Adam Gifford asks why so much cash been given to two telcos with a record of failure?
Bill English says the country can’t afford waffly policy.
Great. They can do away with the Ministry of Economic Development. That should save billions and get rid of policy that is not only waffly but downright destructive.
The decision to start commercial negotiations with Telecom and Vodafone about handing over $285 million to improve rural broadband services is a case in point.
Either the ministry supplied bad advice to Communications and Information Technology Minister Steven Joyce, or it is shielding a decision he made for his own political or philosophical reasons.
Because be in no doubt, this is a bad decision that will not only saddle rural areas with sub-standard service, it will entrench existing monopolies and blight international standing as a place to invest or do business.
The group which may have the biggest stake in improved rural broadband, Federated Farmers, isn’t happy.
It’s trying to get Joyce along to a “solutions summit” with the successful and unsuccessful bidders, industry experts and other stakeholders, to thrash out the issues under Chatham House rules.
The most positive thing the Feds drew from the announcement was the promise to retender if the contracts can’t be finalised by the end of March.
The successful plan will extend Telecom’s fibre network to 719 rural schools and to 154 new cellphone towers that Vodafone will build.
Apart from the schools, the other 250,000 potential customers will have to connect through either ADSL on Telecom’s copper network, or through wireless connections.
Joyce is promising at least 5 megabits per second to 86 per cent of rural homes and businesses.
Federated Farmers wants at least double that speed, for around $60 a month retail.
In reality the proposed solution may deliver 1 mbps.
Joyce says the joint Vodafone/Telecom proposal is based on proven, existing technology, giving the government confidence it will work.
He says it will ensure serious competition in the last mile, giving many customers a choice of fixed wireless, ADSL2+ or mobile broadband, and was the only one that increases mobile coverage.
Joyce said it with a straight face, although he does have a tendency to smirk when he’s putting across something particularly outrageous. But he didn’t make his fortune in radio by relying on outdated technology.
The unsuccessful bids, from the OpenGate consortium with Kordia, Woosh and FX Networks and from the Maori-backed Torotoro Waea group, were based on deploying 4th generation technology called TD-LTE.
Joyce says it’s risky, while giving his preferred partners five years to roll out more of the old 3G kit that has so far failed to do the job.
A generational step in technology is exponential rather than incremental. LTE stands for long term evolution – this stuff has been a decade in development, so the bugs have been worked out of it.
TD, or time division, is a variant on LTE developed by China Mobile that runs on cheaper spectrum bands.
LTE has much faster speeds than the solution Joyce wants to lumber farmers with – easily 50 to 100 times faster – and it has a larger coverage area, with a single cell tower covering up to 100km. It can also support more users in an area.
One of the reasons it took so long to develop was future proofing. Networks were designed so it can be easily upgraded in future.
The equipment is cheaper, it works better, and it uses less power.
OpenGate would have its network complete in two years, not five, delivering more than Federated Farmers was asking for at the price it was seeking.
So why give a mountain of cash to two transnational companies with a record of failure in rural New Zealand?
Telecom has been subsidised for years through the Kiwishare to supply rural service, and has done the least it could get away with to keep the 111 service going.
Vodafone hasn’t invested any fresh capital in New Zealand since it bought Bellsouth’s network, merely reinvesting some profits and taking advantage of poor regulation to lock in customers.
The big loser in this, apart from rural New Zealanders, is 2Degrees.
Its investors have sunk close to half a billion dollars creating a mobile network, despite an extraordinary unwillingness on the part of the politicians to address barriers to competition that would be considered illegal in other countries.
Now Joyce is offering a dollar for dollar subsidy – to the multinationals using anticompetitive tactics to lock it out.
Call in the World Trade Organisation.