneline is terminated to a VDSL rated master filter that is located inside the unit and your modem is now connected to port 1 of the SDP. Port 2 is the voice output from the VDSL filter, while port 3 is connected internally to existing phone jackpoints in your house. Port 4 is connected to port 3 and allows you to plug a phone in directly to the SDP. The PSTN jumper clip (shown in the image above) bridges your incoming voice services to your internal house wiring. Removing this and plugging a phone directly into port 2 allows a simple isolation test to be performed to establish very quickly check if a fault (such as no dialtone) is an internal wiring fault or is located between the premises and the cabinet or exchange.

The following images show a typical SDP installation:

The SDP itself is unpowered and requires no power to operate. Under development however is a battery backup module that allows home networking equipment to stay powered during a power cut. This is particularly important as we move into the fibre world with Fibre To The Home (FTTH) deployments and move towards using VoIP as a primary voice line replacement.  With FTTH all voice services use VoIP as analogue phone services can’t be carried over fibre optic cabling. The loss of power to your home will mean a loss of all phone and internet services, as unlike Telecom’s existing copper network which has batteries and generators at both cabinets and exchanges to maintain power during an outage, the equipment in your house can only be powered by your own electricity. The battery backup will allow you to keep your equipment powered so phone calls can still be made during a power cut.

It’s worth noting that while a lot of media attention has focussed on the battery backup issue and the potential inability of people to contact emergency services during a power cut if they use VoIP services, that a large number of New Zealand homes currently only use cordless phones that are rendered unusable in a power cut anyway. People should  ensure that they have at least one corded phone in their house that will allow them to make calls during a power cut.

There are two primary methods of connecting a SDP – one with a phone service delivered over POTS (as is the case for most people now), and one where a VoIP service is used as a primary voice line. The following example shows a typical SDP installation where a customer has voice (POTS) and DSL services provided over copper.

One of the great things about the SDP is that it allows a very simple transition process to a VoIP based phone service. Right now a large number people have installed their own analogue telephone adapter (ATA) at home and use VoIP services such as VFX or 2talk for their phone line. Many have also opted for Vodafone Home Phone Wireless boxes which use Vodafone’s mobile network. In both cases many people choose to simply plug a phone into the port on their ATA or Home Phone Wireless box because hooking this up to their existing house wiring is a process that is beyond many people’s capabilities. With the SDP, delivering a dial tone to any existing jackpoint in your home is a simple two step process – simply remove the PSTN clip and run a cable from your ATA or At Home box into port 3. Every jackpoint in your home that is connected to the SDP will now be connected to the ATA.

The SDP isn’t magical but it’s certainly a very cool little unit. Poor internal wiring is an issue that affects a large number of DSL customers, many of whom are totally oblivious to the issues and put up with speed related issues and problems such as frequent disconnections that can be directly attributed to poor internal wiring. To deliver optimum performance on ADSL2+, users should really have a central splitter installed, and for VDSL this will be mandatory. The SDP becomes a logical replacement for a master filter installation – rather than just install a basic filter the SDP fills a void that exists where people don’t want to spend significant amounts of money to replace wiring in their house, but want a cost effective way to be able to take advantage of faster broadband speeds and also future proof themselves for the arrival of fibre and VoIP services.

It is not a replacement for a proper structured cabling solution such as those recommended by the TCF, and if you are building a new home or upgrading your home then a structured cabling system should be seen as a key requirement.

If you’re wondering where you can sign up for one you’ll just have to wait a little while yet still. Chorus will be responsible for the installation but will not take orders directly - you will be able to request an installation through your ISP. The launch is not far away, and I’m sure we will see plenty of publicity surrounding the rollout when it does happen.

Those who have followed by blog posts over the years will have seen numerous posts from me in regards to home structured cabling solutions. I have installed cabling in a number of new homes over the past few years as well as having retrofitted a number of older homes. I've also written some DIY installation guides that I hope to find time to update in the near future as there have been some changes recently in the recommendations for home cabling.

In early 2009 the Telecommunications Carriers Forum (TCF) established a working party to prepare a Code of Practice for Residential and Small Office Premise Wiring. The project goal was to develop a code that could be used as a benchmark for all installers who are installing or retrofitting cabling solutions in a residential or small business situation. Telecom had created PTC106 in the late 90's to deal with the planned growth of home networks, and this standard has been largely developed on that, with updates to reflect changes that have occurred in the past decade, particularly with recent and planned fibre to the home (FTTH) deployments.

By law in New Zealand there is no requirement for new homes to have any form of structured cabling solution. In my opinion this should be a legal requirement, in the same way that insulation and double glazing are now mandatory. We are in the early stages of a Government funded FTTH rollout to the majority of homes in New Zealand - what most people don't realise is that it's no good having a fibre connection to your house without suitable wiring inside your house. One could compare this to running electricity to a home 75 years ago that had no existing power cabling, switches or lights!

While the Government has talked about the costs of deploying fibre to your doorstep, nobody has yet talked about the cost of actually connecting your house to this fibre. The costs of retrofitting an existing home to take full advantage of the fibre connection to your door, as well as installation of the hardware required for fibre could easily run from a minimum of $1000 upwards, with costs probably approaching $2000 - $3000 if new cabling is run to every room back to a new patch panel. The costs of installing cable in a brand new home that is under construction is minimal compared to the costs of attempting to retrofit a house afterwards. In my opinion Minister's should be taken to task and to explain why there are no minimum requirements, because right now there are new houses being built with phone cabling being installed in ways that are incapable of even delivering optimal ADSL speeds, let along being able to easily support advanced services in the future.

The new TCF guidelines future proof your house for the introduction of fibre, and also for the introduction of Telecom's Next Generation Voice services that are being launched this year. Most people are probably unaware that by the end of 2010 Telecom are required by it's deed of undertaking with the Government to have 17,000 lines switched to a Next Generation VoIP platform for all voice calls. This will mean the installation of a residential gateway (RGW) on the premises that will deliver VoIP and internet to your house over an EUBA ADSL2+ internet connection, with a built in ATA allowing existing phones to connect to a VoIP service for your voice services.

These new guidelines recommend a minimum of 2 x RJ45 jack points and 2 x F type coax connections in every room in the house, and 4 x F type coax connections in the lounge or location where the primary TV will be located. A minimum of tri-shield RG6 coax cable is to be used so it meets the requirements of the Freeview|HD UHF service, TelstraClear's HFC network in Wellington, Kapiti and Christchurch, and that of Sky TV.

The home distributor serves as a central point where an ADSL modem, router and patch panel is located. It also serves as the home for a Optical Network Terminal (ONT) when fibre eventually makes it to your home. The ONT converts the optical signals an an electrical form and will connect via an Ethernet cable to a router that will provide internet to your home. Photos showing a typical home distributor (as being deployed by WxC in existing FTTH installations) can be viewed here.

If you are building a new home or involved in alterations to an existing home then this new guide should be essential reading. If you are in the process of building or planning to build a new home the installation of suitable cabling to future proof yourself is essential.

All the information you need to know is available on the TCF website

www.tcf.org.nz/premwiring 

        

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I'm not the only person asking myself this question today after the Commerce Commission backtracked on their earlier decision and recommended regulation of Mobile Termination Rates (MTRs) in New Zealand. This is an about face from their February decision that recommended against regulation, and instead that a voluntary undertaking by Vodafone and Telecom be accepted. A final decision will be made by the Minister, Steven Joyce, in early June.

If the decision to regulate is made by the Minister the first question that has to be asked is how long it will take before regulation will take affect. The current MTAS investigation has taken 18 months to reach it's current point, and there are certainly plenty of people in the industry who now believe it could be the very least another 12 months before regulation takes effect. If this was the case it would occur before the expiry of Vodafone and Telecom's existing agreements with the Crown. Trying to introduce regulated prices before then runs the risk of legal action from Vodafone and Telecom - a voluntary agreement on the other hand won't suffer the same fate.

It is also worth remembering that the Commission's preferred outcome was voluntary industry undertakings rather than regulation. It's not hard to take the view reading through documents between the Commission, Vodafone, Telecom and 2degrees in late 2009 that the Commission set strict guidelines on what would be acceptable in these voluntary undertakings. This undertaking was formed and revised many times to meet those guidelines. It seems since then the goalposts have now moved.

A 12 month delay will possibly generate upwards of $100 - $150 million in extra profit between Vodafone and Telecom, a figure based upon estimates of what the voluntary offer from Vodafone and Telecom will cost them. The cynic in me can't help but think such a delay only benefits two parties - Vodafone and Telecom. It certainly does not benefit the end user, or 2degrees. Have the Commerce Commission in effect been railroaded without realising the implications of their change of mind?

So why could regulation take so long? First of all we have to establish the actual reason for the MTAS investigation. Despite popular opinion being that it was launched to force the retail costs of mobile calling down, this was never a focus of the investigation.

In November 2008 the Commerce Commission commenced its investigation into whether the mobile termination access services should be regulated, due to concerns that a combination of mobile termination rates that are significantly above cost, with significant on-net discounting, creates a barrier to competition in the mobile market. The Commission's investigation did not look at the prices that consumers directly pay for mobile services.

Reading through a number of documents from the Commission it is very clear that they had two key goals in mind

• To establish a true cost for MTR rates. Due to voluntary undertakings accepted by the previous Labour Government, concern was raised that our MTR rates were well in excess of the true cost and significantly higher than Australia. Compared to OECD averages and average long term exchange rates our MTR rates were about average however regulators in Europe were aggressively targeting MTRs with the goal of lowering them significantly.

• To consider whether on-net calling deals are anti-competitive. Debate raged on about whether higher MTRs encouraged an environment where cheaper on-net calling became the norm. The argument is that this forms a barrier to the entry of smaller players into the marketplace, however there are arguments against this including setting asymmetrical MTRs for new networks. This allows calls off-net to be charged at a different rate to the inbound MTR revenue received by an operator, resulting in a net gain to them. 2degrees have an asymmetrical agreement in New Zealand.

In light of the announcement yesterday many people see Vodafone as having scored an own goal with the launch of their Talk plan offering on net calling at a cheaper rate than they were willing to offer other providers to terminate traffic on their own network. I don't believe this for one minute - there are some exceptionally good arguments against this and Vodafone's pricing is no different to many other deals that already exist in the marketplace, and in the rest of the world. Cheap on-net calling has become very common in the global mobile market in recent years - in Australia new plans from 3, Vodafone and Virgin all offer unlimited on-net calls. In Europe it's very common to find operators offering large numbers of free on-net minutes with every prepay topup, or offer free on-net weekend or evening calling. None of this is new. Even Taylor Reynolds, the OECD's top telecommunications analyst, was asked about Vodafone's plan when he visited New Zealand last month. His response was one of surprise that we were even paying for on-net calls at all because a lot of OECD operators give users free on-net calling! Turkey have imposed regulation to stop this, with TurkCell being unable to offer on-net calling rates at less than their inbound MTR rate. Such a regulation here would mean that calling plans such as Best Mate, Favourites, TalkZone, and capped calling between Telecom landlines and mobiles would all be illegal. I can only assume that organisations in support of the Commission's decision also support retail price controls and want to see plans such as these made illegal.

A lot has changed in the global marketplace in recent months. In April UK telco regulator Ofcom announced significant MTR rate cuts from the current rate of 4.3p per minute to 0.5p per minute by 2015. Such a fundamental move by Ofcom possibly caught the Commerce Commission off guard, and one has to ask the tough question about the Commission's true reasons for changing their mind. Could the real reason be that  the investigation has dragged on for so long, the goalposts have moved numerous times, and the voluntary undertakings that they helped shape are now seen as being significantly higher than new regulatory proposals from EU regulators be the real cause of this about face?

Getting to where we are now has taken 18 month. In that time we're seen fundamental changes in the NZ marketplace with the extremely successful launch of 2degrees. We are finally seeing prices fall as we now have competition in the marketplace. Are we facing the likelihood of another 12 - 18 months of delays while lawyers, analysts, and regulators battle it out deciding which pricing model best suits New Zealand? Or are we better off accepting voluntary undertakings from the industry, that were by large shaped by the Commission, and getting on with things?

• 
  300 Nights and Weekends minutes to any mobile or network
  
  


• 
  300 TXT messages to any network
  
  


• 
  20 Daytime minutes to any network
  
  

• 
  Your Time 100 - 100 mins to any network or landline for $14.95 = 15c per minute
  
  


• 
  Your Time 300 - 300 mins to any network or landline for $29.95 = 10c per minute
  
  


• 
  Your Time 200 - 200 mins to another Vodafone mobile for $11.95 = 6c per minute
  
  

In November 2008 the Commerce Commission began an investigation into Mobile Termination Access Services (MTAS), also known as Mobile Termination Rates (MTR) - the wholesale prices mobile providers charge each other to terminate calls on their networks. The goal was to assess "whether the mobile termination access services should be regulated, due to concerns that a combination of mobile termination rates that are significantly above cost, with significant on-net discounting, creates a barrier to competition in the mobile market"

I've had a great interest in the MTAS investigation and have blogged about it on numerous occasions. Last week I wrote a slightly tongue in cheek blog post on Vodafone's newly released Talk plan suggesting that Vodafone now welcomed regulation of rates and it is with some irony that on Monday both the Commerce Commission and Minister for Communications and Information Technology, Steven Joyce, announced that they were investigating this new plan to see whether this should be factor in determining the outcome of his decision to either accept a voluntary industry agreed pricing model, or force Government regulation upon the industry.

Despite my tongue in cheek comments last week my stance on the matter is one of impartiality. I agree that mobile calling costs in New Zealand are too high, however I realise that MTR costs are not the cause of high costs in New Zealand. A lack of competition in the marketplace is the sole cause of high rates, competition from 2degrees and virtual network operators such as Slingshot, TelstraClear and Compass has forced retail prices down. The exception has been regular calling prices for Prepaid users on Vodafone and Telecom which are stick stuck in the last decade at 89c per minute.

Revenue for mobile operators is a two way system. Revenue is gained from mobile users who make calls, send text messages, use data or access STK (SIM toolkit) based network services. Revenue is also gained from inbound termination rates that are in essence "earned" by that user, and the network as a whole, when inbound calls and text messages are sent to a user of the network. The common argument is that if revenue is lost from one part of the business it will simply have to be recovered from another part of the business, an economic principle known as the "waterbed effect".

The real world reality is that terminating traffic on any telecommunications network, whether it be a mobile network or a fixed line network has an inherent cost, whether this figure is small or large becomes a moot point, the key point is that a cost is incurred. Carriers have two ways of recovering this revenue, by charging the carrier who is terminating traffic on their network using the Calling Party Pays (CPP) billing model or the Receiving Party Pays (RPP) model, also known as Mobile Party Pays (MPP) in some countries. CPP means that the network charges the network terminating the traffic their negotiated MTR cost to terminate traffic and is the common model used by mobile carriers in most parts of the world. RPP/MPP means that the network terminating the traffic pays no cost but the receiving party is charged by the carrier when they answer the call. This is how an 0800 number works in New Zealand and is also how mobile users are typically charged in North America where they normally pay a flat fee per month for incoming calls or have these incoming calls deducted from their included minutes.

In recent years the MTR debate has become a hot topic for regulators around the world as they have had to try and tighten their grip on what they see as a stranglehold on customers that is artificially keeping the prices of calling mobile phones from landlines and mobile calls between networks much higher than they should be. What is clear is that while many see MTRs as the smoking gun, and that by cutting MTRS they will cut the price of calls and text messages, nobody is able to agree on exactly what constitutes a fair price for termination, or even how much terminating a call on a mobile network really does cost. What is clear is that as MTRs have been forced down by European Regulators prices have not necessarily followed suit , and in many cases have increased as operators try to recover lost revenue [1].

If McBiddle's (a global fast food chain focussing on burgers) were regulated forced by a Government body to slash the price of their McBiddle Deluxe burger by 50% it's inevitable that these costs would have to be reclaimed from elsewhere, whether by cost cutting, charging a fee to dine in, cutting free drink refills or making the McBiddle burger only available as part of a combo meal. The mobile market is no different.

In 2005 the New Zealand Commerce Commission took the opinion that the waterbed existed when in it's final report into regulation of MTAS it wrote:

A regulated fall in mobile termination rates is likely to lead to some rise in the price of mobile
services (mobile subscription and mobile-to-mobile calls), relative to the scenario of no
regulation, or alternatively, lesser price reductions than otherwise. To the extent that
regulation leads to a relative increase in mobile prices, and a reduction in mobile
subscription levels, a range of determinants may be generated. Accordingly, this effect has
been factored into the cost-benefit analysis

So what annoyed the the Minister and the Commission yesterday?

• 200 minutes of calling to any other Vodafone mobile or to any landline phone in New Zealand (on any network) for $12 per month

So what's wrong with that you might ask? Well I raised the issue last week that if those whole 200 minutes were used to call between Vodafone mobiles then it would represent an on-net net MTR rate that is less than Vodafone are willing to offer other carriers to terminate voice traffic. As many people have pointed out not everybody will use all of these minutes or even use them all to call another on-net mobile phone. It is expected that calls to landline phones will make up a significant percentage of these 200 minutes, and Vodafone will be paying approximately 2c per minute to terminate these calls with a fixed line provider. If these 200 minutes were split evenly between mobiles and landlines the net cost of calling another Vodafone mobile would be 12c per minute which is around the same rate that Vodafone and Telecom have proposed to the Minister.

It's worth remembering that deals like this are nothing new. Vodafone have already offered a Your Time 200 You Choose addon for a number of years that offers 200 mins of on-net only calling for $11.95 per month. Telecom offer business customers the ability to make calls to any Telecom mobile phone and speak for up to an hour for $1 + GST. Telecom Favourites also offers the ability to nominate mobile and landline numbers that can be called as much as you want for a flat rate of $6 per number, and likewise Vodafone also offer Best Mate which allows unlimited calling to another on-net Vodafone mobile. Both networks have also had SMS plans that deliver messages both on and off net for significantly less than their current MTR rates.

Cheap on-net calls have become a feature in recent times everywhere in the world. In Australia Vodafone, Virgin and Three all now offer free on net calling and text messaging as a standard feature of many new plans. Vodafone, Optus and Three also offer unlimited plans for $99 offering unlimited calling to landlines and mobile phones on any network in Australia for $99 per month with MTR costs of approximately 9c per minute for mobile calls and fixed price termination rates for calls to landlines.

So the question has to be asked : What issues can the Commission and Minister have with Vodafone's new plan? it does not represent a significant move away from anything that already exists in the marketplace.

And the tougher question: Should the Minister accept voluntary undertakings from the industry or should he regulate?

Those pushing for regulation have to realise that the Minister sending the discussion back to the Commerce Commission could easily face another 18 months worth of delays before any regulation occurs. Are we better to accept the offer that is on the table that will take effect from this October and deliver instant MTR reductions and regular drops down to 6c per minute (billed per second) in 2014 or should we start the entire 18 month long MTAS process again, with no clearcut agenda that will force the Commissioners to accept regulation, while MTR rates stay at at their present levels?

Nobody can say it's not a challenging time ahead for Steven Joyce!

[1] Mobile Regulation and the "waterbed effect" Genakos & Valletti Jan 2010 http://www.voxeu.org/index.php?q=node/4448

Vodafone today launched a new mobile add-on plan into the marketplace. Offering 200 minutes of calls to other Vodafone mobiles or landlines in New Zealand at any time of the day or night for $12 it is arguably the best value mobile add-on in New Zealand. The catch is that it's only available to Prepay users - if you're a On Account user helping prop up Vodafone's ARPU you've just been given the big finger. Vodafone do assure us this plan is coming "soon" to On Account plans, but right now we're all stuck paying more than a pimply teenager who had absolutely no brand loyalty.

$12 for 200 minutes equates to 6c per minute for a call to any other on net Vodafone mobile or landline. That's fantastic value in anybody's terms and is the cheapest available calling rate available on any mobile network in NZ for calling another mobile or landline (excluding deals such as Best Mate, TalkZone or Favorites that only allow calling to nominated numbers. The launch of 2degrees in New Zealand has finally broken the mobile duopoly that existed in New Zealand and finally lead to some significant competition for the customers hard earned dollar.

I've blogged on numerous occasions about the Commerce Commission led MTAS (Mobile Termination Access Services) investigation that has been in place for approximately 18 months. This purpose of this investigation was to look at mobile termination rates (MTRs) - the rates that mobile operators charge each other for terminating voice calls and SMS messages on their network. These rates have been falling consistently for the last 10 or so years from approximately 45c per minute down to approximately 18c per minute now. Many people believe that high MTR costs cause inflated retail mobile calling rates, a conclusion that I neither agree with or have seen compelling evidence to agree with. What is clear however is that rate should be set to reflect the cost of terminating an inbound voice call on the network, it should not be used as a revenue source for operators. International benchmarking shows that our current MTR costs are not excessive but  globally pressure is being put on mobile operators by regulators to force these MTR costs down, primarily because they believe current charges are inflated and do not reflect the true cost of terminating a call in this day in age.

In early 2009 the Commerce Commission welcomed dialogue from all interested parties and in June 2009 issued a draft recommendation that recommended prices should be cut significantly. Needless to say this didn't go down well with either Telecom or Vodafone who were intent on maintaining the status quo. Because only two mobile operators existed in the marketplace the charge became almost irrelevant for calls and SMS messages between Vodafone and Telecom - while they paid the other provider money when a call made off network, they received money when a call was terminated on their network. While there was a marginal imbalance in voice termination rates, SMS termination rates were very equal for both networks which meant very little money actually changed hands at the end of the day. This cosy duopoly upset new entrant 2degrees, who aggressively campaigned for MTR costs to be lowered significantly and also pushed for a move away from the Calling Party Pays (CPP) pricing model to Bill and Keep (BAK) as a replacement pricing model. BAK would mean no money would ever be paid from one operator to another, and that mobile operators would in effect receive no money for terminating a call on their network. This model is used in the USA and typically means that a mobile user pays for incoming calls (normally out of included minutes) as a way of the mobile provider recovering call termination revenue. 2degrees funded what I consider to be a dirty tricks campaign known as Drop The Rate, Mate! that mislead people into thinking that MTR costs were the root cause of high mobile calling costs and the lack of competition in NZ, however the hugely successful launch of 2degrees into the marketplace with aggressive pricing shows that the existing regulatory environment was not broken - we were being ripped off as mobile users because of a lack of competition in the marketplace. Despite MTR costs having fallen by well over 50% in recent years, retail pricing has not followed suit with a Vodafone or Telecom prepaid mobile user still paying similar rates now to what they were three years ago.

In the following months plenty of debate took place and numerous submissions were made by all three networks putting forward their cases. The Commission indicated it would prefer an industry lead solution rather than being forced to regulate the market and in December 2009 both Vodafone and Telecom submitted final submissions to the Commerce Commission pledging to reduce MTR costs for voice calls to 12c per minute (billed per second) from October 2010 and gradually reducing to 6c per minute (billed per second) by 2014. 2degrees threw all of their toys out of the cot believing the Commerce Commission were ignoring them, and withdrew all offers they had previously put on the table.

In February 2010 the Commission delivered it's final report to the Minister for Communications and Information Technology, Steven Joyce. This report recommended that the Minister should accept the submissions from both Telecom and Vodafone rather than regulating the market, but the decision was not without controversy, only two of the three Commissioners involved in the investigation agreed with this approach, with Commissioner Anita Mazzoleni recommending that regulation of the market take place.

So now back to todays news..Vodafone have now told us loud and clear that  6c per minute is now sufficient revenue for an on net call from one Vodafone customer to another Vodafone customer. One has to now ask the question - why do Vodafone believe that the rate for any other mobile network operator to terminate a call on the Vodafone network should exceed 6c per minute from today? If that 6c was split 50/50 between the revenue cost of the A party making the call and B party answering the call then that MTR cost should not exceed 3c per minute. What possible argument could Vodafone have for charging another network operator more to terminate a call on the Vodafone network than they "charge" themselves?

The decision  to either accept the proposals from Vodafone and Telecom currently sits with Minister Joyce, who has the decision as to whether he should accept voluntary proposals from both networks or with the full force of the law regulate MTR pricing. Vodafone have now very openly come out and made a mockery of many of their claims that MTR costs can't drop to 6c until 2014. I'm no fan of regulation but if I were Minister Joyce I'd calling Vodafone's bluff and  recommending regulation. Thumbing your nose at both the Commission and Minister like Vodafone have done is not smart business.

*= my opinion of what Vodafone's new plan represents

I had the opportunity yesterday of attending a Telecom Exchange tour hosted by Chorus & Telecom Wholesale. This included a visit to the Courtenay Place exchange here in Wellington, a look at a current Fibre To The Home (FTTH) deployment in Grenada Village and a look at a Whisper Cabinet that are currently being deployed nationwide as part of the Fibre to the Node (FTTN) cabinetisation program. It was a very interesting day with plenty to see and talk about. Since it's something many people would never get the chance to experience I took a few photos to share with everybody.

 
COURTENAY PLACE EXCHANGE
 

Our first stop was the Courtenay Place exchange. This is one of the two major exchanges in the Wellington CBD (the other being on Featherston Street).

Phone cable entering the exchange from the outside world

 

Fibre optic cable entering the exchange 

A room full of batteries in case of a power cut

And backup generator. There are two of these required to power the exchange.

A view of the MDF (main distribution frame) in the exchange and some close up photos of the different types of connections - ranging from the old solder type to more modern punch down blocks. The frame contains a "D" side and an "E" side - one is from the outside world and the other is from the NEAX switch. A cable is patched between both sides of the frame to provide service.

The fibre section of the exchange. Fibre enters the exchange and has to be patched in much the same way copper is.

Inside of a cable trays where the fibre is joined.

The Alcatel Lucent 7302 ISAM that provides ADSL/ADSL2+ broadband services from this exchange. This is the same hardware that is deployed in the new roadside cabinets.

Orcon and TelstraClear equipment in the exchange. Both provide ULL (Unbundled Local Loop) internet and voice services from this exchange.

FTTH

Next up was a visit to Grenada Village to visit the single FTTH deployment in Wellington. This deployment uses the GPON (Gigabit Passive Optical Network) standard. This deployment is in a new subdivision that currently only has a handful of active customers and there are approximately another dozen houses under construction at present. This cabinet is what is known as a "passive cabinet" - it does not require any power to operate. It is simply splitting the incoming fibre and acting as a simple patch panel. This cabinet has capacity for up to 288 houses.

In the photo above you can see the the yellow fibre that runs from each house back to the cabinet. The fibre at the top is currently unconnected.

The optical splitter (essentially just a glass prism) splits a single optical signal across 32 outputs. There is capacity in this cabinet for 9 splitters but only a single splitter is fitted at present due to the small number of customers.

The fibre then enters the tray where it is "patched in" and connected to liven up the connection to the house.

The underground pit where fibre from the exchange is connected to the cabinet. Spare fibre is available so the installation is future proofed.

There is no copper cabling deployed in this subdivision, every household requires a ONT (Optical Network Terminal) which turns the optical signal back to an electrical signal. The ONT provides a standard Ethernet output which connects to a router to provide internet access. The phone service is VoIP (Voice over Internet Protocol) and customers have the option of using VoIP handsets in their house or connecting regular analogue phones to an ATA (analogue telephone adapter) that converts the VoIP service to analogue. At present all internet and voice services are provided through WorldxChange Communications as Telecom Retail do not currently have a residential VoIP product in the marketplace.

The picture above shows a mock-up of the hardware that is typically being fitted in the home at present. This includes a Linksys router with built in ATA that allows you to connect analogue phones. It also includes a battery backup to ensure that phone service is still available in the case of a power cut.

FTTN 

Next up was a site visit to a working Chorus FTTN cabinet. These cabinets are brand new state of the art technology that are being deployed nationwide as part of the Chorus cabinetisation rollout. Approximately 1500 have currently been deployed nationwide out of a total of 3400, with the project due for completion towards the end of 2011. ADSL (and the forthcoming VDSL) deliver faster speeds the closer the customer is to the cabinet or exchange - because the customer can't be moved closer to the exchange the solution is to build these cabinets and move the hardware closer to the customer. These cabinets are connected back to a local exchange by fibre and copper, the fibre is used for backhaul for internet services and the copper is used to provide voice service from the existing NEAX switch in the exchange

Inside of the cabinet. On the left is the Alcatel Lucent 7302 ISAM that provides ADSL/ADSL2+ broadband. On the right is the MDF (main distribution frame) which contains copper cabling from the local exchange and from each nearby house or business. These are jumpered together to provide voice and broadband service to customers.

A close up look at the ISAM and cards

These cabinets were designed and built in New Zealand by Eaton in Christchurch and each cabinet is designed to serve to up approximately 300 customers. At present they only contain Telecom equipment but the space on the left is available for other telecommunications providers or ISP's to install their own equipment if required. As mentioned above all voice services are still provided by the existing phone exchange, however it is possible that in the future Telecom could install hardware in these cabinets to deliver voice services when the NEAX switches are retired. A voice card for the existing Alcatel Lucent ISAM could easily be installed and would connect to Telecom's core network using VoIP but would convert this to analogue so that existing phones in your home or business would continue to work as normal. The cabinets have a battery bank to ensure they work even during a power cut, and can be powered by a generator if need be during a prolonged outage.

A special thanks has to go to Chorus and Telecom Wholesale for organising such a great afternoon!