Small step for rural NZ

To dismiss all questions about the Government’s decision to go with Telecom and Vodafone for the Rural Broadband Initiative as simply anti-incumbent or chatter from sore losers and theorists is both wrong and disingenuous. At the very least, negative comments about the decision has elicited more information from the Government (for example, see ICT Minister responds to critics of Telecom/Vodafone RBI decision) than carefully worded press releases.

The word on the street is that the bid from OpenGate/FX Networks consortium never had a chance. The talk is that the Government’s experience with a key member, Woosh Wireless, in Project Probe meant that they were never really in the running. Is that right or wrong? It’s impossible to know based on the information the Government has chosen to release at this stage.

What is more likely that a factor that wasn’t in the Request for Proposal- increased mobile coverage (noting that the initiative was for rural broadband, not mobile coverage)- may have played some role in the decision to go for Telecom and Vodafone. Is that right or wrong? Again, it’s likely but impossible to be fully certain.

The point I’m trying to make by indulging in this speculation is that more transparency in Government’s decision-making is essential. Government cannot expect trust and support for its decisions based on only press releases and interviews. Undoubtedly we will not get even a barely acceptable level of information at present based on excuses around the need for commercial secrecy. So all we can do is to keep a look out for more information at a time Government thinks is right.

Leaving aside speculation about criteria and bid evaluation, it is clear that the Government went for immediate benefits to rural areas over a more ambitious, and probably more risky, big leap. To that extent it is a wise political decision.

Let’s not get so lost in the details that we overlook the big improvements that are coming fairly quickly to rural areas. This is hugely important, hugely welcome. The frustrations of slow and unreliable Internet access in areas just outside urban areas are very real and urgent. Resolving access constraints for the many Kiwis living outside the big cities at low technical risk is a good use of public money.

Yet therein lies the rub. The 5 Mbps quick fix will become the millstone of the future. The Government should acknowledge the trade-off and seek buy-in for its decision not to be more ambitious. New Zealand has a once in a generation investment opportunity to boost rural broadband. The Government has taken the path of a quick fix rather than a big leap. That is a choice for Government to make and for people to judge but let’s be clear and upfront about it.

Rural Broadband Initiative: a quick fix

Source: Alaina B

The second area of concern is around competition, or rather the lack of it. Competition can be a great way to ensure the best possible services and prices for customers. In that regard, regulation and oversight should be seen as a backstop as opposed to genuine market competition.

The whole argument put forward by Government around preventing a cosy duopoly being built from our money hinges on open access. The thinking is that competitors can use the infrastructure funded by the public to provide their own competitive services.

Minister Joyce speaks of open access and equivalence in the same breath. MED’s description of the proposal talks about open access only in relation to towers and non-discrimination for Layer 2 Wholesale bitstream services. Pointedly, Telecom’s view of open access (audio) is an idea-in-progress at best.

Open access, equivalence, non-discrimination: everyone is using these terms to mean something different, depending upon their viewpoint. No objective person can possibly be confident about the precise nature of the promised open access.

Yet this is the very thing that’s supposed to ensure competition. And, the comparative merits of providing open access at a service level as proposed by OpenGate/FX doesn’t even figure anywhere. (Actually, the Minister’s press release did not even refer to OpenGate/FX.)

At this rate, the promised open access will turn out to be just the theoretical ability for competitors to gain access to the infrastructure funded by public money, such as towers, and constrained wholesale services. That access is very unlikely to be equivalent or even truly non-discriminatory compared to what Telecom and Vodafone will have in offering their own retail services. The result will be competition in theory but little customer choice and higher prices in practice.

By choosing incumbents Telecom and Vodafone over others, infrastructure-based competition will be severely stifled. Further, once Vodafone get the handout, what mechanisms are in place to provide incentives or obligations on upgrading the infrastructure from 3G to offer newer technologies, faster speeds, and lower prices?

Yes, there is as MED describes it, “a recognised upgrade path” but what will allow (in terms of spectrum) or require Vodafone to go down that path other than their own internal requirements of technical efficiency? Internationally, only 4G is regarding as providing true, all-IP mobile broadband.

InternetNZ’s concerns around lack of competition and ambiguity of open access requirements will, I hope, be taken up as areas for Government to lock down in the contract negotiations.