Congrats - you are subsidising Chorus shareholders by $100s of millions

Forums › New Zealand Broadband › Congrats - you are subsidising Chorus shareholders by $100s of millions

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#875409 11-Aug-2013 17:17

UFB isn't going in to 'wealthy' areas. Come to Palmy and you will see that...

The OP is just being short sighted. I don't mind paying an extra $12/month to get a $3000 fibre install done for free. Chorus have got some huge costs at the moment. The minister has made the right call.

cyril7

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#875410 11-Aug-2013 17:17

Hi, I agree, I have not seen evidence in the welly district of wealthier areas been upgraded first, infact very much the opposite.

I was up in Auckland recently for a few days work, our motel was in a relatively middle NZ areas from my perception, Chorus were digging in all over from my early morning walk observations.

Cyril

alexx

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#875419 11-Aug-2013 18:20

nickb800: As discussed above, the rollout relies on people signing up early, as the revenue received from customers in the early stage of the rollout will be 'recycled' to fund the later stages of the rollout. Poor uptake of UFB in early stages = more government funding needed to complete the rollout

Except many of us don't have the option of signing up, but are still going to be forced to pay the subsidy.

From my understanding the OP is not talking about the evils of "government funding needed to complete the rollout", he is talking about how the people on copper internet access are going to fund the UFB rollout more than other New Zealanders.

Now if it were simply a matter of raising tax revenue and using taxpayer funds to cover any shortfall, that might be a different matter - at least there cost is shared around all tax payers and we can all vote on tax issues at the next election. But here we are effectively treating copper based internet users as if they were smokers or drinkers and expecting them to pay an additional fee.

nickb800: FTTH is here for the long-haul - could be 50-100 year infrastructure. If 5-10 years of slight inequity is required at the beginning to ensure a smooth rollout, then I don't see a problem.

Nice crystal ball you've got there, and you could be right, but most predictions in the industry have some difficulty lasting 10 years let alone 50-100.

Remember when ISDN was going to be the future, and of course it would all be based around the telco switching platform? Or when the OSI protocols were going to be the be all and end all ... never might that inferior TCP/IP stack, that won't last and of course more recently how we were all going to run out of IPV4 addresses and the internet would come to a grinding halt if we didn't move quickly to IPV6.... that one might still come about, but at a much, much slower timeframe than predicted.

Should the government of the day have intervened in each of those cases, to make sure that industry and consumers did the right thing?

It's tempting to believe that as someone in the IT and Telecoms world, that what we do is far more important than other areas of the economy and that our little world needs special assistance in the way of subsidies. You'll find that just about everyone else from Nurses, to Railway workers, Bankers, Farmers... they all feel just the same. They all think that if only the government would help their group, everyone would be better off.

#include <standard.disclaimer>

nickb800

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#875426 11-Aug-2013 18:43

alexx:
nickb800: As discussed above, the rollout relies on people signing up early, as the revenue received from customers in the early stage of the rollout will be 'recycled' to fund the later stages of the rollout. Poor uptake of UFB in early stages = more government funding needed to complete the rollout

Except many of us don't have the option of signing up, but are still going to be forced to pay the subsidy.

From my understanding the OP is not talking about the evils of "government funding needed to complete the rollout", he is talking about how the people on copper internet access are going to fund the UFB rollout more than other New Zealanders.

Now if it were simply a matter of raising tax revenue and using taxpayer funds to cover any shortfall, that might be a different matter - at least there cost is shared around all tax payers and we can all vote on tax issues at the next election. But here we are effectively treating copper based internet users as if they were smokers or drinkers and expecting them to pay an additional fee.

nickb800: FTTH is here for the long-haul - could be 50-100 year infrastructure. If 5-10 years of slight inequity is required at the beginning to ensure a smooth rollout, then I don't see a problem.

Nice crystal ball you've got there, and you could be right, but most predictions in the industry have some difficulty lasting 10 years let alone 50-100.

Remember when ISDN was going to be the future, and of course it would all be based around the telco switching platform? Or when the OSI protocols were going to be the be all and end all ... never might that inferior TCP/IP stack, that won't last and of course more recently how we were all going to run out of IPV4 addresses and the internet would come to a grinding halt if we didn't move quickly to IPV6.... that one might still come about, but at a much, much slower timeframe than predicted.

Should the government of the day have intervened in each of those cases, to make sure that industry and consumers did the right thing?

It's tempting to believe that as someone in the IT and Telecoms world, that what we do is far more important than other areas of the economy and that our little world needs special assistance in the way of subsidies. You'll find that just about everyone else from Nurses, to Railway workers, Bankers, Farmers... they all feel just the same. They all think that if only the government would help their group, everyone would be better off.

It might not be a tax issue, but you can still vote on any policy issue that you like at the next election

You can't compare a change in networking protocols to civil works in (virtually) every street in the country. ISDN, TCP/IP, IPV4/6 were delivered over the same copper, in much the same way that the protocols of the future can probably be delivered alongside those of the past over Fibre.

NonprayingMantis

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#875435 11-Aug-2013 19:22

alexx:

Except many of us don't have the option of signing up, but are still going to be forced to pay the subsidy.

From my understanding the OP is not talking about the evils of "government funding needed to complete the rollout", he is talking about how the people on copper internet access are going to fund the UFB rollout more than other New Zealanders.

that's how taxes work

people with no kids still have taxes going towards schools, people who never visit auckland still funded motorways, people who are never unemployed still fund unemployment benefits to other people etc etc

PaulBags

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#875477 11-Aug-2013 20:31

NonprayingMantis:
alexx:

Except many of us don't have the option of signing up, but are still going to be forced to pay the subsidy.

From my understanding the OP is not talking about the evils of "government funding needed to complete the rollout", he is talking about how the people on copper internet access are going to fund the UFB rollout more than other New Zealanders.

that's how taxes work

people with no kids still have taxes going towards schools, people who never visit auckland still funded motorways, people who are never unemployed still fund unemployment benefits to other people etc etc

Right, but most people can have kids and send them to school if you want. [edit] Or can get unemployment if they suddenly find themselves without a job. [/edit] Most of us can't get UFB yet, alot of people won't be able to get it for another ~6 years. That's a long time and we'll go through a couple of governments in that time; so that could easily double or even halt and a bunch of us will be left with copper only. Is that likely? I don't think so. But I don't want to subsidise better internet that I can't get, and that I may never get. Just look at the telstra/telstraclear/vodafone cable network, we got promised that ten+ years ago and yet where is it?

As for being rolled out in rich areas first: name one poor suburb in Christchurch to receive UFB yet. I've only seen it being rolled out in the west, in all the pretty streets that City Care actually clean. The grotty side of town where the streets and parks are left covered in glass and rubbish, we don't even get to know when we might get UFB.

And another thing, why punish people for not switching to UFB when some of us are still waiting for EQC to decide to lift up our houses and finally fix the piles? Would be a shame to blow fiber and then have to snap it to fix the foundations, and who gets to pay for the new fibre afterwards? I doubt lifting the house off of it's foundations will be covered by wiring and maintenance.

TL;DR == Bah Humbug

sbiddle

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#875481 11-Aug-2013 20:54

PaulBags:
As for being rolled out in rich areas first: name one poor suburb in Christchurch to receive UFB yet. I've only seen it being rolled out in the west, in all the pretty streets that City Care actually clean. The grotty side of town where the streets and parks are left covered in glass and rubbish, we don't even get to know when we might get UFB.

You'd have a point if the residential focus on UFB had started, but it hasn't.. and it's not even close. Right now the focus is on priority users with some residential. The bulk of the residential coverage won't start until 2015 and be completed between then and 2019.

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richms

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#875484 11-Aug-2013 20:59

If your fiber install is broken in the repair of your house by EQC then I would expect it to be sorted by them at the time your house is repaired, same as they will have to with regards to the power and other services.

The copper network is on its deathbed in many areas that were cabled up 40-30ish years ago. Why should chorus cut the price of this product that is needing more and more maintanance every year that goes by when there is no future in it? Why should they maintain it when in 5 years time there is a street which has a handful of people on it still, when a majority are on the new fiber network. The fewer customers on copper, the less sense it makes to keep it running.

Richard rich.ms

NonprayingMantis

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#875492 11-Aug-2013 21:23

PaulBags:
NonprayingMantis:
alexx:

Except many of us don't have the option of signing up, but are still going to be forced to pay the subsidy.

From my understanding the OP is not talking about the evils of "government funding needed to complete the rollout", he is talking about how the people on copper internet access are going to fund the UFB rollout more than other New Zealanders.

that's how taxes work

people with no kids still have taxes going towards schools, people who never visit auckland still funded motorways, people who are never unemployed still fund unemployment benefits to other people etc etc

Right, but most people can have kids and send them to school if you want. [edit] Or can get unemployment if they suddenly find themselves without a job. [/edit]

...or can move house to where UFB is available

(having kids is a lot more expensive than moving house btw)

PaulBags

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#875517 11-Aug-2013 22:20

sbiddle:
PaulBags:
As for being rolled out in rich areas first: name one poor suburb in Christchurch to receive UFB yet. I've only seen it being rolled out in the west, in all the pretty streets that City Care actually clean. The grotty side of town where the streets and parks are left covered in glass and rubbish, we don't even get to know when we might get UFB.

You'd have a point if the residential focus on UFB had started, but it hasn't.. and it's not even close. Right now the focus is on priority users with some residential. The bulk of the residential coverage won't start until 2015 and be completed between then and 2019.

It's really hard to tell what's actually going on with no current/soon to be available maps, just an address look up, but so far I've found more fibre access available/coming soon in blatantly residential only areas of the west side than near even business/school areas in the east. Between a primary and an intimidate school in Shirley (and down the road from the shopping centre)? Not even coming soon. In Oaklands/Halswell, houses no-where near schools or businesses have fibre already. Near eastgate shopping centre in Linwood? No idea. A cul de sac in Papanui? Soon, not 'very soon', but still soon.

In fact the only addresses that give any indication that fibre is coming are on the west.

sbiddle

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#875566 12-Aug-2013 07:05

PaulBags:
It's really hard to tell what's actually going on with no current/soon to be available maps, just an address look up, but so far I've found more fibre access available/coming soon in blatantly residential only areas of the west side than near even business/school areas in the east. Between a primary and an intimidate school in Shirley (and down the road from the shopping centre)? Not even coming soon. In Oaklands/Halswell, houses no-where near schools or businesses have fibre already. Near eastgate shopping centre in Linwood? No idea. A cul de sac in Papanui? Soon, not 'very soon', but still soon.

In fact the only addresses that give any indication that fibre is coming are on the west.

If you're really only talking about Christchurch you really need to take your issues up with Enable since it's not a Chorus UFB area. The Chorus maps are very good with coverage maps now showing up to June 2016.

PaulBrislen

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#875630 12-Aug-2013 09:50

The fibre deployment will only ever reach 75% of the population. That means the remaining 25% will be on copper for the foreseeable future and will have to subsidise fibre users for that period.

In addition, the move from a "retail minus" to a "cost plus" model was introduced before Chorus was even created. It's listed as a risk in Chorus's original prospectus, detailed in the Regulatory Impact Statement prepared for the minister on the issue and has been discussed at length both within and without the industry for at least the past three years.

Retail minus was always a con. Because the Commerce Commission chose to average retail prices across the board, Telecom simply had to keep one or two highly-priced retail plans in the market (regardless of uptake) and that would skew the playing field. For a long time the most popular plans in New Zealand were more expensive at wholesale than at retail.

So great was the impact of moving to cost plus expected to be that the minister introduced a delay of three years to ensure Chorus got its house in order before it arrived.

Once it did arrive, Chorus cried foul and the government bought its argument.

This is, in essence, a renegotiation of the Chorus UFB contract and as such we should be going out to tender again. I'm sure Vector, for example, would love a cross subsidy to the tune of $100m a year for the next seven years.

In short, the government has intervened in a regulatory process that was barely underway. It's removed several key powers from the Commerce Commission in the process and has taken money out of the pockets of New Zealand customers and unilaterally given it to Chorus shareholders.

The government has a major conflict of interest in this issue. It is both investor (in Chorus and the other LFCs) and now has taken on the role of regulator as well. This flies in the face of world best practice and may actually be a breach of our WTO obligations.

The regulator is supposed to be at arm's length from the investment arm of government but in this case it's not. The new regulator is the minister and prices are being decided in the Beehive.

We should all be very alarmed by this.

ajobbins

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#875664 12-Aug-2013 10:30

PaulBrislen: The regulator is supposed to be at arm's length from the investment arm of government but in this case it's not. The new regulator is the minister and prices are being decided in the Beehive.

This type of behaviour is starting to become typical of the current government.

We should all be very alarmed by this.

Yes, yes we should.

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Lias

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#875724 12-Aug-2013 11:25

Copper should not be subsiding Fibre

If Chorus didn't want to be loosing money hand over first for the next 10 years, it shouldn't have agreed to do the UFB roll out. They knew plummeting copper prices was a real possibility, but then went ahead and bid on the contract, hoping that they would have enough political clout to do what they have done, and ensure that taxpayers are giving them profits. My expectation as a taxpayer was that Chorus would lose an astronomical amount of money over the next decade, and then very gradually recoup that over the next 30-50 years of owning the fibre and would only ever have a very low ROI. Chorus should never have been seen as an investment vehicle that would offer high returns, or fast returns.

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Ragnor

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#876203 13-Aug-2013 04:32

insane: All these flip flop decisions only make investing in NZ telecommunications infrastructure less attractive. One moment you're profitable, then next you're not, and then you are again because someone has decided to change their mind for the second time.

They need to let the market sort out the pricing, and there's nothing quite like competition to do that.

What competition is there at the "fibre the ground to the home/business" infrastructure level?

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