Tuesday, May 02, 2006

Peter Nowak: Government holds web key

The rural sector has been quite vocal of late in the broadband debate. Farmers and other provincial residents have been voicing their opinions in an effort to avoid getting left behind by the Government when it unveils its telecommunications review, evidently now only a month away.

If anything the complaints shine a spotlight on just how much broadband is the Government's problem, not Telecom's.

Hugh Ritchie, Federated Farmers telecommunications spokesman representing 17,000 farmers across the country, wrote in the Herald a few weeks ago that unbundling Telecom's local loop could be bad for rural residents.

"If Telecom's network is unbundled, can farmers and their families really continue to expect Telecom and other companies to invest in getting broadband services to rural New Zealand?" he wrote.

Telecom's competitors have admitted they'll concentrate their investment on high-value urban areas once unbundling is instituted. Telecom, for its part, has suggested the resulting increase in urban competition could mean less investment in rural areas.

Nobody wants to invest expensive telecommunications equipment in sparsely populated areas that show little promise of generating a return.

Strangely, Federated Farmers - which comes to Telecom's defence whenever there's a regulatory threat - seems to harbour the belief that the company is their benevolent friend.

But Telecom isn't necessarily providing rural New Zealanders with services because it wants to. It may be good for public image to do so, but it certainly doesn't stack up for the company's bottom line.

Telecom is obliged to provide these services by an agreement it signed with the Government in 1990. The deal requires Telecom to maintain phone services wherever they were available at the time, and the agreement was updated in 2001 to include dial-up internet services.

Each year, the Commerce Commission determines the total cost to Telecom of provisioning these services - $41.2 million in 2003-04 - and then forces other telcos, such as TelstraClear and CallPlus, to pony up a portion based on their percentage of the telecommunications market.

In effect, the Government requires Telecom to supply services to unprofitable customers, then forces other telcos to subsidise the act. It's a bizarre set-up that doesn't make business sense for anyone involved.

The broadband complaints from rural New Zealanders are inevitably about either their inability to get it, or if they can get it, the slow speeds and high prices on offer.

The cynical city slicker is often quick to spurn these complaints. Poor telecommunications and slow internet speeds are part of the price to be paid for living in the country, the argument goes. After all, rural dwellers don't have to deal with recycling trucks smashing bottles outside their apartment at two in the morning, and the sight of rolling hills or mountains is substantially more soul-soothing than concrete skyscrapers and traffic jams. We city dwellers may get better and cheaper broadband, but we don't get peace and quiet and nature.

But the issue goes beyond that. Given that the economics of the private sector provisioning rural residents with proper telecommunications services don't stack up, this is clearly a public sector problem.

The Government seems to understand this, but its solutions thus far have achieved only limited success. Four years ago, the Ministries of Education and Economic Development set up Project Probe to help facilitate the roll-out of wireless and satellite broadband to rural communities, primarily to schools.

Tens of millions of dollars later, the project was completed last year, but given the number of complaints that continue to roll in, it's obvious there's still much to be done.

The Government's first step should be the removal of the anachronistic universal phone service obligation on Telecom. Supplying rural New Zealanders with their phone and internet services should not be any company's obligation. They should only do so if there's money to be made.

Indeed, that fact has led to a cottage industry - pardon the pun - springing up. Internet service providers such as Iconz and Bay City seem to be doing quite well in trying to fill the void by selling satellite and wireless broadband services out in the boondocks. The impending addition of services from US-based PanAmSat will increase the choices - and thus lower the prices - for rural dwellers.

Still, as far as wired phone and broadband goes, if the Government is really serious about rural New Zealanders not being left behind it needs to knuckle up and invest some serious money of its own.

The Government needs to either build its own rural network, buy Telecom's, or pay the company to provide better services. Nobody else will, and nobody else should.


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7:48 PM  

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