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

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

giollarnat

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#127458 11-Aug-2013 10:52

"Communications Minister Amy Adams overruled the Commerce Commission's
move to cut the cost of regular "copper"' broadband by as much as
$12/month. Instead, prices will fall between $2.48 and $7.48 a month,
meaning NZ's 1.25 million broadband households will miss out on as much
as $140m a year in reduced charges.

Chorus' profits would also have been much lower, so Adams' decision to
overrule the regulator was welcomed by shareholders. Their shares' value
has risen almost $300m over the past month."

http://www.nzherald.co.nz/opinion/news/article.cfm?c_id=466&objectid=10911010

It's great that the NZ public is subsidising another now privatised but once state-gifted monopolistic enterprise built on publicly-funded infrastructure.

Your average Joe Kiwi has plenty of spare disposable income ... it is only right that he should donate to this worthy cause through higher broadband prices.

After all, it is well known that private shareholders and investment banking houses, and multinational holding companies like Rio Tinto are strapped for cash ... the least we can do is give them a hand out... they are too efficient to be able to cope with a competitive market (the electricity gentailer cartel also comes to mind).

Corporate Welfare - Because They're Worth It! ;-)

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#875295 11-Aug-2013 11:09

It's a complex situation due to the government subsidization and support of the ultra fast broadband network. If there is too much of a price disparity, people won't switch.

Speedtest 2019-10-14

sbiddle

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#875299 11-Aug-2013 11:28

That's an overly simplistic view of an extremely complex situation, and I couldn't disagree more with your conclusion.

Clearly you believe subsidies are wrong - one can presume you're happy to pay $6k out of your own pocket to get UFB connected rather than the cost being free because it's in effect subsidised?

tdgeek

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#875303 11-Aug-2013 11:39

sbiddle: That's an overly simplistic view of an extremely complex situation, and I couldn't disagree more with your conclusion.

Clearly you believe subsidies are wrong - one can presume you're happy to pay $6k out of your own pocket to get UFB connected rather than the cost being free because it's in effect subsidised?

And the ultra slow take up will add costs continually as the financial costs of whoever provides the un subsidised network will spiral. Costs are added as the network is built, that is required to be recovered over a lengthy period. and a profit for the risk. Every year the take up is dawdling, adds to these financial holding costs.

stevenz

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#875304 11-Aug-2013 11:44

There definitely needs to be serious incentives to switch, otherwise people just won't bother. I suspect that I'm a much higher than "average" user and was more than happy with my ADSL except for the limited upstream speed which is now roughly 10x the speed since I switched to VDSL, the fact I doubled my download speed is a nice bonus, but not one I really cared about.

UFB is probably a similar deal, but even more so, people like my parents who use their internet for TradeMe, Skype, email and not much else, simply don't see the benefit of changing from their 5GB/month ADSL plan despite fibre being available at the end of their driveway for some time (in one of the earlier rollout areas in Nelson), so there would have to be some pretty seriously good deals for people to consider switching over.

Given that internet access has become pretty much a "right" in modern society, we don't want to be still relying on outdated technology in 5-10 years (given that ADSL is already very old tech), so while it's not great for the taxpayer in the short term, it means everyone is better off in the longterm.

@KnightNZ

sbiddle

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#875305 11-Aug-2013 11:48

tdgeek:
sbiddle: That's an overly simplistic view of an extremely complex situation, and I couldn't disagree more with your conclusion.

Clearly you believe subsidies are wrong - one can presume you're happy to pay $6k out of your own pocket to get UFB connected rather than the cost being free because it's in effect subsidised?

And the ultra slow take up will add costs continually as the financial costs of whoever provides the un subsidised network will spiral. Costs are added as the network is built, that is required to be recovered over a lengthy period. and a profit for the risk. Every year the take up is dawdling, adds to these financial holding costs.

This is a bigger issues for the other LFCs - they rely on uptake for their funding to continue expansion. If people don't sign up there is a very real risk of them needing to look elsewhere for interim funding to continue the build. Chorus have money and funding (as well as income) to continue a network build program even if uptake is poor.

richms

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#875321 11-Aug-2013 12:14

IMO the price of copper should go up in areas with a fiber build out done.

Richard rich.ms

nickb800

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#875332 11-Aug-2013 13:03

richms: IMO the price of copper should go up in areas with a fiber build out done.

Just imagine the logistics:
a) ISPs would need two-tiered package pricing, to reflect the different charges for underlying copper service
b) This would need to be advertised and staged, so that Chorus/LFCs have the resource to install fibre in (virtually) every broadband-connected within a short period of time, rather than the status quo of piecemeal uptake which smoothes out demand for installs
c) Some sort of arrangement for people caught in an install backlog (as in (b), or complicated install requiring neighbours permission) whilst the copper prices are bumped up

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richms

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#875345 11-Aug-2013 13:39

A) Up to the ISP if they continue to offer copper service at a higher price or discontinue the service in areas.

B) Yes, not an overnight thing, IMO prorated based on the % shifted to fiber, so the more people moved, the higher the price goes as the cost of supporting the aging network would be spread across fewer people.

C) Resolve the whole problems where a single luddite can hold an entire multi unit dwelling to ransom, blanket approval for all cabling processes to happen and bring fiber to the house into the same requirements for rentals as water and sewerage is.

The installs are being paid for by the taxpayer, there is no excuse not to change over to fiber if it is available. This would just be another push in the right direction for people that are hesitant.

It doesnt help that the large "super" ISP still has yet to pull finger on UFB plans, perhaps a sharp increase in their copper costs in areas that have fiber might get their arse into gear.

Richard rich.ms

wally22

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#875347 11-Aug-2013 13:42

Hey, I'll happily switch to UFB but it is unlikely to come near me any time soon. Just a fact of life that I have to live with, and I really am not jealous of all of you city dwellers.

old3eyes

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#875348 11-Aug-2013 13:44

I'd switch to fiber tomorrow if it came past my front door but it's not for several years yet. I can get VDSL but the benefits are not really worth it for me..

Regards,

Old3eyes

insane

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#875395 11-Aug-2013 15:59

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.

alexx

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#875402 11-Aug-2013 16:39

In many cases it seems that UFB is being installed first in the more wealthy areas. So in effect, the less well off people on copper get to subsidise fibre in the wealthy suburbs. If you are a Chorus shareholder in a UFB area such as Remuera, you effectively get you get a double bounus, paid for by the people on copper.

Given that ACT are the party of "individual choice and responsibility", I was hoping they might make a principled stand on this matter of free markets and free choice, but I'm finding it difficult to find anything about UFB on their site

#include <standard.disclaimer>

nickb800

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#875403 11-Aug-2013 16:40

alexx: In many cases it seems that UFB is being installed first in the more wealthy areas. So in effect, the less well off people on copper get to subsidise fibre in the wealthy suburbs. If you are a Chorus shareholder in a UFB area such as Remuera, you effectively get you get a double bounus, paid for by the people on copper.

Given that ACT are the party of "individual choice and responsibility", I was hoping they might make a principled stand on this matter of free markets and free choice, but I'm finding it difficult to find anything about UFB on their site

What area do you think will have the highest uptake?

alexx

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#875405 11-Aug-2013 16:49

nickb800:
alexx: In many cases it seems that UFB is being installed first in the more wealthy areas. So in effect, the less well off people on copper get to subsidise fibre in the wealthy suburbs. If you are a Chorus shareholder in a UFB area such as Remuera, you effectively get you get a double bounus, paid for by the people on copper.

Given that ACT are the party of "individual choice and responsibility", I was hoping they might make a principled stand on this matter of free markets and free choice, but I'm finding it difficult to find anything about UFB on their site

What area do you think will have the highest uptake?

I would expect they would be the areas that have the least need to be subsidised.

#include <standard.disclaimer>

nickb800

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#875407 11-Aug-2013 17:08

alexx:
nickb800:
alexx: In many cases it seems that UFB is being installed first in the more wealthy areas. So in effect, the less well off people on copper get to subsidise fibre in the wealthy suburbs. If you are a Chorus shareholder in a UFB area such as Remuera, you effectively get you get a double bounus, paid for by the people on copper.

Given that ACT are the party of "individual choice and responsibility", I was hoping they might make a principled stand on this matter of free markets and free choice, but I'm finding it difficult to find anything about UFB on their site

What area do you think will have the highest uptake?

I would expect they would be the areas that have the least need to be subsidised.

Well the subsidy isn't area based (Just imagine the TV ads: Free installation for UFB, except for Remuera).

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

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.

BTW I can't see any evidence that the rollout is going in first into wealthy areas - in Wellington I can't see a bias either way with the likes of Cannons Creek, Naenae, Wainuiomata getting fibre just as quickly as Whitby, Khandallah, Korokoro. Ditto in Christchurch, although not a Chorus rollout here.

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