Hard News: Ambition
76 Responses
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I'm prepared to buy that we are paying too much for telecoms, and that the telcos are making excess profits at peoples expense.
I'm also in agreement that it would be jolly nice if we could get reliable, fast broadband with coverage out to rural areas.
What I don't buy is that doing this would unleash some sort of massive economic burst of activity as we invent clever new ways to take advantage of all this bandwidth. Nobody's ever produced any evidence of this that doesn't involve an awful lot of hand-waving.
Internet technology has actually created *negative* growth in the content sector - people are now spending less on downloads then they previously did on CDs and video rental.
One thing that people forget in pricing Internet business is that content and technology are discretionary spending that competes with food, houses, cars and holidays. Even for me, I doubt that I spend more than a few percent of my income on or through the 'net.
Which does beg a question as to whether, apart from strong regulation, we should be trying to artificially force wealth to go into Internet infrastructure and what that will achieve.
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I suspect you guys are right about cabinetisation -- shortest path to better service in many areas but it undermines LLU.
So the short term question becomes: Do we stop a major player actually improving services just to help other players in the market make money? i.e. retard broadband improvement for broadband competition?
The longer-term view is does retarding it for now mean a longer-term competitive landscape and therefore more investment at that point?But at what point exactly are Callplus, Orcon, iHug etc going to step up and invest themselves?
And what does Telecom's NGN network require that others can't do themselves? I was all for opening up the historic network, but right now Telecom are investing a fortune (from private shareholders) for this new network - why exactly can nobody else do that?
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I think what they're talking about is encouraging the development of a kind of investment vehicle that's scarce on the ground here.
And that's going to be a highlight of the investment money created because of Kiwisaver - when money goes looking for a long-term, low-risk home, infrastructure investment opportunities pop up to take that money!
But I seriously doubt that these funds are going to give govt (central or local) money to deliver on these - it will only go to some form of private infrastructure company that is going to deliver investment returns. Councils may be able to issue bonds to pay for it that Kiwisaver funds will take up I suppose, but then they would have to be happy that the councils are financially stable enough to continue financing that debt long term - and big infrastructure investments run without private help won't look good in that regard... -
On the financial side:
If we *really* want to invest in telecoms infrastructure, then there are two types of cash, debt and equity.
Equity money is priced on a risk/return basis. At one end of the scale, if there is the prospect (real or imagined) of future massive revenue growth, then zero dividends are acceptable and equity is cheap money (e.g. Google).
At the other end, businesses such as power utilities with little prospect of revenue growth pay yields that are similar to debt interest rates.
So, assuming that this telco infrastructure upgrade isn't going to be allowed to make super profits in the future (implying that they are screwing the customer, which is what we are trying to avoid), then it'll probably be easist to finance it with debt.
The cheapest debt solution is for the government to raise sovereign debt in the markets. They will by definition get the cheapest money around.
So there's no real need to raid Kiwisaver accounts, the Cullen Fund or anything else.
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I have been nagging Auckland City Council for years to run fibre through the sewer system
Seriously dude, you're not connecting my toilet the the interweb. Major privacy issues involved!
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I'm with Gareth that KiwiSaver funds are directed by the fund managers and cant be directed by government decree... both in practice and as a general philosophy...
And, as mentioned earlier in the thread, the "Cullen Fund" is currently handled fairly indirectly... but I wonder if that fund might not be more easily channeled by government to proposed infrastructure initiatives ... if the government were so inclined? (they would still have to provide a return.... dead investment with no pay-off back to the fund would obviously be out of the question).
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What I don't buy is that doing this would unleash some sort of massive economic burst of activity as we invent clever new ways to take advantage of all this bandwidth. Nobody's ever produced any evidence of this that doesn't involve an awful lot of hand-waving.
Check out the info from the New Zealand Institute.
The New Zealand Institute has identified national economic benefits from broadband in the range of $2.7-4.4 billion per year with further upside potential possible.
They state quite specifically that they have been conservative in the returns that they have defined.
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So the short term question becomes: Do we stop a major player actually improving services just to help other players in the market make money? i.e. retard broadband improvement for broadband competition?
The answer from the minister fairly clearly seemed to be "no".
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Seriously dude, you're not connecting my toilet the the interweb. Major privacy issues involved!
It would seem to be an ideal solution in Dunnydin ;-)
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Peter Griffin has more on Cunliffe's speech:
- Setting up of a private-sector utility company that would accept a lower rate of return on investment to build a fibre-to-the-node network beyond Telecom's.
- Invest in rural broadband infrastructure through Kordia.
- Set up a contestable fund to subsidise the building of a second fibre link to Australia.
- The Government wants access speeds of 20Mbps (megabits per second) to be available in towns of over 10,000 people. That's twice the speed Telecom is expecting to be able to offer.
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__I have been nagging Auckland City Council for years to run fibre through the sewer system__
Seriously dude, you're not connecting my toilet the the interweb. Major privacy issues involved!
Sounds like a job for Google TISP. You can trust Google not to be evil...
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Re: investment from Cullen Fand and/or KiwiSaver:
What I've heard from people in the funds management industry is there would not necessarily have to be a govt directive to invest more in broadband and related ventures.
This is because, as I think Cunliffe alluded to, there is an appetite for such investment on the investor side of the equation anyway. It's just that at the moment there isn't as much opportunity as their could be, locally, so it goes offshore.
There's a 'home country' bias in most investments: there are emotional/nationalistic reasons for this, but also practical ones. Investors are more likely to know more about what they are investing in, or at least they have a better opportunity to 'kick the tyres'.
The argument is that were the govt to allow more public/private partnerships, not only for broadband but roads and the like, the fund managers looking after both the Cullen Fund and the KiwiSaver monies would be bound to invest in them, just as part of having a normal balanced portfolio. There would be no need for any directive from the govt that they do so.
There's a lot of ideological resistance to PPPs in the current govt, simply because they fear that once they're allowed for broadband and roads, the next step will be schools, hospitals and prisons.
Personally I've got no problem with private investment in schools, hospitals and prisons. I have a few concerns about the practicality of PPPs - there's some tricky economies of scale issues in a country this size.
No ideological difficulties though. I want my kid well educated and, if she gets sick, healed, but I don't give a damn about who owns the building those activities are done in.
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Sounds like a job for Google TISP. You can trust Google not to be evil...
Well, from that site:
TiSP in-home wireless broadband is:
* Free, fast and highly reliable
* Easy to install -- takes just minutes
* Vacuum-sealed to prevent water damageIf it's vacuum-sealed to prevent water damage, then it's perfect!
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If it's vacuum-sealed to prevent water damage, then it's perfect!
But will it work in your longdrop?
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Not having heard the speech but just read this coverage, I get this feeling that with comments like:
"there's scope for an investment group to be set up to provide an open-access utility service that would build and run a FTTN network open to all providers. A key barrier to investment in fibre to the node is the reluctance of... investors to accept the levels of return and longer time frame... Looking for investments that are not driven by short term investment cycles and investments that allow for lower but still positive rates of return"
that Mr Cunliffe basically wants a private network investor to build and run this in partnership with the government (because govt would have to help out somehow for these low ROI's to suddenly be worthwhile for a private company)? But the ol public-private partnership is not a great word for a Labour Cabinet Minister to be bandying around given it's a useful little position to hold against National...
Peter Griffin isn't using the word either but is pointing out that is how the Australian rollout is progressing... -
The problem of course is that laying fibre, digging up streets is terribly capital extensive - you can't really have 10 different sets of people do it up every street
If telecom can be brought on board, there is no need to go digging up the streets. For years they have realised that digging is a mug's game, so we have miles of mint green duct pipes running under a street near you. The fibre will actually take up less room than the copper wires, and they should just be able to pull the fibre through them. </rose tinted glasses>
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Other countries have done this, Canada for example, so the technology is out there.
third world Bali has just done this, and where no sewers are available they just ploughed ahead and dug. The whole island is now covered in a fibre network
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Check out the info from the New Zealand Institute.
I could fisk that in detail, but I don't have time.
In short however:
- the "innovation in the weightless economy" bubble requires a combined net export growth / net spending growth of over $1000 per capita. I can't see how people will raise their spending by that much, or how net exports will shoot up. (The most successful web business in NZ, TradeMe, is almost entirely domestic in reach).- many of the other good things are possible now, if expensive. If you want fibre to your office (or even home) then within most CBDs it's available. My firm has it.
- the benefits of new technology are being overstated.
I do a lot of meetings by telecon/webex/video conference already. The reason I don't do more is that they aren't as good as actual face time if you want the other party to do what you want. Improved technology doesn't really change this - and you can't buy people lunch by webex.
It's entirely possible that if NZ companies do more of their business through webex, they'll lose market share as customers choose to go with a local supplier who will actually come and visit.
(Remote software development works well by email & phone, though.)- their benchmarking against Ireland is bogus. Ireland's success comes from:
(a) being a tax haven
(b) being the only English speaking country in the Euro
(c) having an educated, entrepreneurial population.We won't do (a) and can't do (b). We can do (c) but broadband isn't a magic wand to get us there.
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And Moz has just said there's "no major difference" between National and Labour and even the Greens on broadband policy!
First he comes to the NZ Open Source Awards now this. It is a confusing and fast moving world for sure.
their benchmarking against Ireland is bogus
Almost a sure fire way of saving your reading time is to check for "Ireland economic miracle" type statements in these sort of reports.
Does anyone know, is the NZ Institute another BRT front or are they really doing useful, independent economic analysis?
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I think the NZI is somehow involved with that genius of public administration Dick Hubbard. (Who's a very nice man, but...)
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I was astonished to hear Maurice suggesting raising debt to finance a public-owned (presumably) fibre to the home project.
I can see this working if it's in conjunction with Telecom's cabinetised network... Telecom owns that, we the people own the fibre at the ends of it (cabinet to curb/property) and everyone gets open access to the last mile.
On the point about cabinets, in general it's a great principle to get the fibre as deep into the network as possible. What Telecom is suggesting, however, is akin to the government saying it will invest $1.4bn in improving regional transport by building motorways and then building them all in central Auckland. Most of the customers who will be moving from exchange to a new cabinet won't notice any difference as they're already well within the range needed to get faster broadband.
It's not cabinets that are wrong here - far from it - it's the lack of consultation and the protectionist approach to the roll out. The areas that really need cabinets are further afield (not central Auckland) yet they're getting nothing.
Cheers
Paul Brislen
Vodafone External Communications Manager -
Yeah, I think Cuncliffe has ambition, but as for providing new thinking I'm not so sure. He's merely copied and the ideas that Australia and the UK have had for increasing internet speeds and made it sound like his own.
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Yeah, I think Cuncliffe has ambition, but as for providing new thinking I'm not so sure. He's merely copied and the ideas that Australia and the UK have had for increasing internet speeds and made it sound like his own.
That's a childish comment. Of course he's borrowing ideas. He's also been listening fairly intently to a range of people here.
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WH,
There's a lot of ideological resistance to PPPs in the current govt, simply because they fear that once they're allowed for broadband and roads, the next step will be schools, hospitals and prisons.
I think the core concern is that the PPP structure may not be an optimal form of procurement. Generally the private sector partner wants to be paid, and won't participate if it won't be. British experience suggests that when things go wrong with PPP's, they can go badly wrong.
Regulating monopolistic industries is a tricky business. I can't comment on the technical or technological aspects of telecommunications, but it's axiomatic that monopolistic companies need incentives and disincentives if they are to deliver socially optimal results. Cunliffe is surely an improvement on Williamson in this regard.
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I don't suppose there is a link to the speech?
Cunliffe: Keynote speech at the Digital Summit 2.0
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