Wednesday, April 23, 2008

Broadband Think Big - so where is the demand?

Well as David Farrar posts there has been a lot of positive about National's proposal to make you pay for a network you may never use. Even some snarking from the left, which of course means nothing, because as Owen McShane pointed out on Kiwiblog - Labour (and the Greens) want to pour over a billion dollars of your money into public transport that hardly anyone will use, and which will lose money and make hardly a dent on congestion in Auckland.
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So in some ways you can see that spending $1.5 billion on broadband makes more sense that on railways. No study asserts that Auckland rail improvements will generate new income or even generate net economic benefits.
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However, it is important to remember Telecom's (ha!) network of twisted copper pairs is not the only telecommunications network to many homes in the country. In Christchurch and Wellington (including the Hutt Valley and Kapiti, but not Porirua except a small part of Whitby) almost all homes have access to, not fibre to the kerb but the next best thing - a hybrid fibre coax network. What this means is that fibre optics provide the backbone, but this is broken out into networks for streets with coaxial cable, which is far higher capacity than twisted copper.
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This network is TelstraClear's and it sells cable TV services and highspeed broadband over that network. In Christchurch it offers 25 Mbps, and 10 Mbps in Wellington.
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So I want to ask, given TelstraClear isn't the majority provider of broadband in either major city, given it is technologically more advanced than current ADSL services, why aren't Wellington and Christchurch enjoying the rapacious economic "boom" promised by National?
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Meanwhile, the reaction from other parties is instructive:
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ACT has actually shown some principles
and argued that (funnily enough) it is Think Big all over again (gee who said that first?) . Rodney Hide said:
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Who will invest now, when National is promising one or other company a $1.5 billion investment subsidy?.... Telecommunications has suffered hugely from government-induced risk and an uncertain regulatory environment. National has thrown the existing regulatory framework back into chaos.... It’s 'Think Big' all over again, with John Key 'picking winners' in an industry remarkable for its innovation. He has set an arbitrary goal of 75 percent "Fibre to the Home" by 2014 with no clear analysis of the costs and benefits. And it's a backward step for competition in the industry as the $1.5 billion subsidy will deliver a state-sponsored monopoly."
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Indeed Rodney, well done, although he didn't explicitly say ACT rejects it, it was as good as doing so. Naturally Libertarianz rejects it out of hand.
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NZ First is just stupid saying National wants to do a deal with Telecom. It's almost as if its geriatric voters don't understand the idea of open access or competition. Nonsense that home phones are dear (with unlimited free calling) and cellphones are expensive is just plain old fashioned pig ignorance.
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Peter Dunne likes it, but then he worships the cargo cult of Transmission Gully - another $1 billion waste of money that needs general taxpayers to prop it up. He funnily said ACT "delivered a standard libertarian rant", ah we can dream Peter. You deliver the standard "government should spend other people's money" rant.
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So I do wonder, should National sacrifice Transmission Gully in favour of transmitting broadband? Or should it just remember whose money it is?
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Oh and for all the arguments about lifting GDP - here's one, for National - cut spending and cut taxes! That means company tax at 20% not 30%, the top tax rate not at 39% but at 20%... it means New Zealand being attractive for investors, businesspeople and professionals.
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It's called the level playing field - you might even find telecommunications investment increases then.


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