Is Chorus too big to fail?

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crackrdbycracku

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#133932 8-Nov-2013 12:42

This is pretty open which is why I'm posting it here in Off Topic.

What would 'Chorus failure' look like?

Does Chorus failure mean UFB failure?

Would a government subsidy to prop up Chorus be just the same as over ruling the Commerce Commission decision to drop the price of copper wire broadband? Could that become an election issue? And does it go against the ideology of a National government?

Should Chorus be left to go to the wall or is it too big to fail?

In 2000 the Sydney Olympics was seen a good opportunity to seriously upgrade the Sydney public transport system. The Olympics would give impetus to the creation of legacy infrastructure which would last for decades but would otherwise be difficult to gain public support for. The call ways 'We need it for the Olympics' but the reality was that it was just needed and the Olympic made is easier to sell.

Could IPTV be used in a similar way to stimulate take up of UFB (built by Chorus or not) in a similar way? Could anything else provide this kind of a push?

I think we need a UFB but I don't think we really know why as yet. Having said that I don't think the 'if we build it they will come' argument carries enough weight these days when everything is an opportunity cost.

So, what's a way forward?

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MikeB4
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#929367 8-Nov-2013 12:47

TBH I think the statements coming from Chorus are bluff, they are trying to influence Government to their favour.

Here is a crazy notion, lets give peace a chance.

ubergeeknz

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#929370 8-Nov-2013 12:50

KiwiNZ: TBH I think the statements coming from Chorus are bluff, they are trying to influence Government to their favour.

I would take it one further. I think the government, or representatives thereof, have already been in discussions with Chorus about how they're going to intervene, and the press release is PR smoke to help give this intervention legitimacy in the public eye.

My opinion not necessarily that of my employer etc etc

andrewNZ

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#929378 8-Nov-2013 13:07

No company is too big to fail.

If they went nipples north, the receivers would sell off their few assets, and if they split them up, there's a chance we'd end up with better service as a result. The Chorus contractors would be the real losers in the whole thing.

But they're not in trouble, they're taking a dive, and hoping for a favourable decision.

The thing that annoys me the most is that I can't vote with my wallet on this one.

mattwnz

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#929382 8-Nov-2013 13:17

Isn't chorus just the company that is deploying most of the new network, as well as owning the copper network? I didn't think they owned the fibre network. They only own the old copper one. So once their job is completed deploying it, aprt from maintenance and extending it into new sub divisions, doesn't the company largely reach the end of it's life in it's current form, as copper will be no longer needed to the same extent? So they may end up becoming a far smaller company.
If this is so, this makes me wonder why people have been saying that shareholders should forgo dividends, as they will reap the benefits in the future as the comapny grows, but I can't see a good future for them after the UFB roll out has been completed.
I have to admit that most of the commentary on this in the media has been pretty one sided. Obviously ISPs are all going to be for the price drop on copper, as they can make more money from the extra margin, as I haven't seen any that have said they will give 100% of the price drop back to consumers.

Dratsab

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#929412 8-Nov-2013 13:43

andrewNZ: No company is too big to fail.

This

I have to kind of disagree about the contractors being the big loser should the company fail (unlikely, brinksmanship). They potentially could be losers in the short term but another company will have to take over the reigns so they'll not be unemployed for long, if at all. I'd suggest that, as a precaution, they may want to be storing their personal tools outside of their vans and/or work premises in the meantime. The big losers will be every day internet users, who'll see a marked decrease in maintenance issues being resolved in a timely fashion or churns to new ISP's being put on hold amongst other things.

mattwnz

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#929419 8-Nov-2013 13:50

Dratsab:
andrewNZ: No company is too big to fail.

This

I have to kind of disagree about the contractors being the big loser should the company fail (unlikely, brinksmanship). They potentially could be losers in the short term but another company will have to take over the reigns so they'll not be unemployed for long, if at all. I'd suggest that, as a precaution, they may want to be storing their personal tools outside of their vans and/or work premises in the meantime. The big losers will be every day internet users, who'll see a marked decrease in maintenance issues being resolved in a timely fashion or churns to new ISP's being put on hold amongst other things.

There shouldn't be, as other companies should pick up the slack, and they would just hire thats contractors. That is only if they are making enough money to actually pay for hiring enough staff to do that work. I think it will cost a lot more than that 1 billion shortfall, if it does fall over. I think the whole thing is a mess.

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wellygary

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#929428 8-Nov-2013 14:03

crackrdbycracku: This is pretty open which is why I'm posting it here in Off Topic.

What would 'Chorus failure' look like?

Does Chorus failure mean UFB failure?

Would a government subsidy to prop up Chorus be just the same as over ruling the Commerce Commission decision to drop the price of copper wire broadband? Could that become an election issue? And does it go against the ideology of a National government?

Should Chorus be left to go to the wall or is it too big to fail?

The Crown got a damned good deal when it screwed down the UFB contracts,( and the govt knows this) which is why it is keen to ensure that Chorus can meet its end of the contract,

They know if it all blows up, any new owners would see the UFB contract it as a liability and not include it in the assets they picked up from the corpse of Chorus. - the private UFB partners are being made to wear the additional roll out costs and the government is doing its best to make sure it stays that way....

As for "going against the ideology of the National party"
I think you are stuck in the 1990s, under the current govt, we have down deals over filming hobbit films, Aluminium plants, Convention centres

graemeh

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#929432 8-Nov-2013 14:17

No company is too big to fail.

That sort of crazy thinking just rewards company managers for taking big risks and transfers the risk to the government (i.e. taxpayers).

k1wi

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#929441 8-Nov-2013 14:21

There are shades of ideology... National may wish to sell assets to the private sector where they can and defer to market forces, but they're no ACT (or what that party formally stood for)... I put them on the sell side of the spectrum, while Labour is more on the buy side. There are a ton of assets National won't sell and a ton that Labour won't buy, as well as markets that National will get involved in and markets that Labour wont...

Every party that has weighed in on the topic thus far (chorus, govt, opposition, coalition) has been pushing their self-interested barrow, so there is a ton of noise and the real challenge is working out which is bluff/rhetoric and what the true story is...

Chorus may not be too big to fail, but size isn't the sole measure. To build on Dratsab - if a failure of Chorus leads to poorer outcomes for users/industry then it's an adverse outcome. I'm hoping that the outcomes remain positive for all 'stakeholders'.

crackrdbycracku

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#929445 8-Nov-2013 14:24

So current consensus is that no company is too big to fail and Chorus isn't in trouble but that the government will step in and 'save' them with a better deal despite the lack of need and that a company unable to keep afloat should be allowed to sink?

Sounds about right.

Wellygary, I think you are right. At least a '90's National government would have had the courage of their convictions.

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k1wi

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#929446 8-Nov-2013 14:29

crackrdbycracku: So current consensus is that no company is too big to fail and Chorus isn't in trouble but that the government will step in and 'save' them with a better deal despite the lack of need and that a company unable to keep afloat should be allowed to sink?

Who know's what they'll do until the report's out/they actually do it.

A cash injection for a non-voting equity stake has been mooted. Maybe the investment banker in JK will come out and he'll pick the country up a bargain.

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vexxxboy

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#929449 8-Nov-2013 14:31

would the public even care if UFB failed, the uptake has been way below what is possible and most people are happy with what they have, when the average usage has just gone from 20 GB a month to 40 Gb a month do people really need UFB as much as the government says they do.

Common sense is not as common as you think.

mattwnz

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#929450 8-Nov-2013 14:32

The thing is that the tax payer is going to have to pay for the UFB roll out no matter what happens. I have read that the government got a very very good deal with the cost. Also everyone nows that when you build something, it will always go over the estimated cost, and sometimes substantially if it is a difficult project. Especially something like UFB where there are possibly lots of unknowns, due to it being the first time they have done this sort of work. I think 1 billion in the grand scheme is tiny, compared to what has been spent on other things, and the UFB network should last at least 50 years, if not substantially longer. Also proceeds from selling assets like the power companies should be used to build it, as investing back into NZ infrastructure is what it is supposed to be used for..

SaltyNZ

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#929451 8-Nov-2013 14:34

The UFB project as originally commissioned was done the wrong way around anyway. Instead of stating that rural users must all get fibre - because the cities are already well served with ADSL2/2+ and or VDSL, as well as multiple wireless options - they decided that the cities should get fibre, and rural subscribers could maybe get some wireless service some time if anybody got around to it, and at a target speed which will still leave them as third class citizens because by the time they get 5Mb/s the rest of the world will have moved on to 50.

In other words the UFB/RBI project was designed from the start to maintain the rural status quo as being not able to keep up with everybody else. Now sure, a private company might decide it is unprofitable to roll out fibre to rural users. But that's the whole point of a multi-billion dollar taxpayer funded project: to ensure that *everybody* gets the same service. Especially in a country like New Zealand, where the rural sector form the backbone of the export economy.

//Rant over

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mattwnz

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#929455 8-Nov-2013 14:42

SaltyNZ: The UFB project as originally commissioned was done the wrong way around anyway. Instead of stating that rural users must all get fibre - because the cities are already well served with ADSL2/2+ and or VDSL, as well as multiple wireless options - they decided that the cities should get fibre, and rural subscribers could maybe get some wireless service some time if anybody got around to it, and at a target speed which will still leave them as third class citizens because by the time they get 5Mb/s the rest of the world will have moved on to 50.

In other words the UFB/RBI project was designed from the start to maintain the rural status quo as being not able to keep up with everybody else. Now sure, a private company might decide it is unprofitable to roll out fibre to rural users. But that's the whole point of a multi-billion dollar taxpayer funded project: to ensure that *everybody* gets the same service. Especially in a country like New Zealand, where the rural sector form the backbone of the export economy.

//Rant over

Exactly, I have a rural property, and don't think I will ever get UFB, as it is not shown on the map. If it was all being done by the government directly, then it would be fair that everyone should get it. But as they have taken the risk to subcontract out to third parties, and setup SOE to set it up and run it, they can politically get away with it, as it is all kept at arms length. It has been further complicated by very heavy regulation. I don't know of any other sector that has had it so hard when it comes to regulation. I just wish they would regulate more pressing areas, such as building material prices (we pay 30% more than in Oz) and tv content.
The thing is we need to encourage more people into rural areas, to get people out of auckland, to help bring down unsustainable housing problems and prices.

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