Crown company's $212m education push squeezing our business, lining Telecom's pockets - ISP

Orcon says Crown company Network For Learning (N4L), is squeezing its education business, and lining the pockets of contractor Telecom.

On the face of it, things are hunky dory.

In June last year, the government formed a Crown company called Network for Learning (N4L). In November, respected ISP industry veteran John Hanna was recruited as CEO (Mr Hanna walked on Maxnet soon after it was taken over by Aussie company Vocus).

Telecom signed as partner
The next key milestone came in August this year, when the government said N4L had signed a contract with Telecom to provide a managed network for all New Zealand schools.

The Crown is bankrolling the managed network to the tune of $212 million between now and 2021.

Killer deal
Before, many schools used to think they didn't have the funds for UFB, or where confused about where to turn for fibre, or what to do with it once installed.

Now, they can tap N4L's fully-funded service that includes internet connectivity, connection to N4L's managed network (which comes with higher levels of service quality and support than what schools get now, N4L says), uncapped data, optional content filtering (an optional service, network performance monitoring and security services.

All the connection and management services are free for schools. Plus there's free, uncapped data until the end of 2016.

If you're a resource starved-school without tech-savvy teachers on staff, it's a pretty appealing offer. In fact, it's pretty appealing to any school, point blank.

Hundreds of schools lined up
Not surprisingly, the offer has proved popular. 100 schools have signed agreements with N4L, the Crown company said earlier this week, with another 700 in the pipeline (NZ has around 2539 schools total).

Hard for commercial ISPs to compete
Commercial internet service providers (ISPs) kept their own counsel as the non-profit N4L made its 100-school announcement on Tuesday.

But NBR wondered if the initiative is, in fact, bugging them. 

Turns out it is.

"N4L has made it very hard for other ISPs to compete," Orcon general manager wholesale and business David Clarke tells NBR.

"We were confident that the market – all the ISPs, ICT integrators, men in vans – would be more than capable of rolling out UFB to schools. It was happening, and happening well," he says.

"What N4L has done is effectively taken the budgets from the schools and popped them into the pockets of the N4L consultants and staff and Telecom. 

"It’s really just yet another example of the government over-riding the commercial market in the telco space by carving off another market. It’s happened before with OneGov, REANZ, NHI and others. 

"The upshot is it’s very hard to compete."

Increasing pressure
Callplus/Slingshot CEO Mark Callander was more reserved in his reaction.

CallPlus has chased the education market hard, which makes sense. 250 students might make for a small intermediate school, but how many NZ companies have that many seats?

Does N4L crimp his business?

"Not necessarily as there is still the voice component which needs to be delivered," Mr Callander says.

"It obviously makes sense to manage the voice as a converged service over the fibre network, but this is often not the case due to gaps in the N4L solution."

The number of schools that CallPlus has on the fibre network continues to grow which reflects the value of the bundled services we provide as a very competitive price, he says.

"This business will come under increasing pressure from N4L over time.

"However, we will continue to keep adding further value to retain and grow the relationships we have established."

Telecom - foot in both camps
For Telecom, the situation is obviously a little different, since the company's Gen-i division is inside the N4L tent, providing its managed network.

But spokesman Andrew Pirie tells NBR not all schools would sign with N4L, at least in the near-term.

Some would chose a relationship with a commercial internet service provider, and "Telecom is also still out there competing with other ISPs to sign up those schools that aren’t going to be, or have chosen not to be, served by N4L within the immediate future.

ckeall@nbr.co.nz