The ultra fast and the furious: UFB fibre gets the Moxie treatment

Our government, delivering on a 2008 election promise, is investing $1.35 billion in making ultra fast fibre available to 75% of New Zealand homes and businesses. What’s not so ultra-fast, though, is the rate at which those homes and businesses are connecting to the network, with only 3% of us (and by us I mean the fibre-ready us) actually hooking up.

The Moxie Sessions is an informal gathering of informed and opinionated Auckland thought leaders. Each month or so the group meets to discuss tech economy issues associated, usually, with unlocking New Zealand’s international competitiveness.

In May we were hosted, appropriately, by Crown Fibre Holdings (the entity tasked with turning that $1.35 billion into a fibre network). As we dined on plastic platters of food-hall sushi, sipped the second-most-expensive fruits of the Pak ‘n’ Save beer aisle and marveled at what some call the best carpark view in the entire Western Viaduct district, our thoughts turned to fibre. Specifically, why is no bugger connecting? Does that matter? And why was it built in the first place?

From a Crown Fibre perspective, Rohan MacMahon argues that while 3% isn’t a big number, connections are increasing at 1,000 per month, and given the scale of the engineering challenge, New Zealand’s uptake rate stacks up well internationally. Plus takeup is a lot higher for “priority users”, the businesses, schools and health facilities that are the first target for UFB connectivity.

One other challenge is on the retail side. While smaller operators have been working hard to connect customers, larger ones haven’t been quite as aggressive. Vodafone, maybe because of the impact of the Telstra Clear acquisition, and Telecom for technical reasons that mean it isn’t able to offer a fibre-only solution, although it has recently launched services.

Promoting fibre “no one’s job”
A deeper issue, though, might be that getting people to connect is no one’s job. Tellingly, a business fibre case study video Rohan played ended with an Auckland Council logo. Crown Fibre Holdings’ responsibility starts and ends with building the network. Not one cent of that $1.35 billion will be spent on telling people what it’s for or encouraging them to use it. (Compare this with the presumably enormous investment in telling people about the TV digital switchover.)

Rosalie Nelson from UFB contractor Chorus reckons we don’t so much have a UFB problem as a business culture problem, and that it’s wrong to see UFB as a solution in itself. A better pathway, she says, is to set policy and incubate the right kind of businesses to capitalise on the environment UFB provides.

While New Zealand is a big user of the Internet, we’re not using it very productively. NZ is 7th in Internet usage worldwide, but 17th in economic utilisation.

A McKinsey study of 13 countries, including the G8, looked at the contribution of the Internet economy to GDP and found an average of 3.2%. 75% of that contribution came from traditional business – half of the gain through productivity improvements, half through new customer and market growth. 

Sweden has pushed that figure to 6% due to a mix of both good infrastructure and a strong mix of policy/business initiatives in education, training and e-Government.

In a New Zealand, small and medium businesses have the most to gain from Internet enablement, but many are mainly using it for browsing and communication purposes.  86% of New Zealanders are buying goods online on a regular basis, yet an MYOB survey says only 35% of New Zealand small businesses even have dedicated websites, and many of those are brochureware.

Speed isn’t everything
Part of the problem might be around the way businesses perceive UFB. While everyone knows that the F stands for Fast, Rosalie suggests we need also to look at more business-focussed benefits.

“The fibre message for business is not about ‘speed,’ but better symmetrical connectivity and throughput that supports their business at peak periods.  And the cost of fibre under UFB is literally an order of magnitude less than what was previously available commercially – a business that would have once spent tens of thousands getting connected can now do so at the cost of two months’ rental of the fibre product. 

“We know from our business survey that 79% of businesses said fibre had high appeal for their business. The issue is ensuring that fibre proposition is not just about capability and price, but also shows how it can meet business requirements – it needs to be much more segmented and targeted to their needs.”

While tech journalist Bill Bennett agrees the UFB rollout has yet to set the business world on fire, he points out that for the telco industry the effects have been massive. Firstly, it’s fundamentally changed the structure of the telecommunications industry through the Telecom / Chorus split and the Vodafone / Telstra Clear merger.

And one level down, it’s created huge entrepreneurial opportunity for second-tier telcos, especially as the leaders drag the chain. To quote one unnamed second-tier telco CEO, “the amount of disruption is glorious.”

Government: “network built, job done”
While Bill considers the network rollout to have gone smoothly, he says the main obstacle is government. “UFB sits in a policy vacuum. The network is being built, so from the government’s perspective it’s ticked off: job done.”

Bill says the project needs to mesh with wider government, as we’ll only get the full benefits when uptake reaches a higher percentage and we reach a tipping point.

Lack of promotion and big-player chain-dragging aside, the other thing UFB lacks is a killer app. As Rosalie asserts, people don’t buy UFB, they buy the things you do with it. In Bill’s opinion, video content will be a big part of this, and it won’t happen until Sky’s dominance is challenged.

[UPDATE: Bill revises his view somewhat given the Coliseum English Premier League deal here; read also Michael Wigley's opinion piece for NBR, English soccer: Sky TV's "tall dwarf"?]

Bill is also worried by the government’s approach to law changes around the Chorus copper access deal, as regulatory uncertainty isn’t a good thing for new players wanting to do business on UFB.

While UFB uptake isn’t a simple problem, a few themes emerged from our discussion:

It needs to be someone’s problem. “Build network, walk away!” (to quote the mold-remover ad) doesn’t seem to be getting us there.

Not all businesses want the same thing. Assuming they’ll switch to UFB so they can do things better/bigger/faster just isn’t true. Speed might not be the killer app here.

Consumers need content. Coliseum’s EPL move is a start, but for people to want this technology, they’ll first need to want the content they can get with it, and the broadcast and media industries will need to find commercially sensible ways to deliver it.

The Government has a role to play. As a major IT user itself, the Government has a huge opportunity to eat its own dogfood and find ways to make the most of UFB itself.

But government is not the answer by itself. If we are really going to transform the economy with this Internet thing, improving technology use by businesses is the key. Ensuring that those who understand the potential value of ICT are talking to those who do not, and making sure that greater use of ICT is a commercially valuable decision: these are the makings of a long-term project.

The Moxie Sessions is an Internet economy discussion group held once a month in Auckland, New Zealand. Its purpose is to bring together a group of interesting technophiles from across the economy to talk about how New Zealand can take advantage of the Internet to improve its economic performance.

Check out the standing invitation, the podcasts and the records of previous events at themoxiesessions.co.nz.

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