Hard News by Russell Brown

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Hard News: Ambition

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  • Craig Ranapia,

    The government, he said, is "exploring alternative investment models" -- indeed, soliciting suggestions on same -- that could fund the development of open-access fibre in urban regions, and an alternative fibre link across the Tasman. (The problem with New Zealand's international bandwidth, he pointed out, is not a constraint on capacity -- it's a lack of competition, and the consequent pricing.)

    This kind of investment, with its long, secure, debt-style return, seems like a sitter for KiwiSaver funds. That, of course, is not something you could have said 10 years ago -- not only because such funds did not exist, but because here would have been ideological outrage

    Well, let's not put that in the past tense yet because if those "alternative investment models" include the whisper of a public-private partnership, I don't think the ideological outrage will be entirely confined to the left.

    North Shore, Auckland • Since Nov 2006 • 12370 posts Report Reply

  • John Holley,

    Had to agree with your summary Russell. The bits on investment, increased broadband reach and Internet Resilience (competition for the Southern Cross Cable).

    I'm just worried this may just be a talk fest with little concrete coming from it. As Lawrence Zwimper said, we must move from projects to policy.

    One real gripe though - who has a digital forum and doesn't provide free internet access? This is the most disconnected conference I have been to in ages. I, and several others, am amazed at the lack of digital capabilities provided!

    I guess it highlights the difference between those who live digitally and those who talk about it! :)

    Auckland • Since Nov 2006 • 143 posts Report Reply

  • Patrick L,

    I don't suppose there is a link to the speech?

    Here's hoping Cunliffe is able to be as effective in Health as he has in Comms & IT!

    Wellington • Since Nov 2007 • 1 posts Report Reply

  • Steve Barnes,

    With the Billions floating around in Kiwisaver there was always going to be the problem of where to invest that money without it skewing the local market. By investing in infrastructure we would eliminate big business maximising profits at the expense of national growth. Using Kiwisaver as a fund for all infrastructure, not only telecommunications but water, power, rail and roading would do more good for the country in terms of growth than allowing foreign business to rape and pillage the nation for mere profit. However, if Don Key becomes PM I can see all good ideas turning to custard as we slide slowly into the ranks of a third world country while his mates buy up all the infrastructure that they will, inevitably, sell off.

    Peria • Since Dec 2006 • 5521 posts Report Reply

  • Neil Smart,

    Russell you are right about Cunliffe, he may at times be naive but he has realised the importance of a high-speed network, and is actively seeking ways to do it!

    On the Internet NZ site this week a discussion has been going on about LLU. Some comments have been quite sensible and others have been simplistic twaddle.

    The key component is that Nzer’s must own the infrastructure to drive investment. Like rail and road private ownership is not an option. The asset is too valuable. Relying on Telecom to do the "right " thing is neither practical nor sensible.

    Cabitenising the network is the only way for Telecom to roll out next generation services from a practical standpoint. That does not suit the rest of us? No of course not, so why does that not surprise us? Telecom is a large corporate with stakeholders demanding their pound of flesh.

    The best comment on LLU from Internet NZ members has been to stop moaning about Telecom and get on with it. David Cunliffe is demonstrating his desire to do so.

    Craig if Private Public partnerships are the only way to do it so is it. But at least ensure NZ inc stays in control and drives investment ideology should not enter into it.

    Since Nov 2006 • 71 posts Report Reply

  • Hadyn Green,

    re: John Key DVD
    How long before we get mash-ups? Seriously. I'm waiting

    Wellington • Since Nov 2006 • 2090 posts Report Reply

  • John Holley,

    Like many I have been worried about the cabitenising of the Telecom Network but listening to Paul Reynolds has given me cause to think.

    As he points out, putting equipment in exchanges won't solve the issues for those at the end of long copper lines. Cabitenising can be seen as more customer focused than ISP. The issue is, of course, who can afford to put their equipment in each cabinet rather than the much smaller number of exchanges?

    From a purely technical perspective which option gives us the best possibilities for the future with respect to the customer? If the cabinet is the best option, and the economic model says only Telecom can afford to do it, is this a case of NZers paying for the infrastructure as Steve and Neil say?

    Auckland • Since Nov 2006 • 143 posts Report Reply

  • Insolent Prick,

    Using kiwisaver funds is an outrageous suggestion. If the infrastructure investment isn't economic, then the Government shouldn't be directing kiwisaver providers to invest in infrastructure.

    At present, the Government doesn't control how Kiwisaver providers invest their funds. They even operate the Cullen Fund at arms-length. And so they should. Spending billions of taxpayers' dollars on a broadband network will be the Think Big of the twenty-first century.

    People save for retirement for the purpose of providing themselves an income in retirement. If you jeopardise returns by channeling capital into non-productive investments, then retirement savings will cease.

    Having said that, there will be very large amounts of capital that will inevitably be invested in good infrastructure. Much of that capital will undoubtedly come from Kiwisaver funds. That's prudent investment management.

    The Government should focus on creating a clean regulatory environment that encourages competition and investment, rather than breeding enormous white elephants with other people's money. Allowing private investors to build roads, water companies, more energy companies, airports, ports, and tecos would be a very good start.

    Auckland • Since Nov 2006 • 15 posts Report Reply

  • Paul Campbell,

    we were talking about this just last night at the local LUG/pub - I want fibre running down my street, pref thru my cellar and I don't mind kicking in something for infrastructure provided I can get it back over time - $1-2k as an early adopter connection cost to get the public fibre past my house in in exchange for a lowered access rate for a while would make sense to me (back in '91 I helped start an ISP using basically that model - didn't end up owning it but got free service for years afterwards - everyone won)

    I want IPTV on my local fibre, IP phone service and competition up the wazoo to provide services - in some sense FreeView helping to put fibre into hilly Dunedin make a lot more sense than pushing broadcast TV

    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 - but IP provides a wonderfull place for competition - so by all means unbundle the local loop - put in the investment to make it fast and ubiquitous then let people compete to put the best packets on it

    Supposedly Dunedin sold our old gas mains to Telecom for $1 - I think it's time to take back the ones they aren't using ($2 would be a tidy profit) and start installing fibre - I proposed this to the city council last year but was ignored

    Dunedin • Since Nov 2006 • 2623 posts Report Reply

  • Russell Brown,

    I suspect you guys are right about cabinetisation -- shortest path to better service in many areas but it undermines LLU.

    Reynolds is holding out the prospect of unbundled DSL ports in the cabinets where competitors can't fit their own gear. The government is going to have to stay on Telecom's ass over this one.

    Auckland • Since Nov 2006 • 22850 posts Report Reply

  • Russell Brown,

    People save for retirement for the purpose of providing themselves an income in retirement. If you jeopardise returns by channeling capital into non-productive investments, then retirement savings will cease.

    Hello, the 90s are calling!

    No one's talking about uneconomic investments, but about longer-term investments that provide a secure, debt-type return. The contrast would be with the obsessively short-term model pursued by Telecom in the 1990s. Dividends were bountiful and capital investment slumped below the rate of depreciation. That model will not create a globally competitive broadband infrastructure.

    Auckland • Since Nov 2006 • 22850 posts Report Reply

  • Steve Barnes,

    Allowing private investors to build roads, water companies, more energy companies, airports, ports, and tecos would be a very good start.

    I beg to differ. Providing a workable enviroment through investment in infrastucture will allow productive business to grow and prosper whilst at the same time discoraging private investment in non-productive asset stripping. Now we, as a nation, are used to the concept of user pays there is no reason for infrastuctuer to be non profitable. Kiwisaver is a long term investment stratagy that would benefit everybody through investing in these areas. As it stands Kiwisaver is unlikley to go for a long term low profit investment but at the same time if it were to continue to grow and compete with private investment the damage could well be disaterous.

    Peria • Since Dec 2006 • 5521 posts Report Reply

  • barnaclebarnes,

    (The problem with New Zealand's international bandwidth, he pointed out, is not a constraint on capacity -- it's a lack of competition, and the consequent pricing.)

    Seems like he listened at KiwiFOO earlier this year then?

    Auckland • Since Nov 2006 • 90 posts Report Reply

  • Matthew Poole,

    Insolent, the last thing we want is more privatisation. We've already established that, where key infrastructure is concerned, leaving it to the private sector is a recipe for getting shafted - Telecom, AIAL, electrickery... all private, all gouging the users.

    Also, as far as retirement investments are concerned, telco's that aren't rapacious incumbents are exactly the type of good investment that KiwiSaver should be pursuing. They offer stable, long-term returns without being high-risk. The problem with getting investment isn't that they don't return, but that they don't offer the short-term, high-value returns that retail investors want. People want strong growth within a couple of years, and broadband networks don't do that. They're something you invest in when your outlook is long-term (defined in economics as no less than seven years, and preferably greater than 10), and if you're saving for retirement that's precisely the kind of return you want. Stable, low-risk, and preferably backed with a solid asset base.

    We were sold the "clean regulatory model" under National, and now look where we are - duking it out in the race to the bottom of the OECD. Hands-off doesn't work where you have a very strong, entrenched player competing in a market with high barriers to entry. Don't come back with wireless, either, because anyone with a clue knows that the only way to get really fast connections is by terrestrial link. Wireless is the low-speed, entry-level competitor, not the one that'll let digital businesses do anything worthwhile.

    Auckland • Since Mar 2007 • 4097 posts Report Reply

  • John Holley,

    LLU needs to be defined as being to where the IP interface device that talks to the end user resides. If that is a cabinet, then so be it. The residence? So be it perhaps - get's more blurred. But I think LLU to the cabinet offers some real opportunities - we need physically bigger/architected cabinets, but I see that as a relatively straight forward issue to address.

    This would then drive partnership arrangements. Why would Telecom invest in Fibre to the cabinet on their own if others could just jump on it? Reynolds just said he would welcome more co-operation with partners/investors. As he said, "Telecom can't do it on it's own."

    Auckland • Since Nov 2006 • 143 posts Report Reply

  • Neil Smart,

    As he (Paul Reynolds)points out, putting equipment in exchanges won't solve the issues for those at the end of long copper lines. Cabitenising can be seen as more customer focused than ISP. The issue is, of course, who can afford to put their equipment in each cabinet rather than the much smaller number of exchanges?

    John that is exactly the point I was making. Telecom is not going to design a network to suit NZ but their shareholders.

    We need to accept that cabinets are the right way to design a new NGN network and get on with building something that competes with it.

    The early signs in areas like the fibre project in Nelson is that it may be possible but it needs funding. . Unfortunately TUANZ got too fixated on LLU. LLU has to be done but it should not be a single strategy approach.

    Cunliffe is doing his best to point out the obvious

    Since Nov 2006 • 71 posts Report Reply

  • Russell Brown,

    Oh, and totally OT: if you're in Wellington, go and see Otis Mace and Bill Direen at Mighty Mighty tonight.

    Mike McCaleb made this video of Bill playing Christchurch:

    http://www.youtube.com/okmccaleb

    The show comes to the Masonic in Devonport on Friday night.

    Auckland • Since Nov 2006 • 22850 posts Report Reply

  • Craig Ranapia,

    Craig if Private Public partnerships are the only way to do it so is it. But at least ensure NZ inc stays in control and drives investment ideology should not enter into it.

    Which strikes me as a rather 'ideological' statement in itself, then again I don't regard 'ideology' as the political equivalent of dropping the F-bomb in church.

    North Shore, Auckland • Since Nov 2006 • 12370 posts Report Reply

  • Steve Barnes,

    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

    I have been nagging Auckland City Council for years to run fibre through the sewer system, their reasons for not doing this have been pathetic (toilet paper will get stuck to the fibre, telecoms people have no experience in sewers etc.).Other countries have done this, Canada for example, so the technology is out there. How this would all tie up is beyond me but I'm sure some bright spark could create a model that could allow the investment fund to have some investment in this area along with other infrastructural elements that should never have gone out of public control.

    Peria • Since Dec 2006 • 5521 posts Report Reply

  • Russell Brown,

    Don't come back with wireless, either, because anyone with a clue knows that the only way to get really fast connections is by terrestrial link. Wireless is the low-speed, entry-level competitor, not the one that'll let digital businesses do anything worthwhile.

    The guy from Vodafone has pointed out that they can't get the dark fibre they need to link all their wireless points.

    And Moz has just said there's "no major difference" between National and Labour and even the Greens on broadband policy!

    IP, your world is changing.

    Auckland • Since Nov 2006 • 22850 posts Report Reply

  • John Holley,

    Why build something that competes with cabinets? Reynolds is indicating an acceleration of the roll out to cabinets.

    Does defining LLU as being to the cabinet change things?

    Not sure, but Reynolds is saying that Telecom is committed to a more cooperative model - which must come with operational separation.

    But as Russell says, someone has to ride Telecom's ass on this.

    Auckland • Since Nov 2006 • 143 posts Report Reply

  • Gareth Ward,

    There seems to be at the very least some crossed-wires here re Kiwisaver and privatisation - only way Kiwisaver money (managed by private investment funds on behalf of us investees, nothing to do with Govt at all) will be utilised to fund infrastructure investment is if that infrastructure is privatised or run via PPP. The investment funds will only put money into profitable companies, not some Govt run organisation? Macquarie etc have made fortunes doing this.

    There is no "Kiwisaver money" that the Govt can direct into public infrastructure at all. So at the very least, a PPP will be in order and even then will need to be profitable (yes long-term, cash-rich, risk-averse profitable but still profit driven).

    Auckland, NZ • Since Mar 2007 • 1727 posts Report Reply

  • Russell Brown,

    Moz has mentioned PPPs too. My main problem with them isn't ideological, just that they're kinda bullshit.

    And Reynolds from Telecom just got a scattering of applause for saying he'd like to see more shared infrastructure.

    Auckland • Since Nov 2006 • 22850 posts Report Reply

  • John Holley,

    Reynolds really does seem sincere in his desire for co-operation on infrastructure. He doesn't see infrastructure as something to compete over - it is the services that run on the infrastructure that he want to compete on.

    Auckland • Since Nov 2006 • 143 posts Report Reply

  • Russell Brown,

    There seems to be at the very least some crossed-wires here re Kiwisaver and privatisation - only way Kiwisaver money (managed by private investment funds on behalf of us investees, nothing to do with Govt at all) will be utilised to fund infrastructure investment is if that infrastructure is privatised or run via PPP.

    I think what they're talking about is encouraging the development of a kind of investment vehicle that's scarce on the ground here.

    But I don't think the infrastructure will be monolithic at all. Some fibre will be owned by local authorities (and I think theyre better off raising debt that engaging in PPPs -- Treasury seems to agree), some by telcos, some by others.

    Auckland • Since Nov 2006 • 22850 posts Report Reply

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