NZ Telecommunications - Broadband

Broadband Overview

New Zealand was well down the OECD broadband penetration list in the previous few years, but in 2006, there was a 60% increase in residential broadband, lifting New Zealand to more respectable levels, although still lagging most developed nations.

Government policy on Local Loop Unbundling (LLU) was introduced in New Zealand in 2006. This will allow Telecom's competitors to build their own services over the Telecom network, independent of the incumbent, rather than the non-viable reseller arrangement currently in place.

However, the quality of these services will rely on Telecoms network infrastructure. Until the completion of the NGN infrastructure rollout, resellers are limited to re-selling Telecoms ADSL service.

Wireless broadband is provided by Woosh Wireless, and resold by Vodafone.

Market and Industry Analysis

Broadband penetration in New Zealand was slow during the first few years, due to high priced plans and low speed. This unattractive combination was largely due to a combination of lack of network capability and lack of regulatory intervention to introduce Local Loop Unbundling (LLU). During 2007, Telecom attempted to remedy part of this equation with the release of well priced plans and fast speed broadband. Unfortunately, in spite of rapid uptake of the offer, Telecoms network failed to deliver to performance promises, and is now facing commercial charges.

Regulatory intervention has finally spliced into Telecoms market monopoly with the promise of more viable wholesale offers enabling virtual ISP's to configure affordable broadband packages by end of 2008.

Triple Play

The only only player offering real triple play services in New Zealand in late 2005 was TelstraClear. With the dissolution in 2007 of the reseller agreement with Vodafone for its mobile offering, TelestraClear is now relying on forging a bridge with Telecom NZ to support its customer base.

Digital TV

The broadband market is not the only telecom market sector to suffer through monopoly stranglehold. Pay TV prices also remain far too high due to the market dominance of SKY TV. New Zealand continues to lag behind most of the developed world in the transition to digital television.

With the impending unbundling of Telecom, due March 31 2008, New Zealand may finally have a chance to develop an equal footing in the global Internet economy. Whilst this action may not be the most profitable for Telecom shareholders, it is most certainly in the interests of the country, and signals the need for a stronger regulatory body in the Telecommuncations industry. The promise of improvement is there, all it needs is concentrated effort to ensure a profitable environment exists for all [including Telecom NZ] and continued NGN upgrade to support innovative new services such as triple play, IPTV and VoIP.

Infrastructure - NGNs and FttH

Telecom's initial Next Generation Networks [NGN] rollout completion data has been pulled back from 2012 to end of 2008. This aggressive deployment has been driven by a combination of the higher than expected uptake on the initial offerings, leading to overloading of the network and poor QoS, and the introdcution of overnment policy on Local Loop Unbundling (LLU) due for implementation March 31 2008.

This will signal a new era for broadband access and services for the NZ market, paving the way for Internet media services such as VoIP, IPTV.

A number of niche fibre optic networks have also been established. The first FttH service was rolled out in a new Marlborough housing project, deploying 1Gb/s Fibre-to-the-Home (FttH) network.

Fiber

Auckland lines company Vector is currently extending its existing fibre-optic broadband network in Auckland City by more than 300 kilometres to connect Auckland city, Henderson, the North Shore and Papakura.

The network extension will connect forty-one Telecom exchanges, providing provide direct and open access to Telecom's unbundled copper local loop for Internet service providers. This will remove network performance constraints for service providers otherwise seeking access to Telecom's unbundled local loop.

The extension effectively forms a ring around the metropolitan Auckland area, and will also connect forty of Vector's electricity sub-stations to support state-of-the-art network management.

Vector has already signed a long-term agreement Vodafone as an anchor customer for the network extension.

Statistics, Overview & Providers

The NZ broadband service provider market is dominated by Telecom New Zealand. Other players include:

• ihug - now owned by Vodafone
• TelstraClear
• CallPlus
• ICONZ
• Maxnet

Competition is largely from reselling of Telecom's ADSL services.

ADSL

ADSL2 is the prevailing high-speed broadband technology deployed in New Zealand.

ADSL2+ broadband has been rolling out since March 2007, initially only to metropolitan areas.

Orcon was also preparing to deploy a high-speed broadband ADSL2+ network to suport IPTV services.

Wireless

A limited number of wireless broadband players, including:

• Woosh Wireless
• CallPlus

Wireless Broadband

With the lagging of high speed ADSL, wireless broadband is increasingly being seen in New Zealand as a serious alternative to fixed broadband services.

Usage is growing steadily from a low base, but remains very much a niche with usage restricted principally to regional areas outside the coverage of fixed ADSL and cable services.

Niche wireless broadband providers competing Telecom include:

• Woosh Wireless
• CityLink
• CallPlus

WiMAX

Several WiMAX deployments are currently underway throughout the country.

• CallPlus - WiMAX data and VoIP network in Whangarei
• Woosh Wireless -city-wide WiMAX network in Hamilton.

Cross Subsidizaton

Vodafone is launching after fixed line customers that includes Free broadband access if you commit to $20 worth of tolls. Cross-subsidization of services such as this offer is restricted to the big multi-service providers, effectively cutting out mid market resellers.

At present, niche providers are the ones investing in local innovation is occuring, however with this level of competition it is doubtful that is is sustainable. Pricing wars provide no real benefit or improvement to the issues we have, or promote investment in infrastructure.

Next: NZ Mobile Telecommunications

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