Current | 2004 | 2003 | 2002

13 August 2004

Comment on A Draft New Zealand Digital Strategy

NGI-NZ congratulates the Government on an excellent start to setting out a Digital Strategy for New Zealand. The NGI-NZ Society wishes to comment in particular on the 'Connection' section.

The NGI-NZ Society wishes to comment in particular on the ‘Connection' section.

General Comments

Electronic communications

One of the most difficult aspects of human endeavours is effective communication. One of the greatest potential enhancements in communication comes from the advances in technology.

The best opportunity for communication usually comes about when people are gathered together in the same physical space, where they can easily see and hear each other. For many reasons it is not always practical to bring people together to communicate. In situations where people need to communicate at a distance they use the intermediary of tele-communications. In earlier centuries the physical letter was the predominant method of tele-communication. In the 20th century the voice tele-communication became dominant, with its immediacy. In parallel the one to many tele-communication broadcast technologies became part of everyday communication.

In the 21st century we will see the opportunity for affordable multi-party high quality video and audio communication. These services put a high demand on the telecommunications infrastructure to deliver highly reliable very high bandwidth services. Luckily technology advances are working to make such infrastructures not only possible but also potentially very affordable.

Infrastructure development

Unfortunately New Zealanders do not generally have access to reasonably priced high bandwidth communications. There are several reasons for this situation. Telecommunications companies have had over a century of developments where they have been dealing with managing a scarce resource - bandwidth. They have developed well-honed techniques for such management, and industry technologies have been developed to assist in that management. However, over the past decade dramatic advances in communications technologies have continued to drop the cost of the actual transport of data at least two or three fold each year, and there is not an end in sight to these advances. It is, for example, technically possible to carry a video stream for every individual on earth simultaneously along a bundle of fibres that would fit into a 25mm diameter package.

In the meantime telecommunications companies have built their networks to be able to carefully manage a scarce resource that no longer needs to be scarce. Compounding this problem, a very large part of the cost of operating a telecommunications network is in the complex charging regimes that are implemented. With this cost-riddled regime telecommunications companies are loath to release the real potential of their networks, as it could - many say would - cannibalise their own revue streams and lead to commercial collapse.

We have come to a time where there must be some disruption caused in the industry to allow New Zealand to make the advance into the new world of data communications. However there are good reasons in our environment not to cause catastrophic failure in the industry, but rather to look forward to pushing change through as quickly as possible without fatally damaging current players. We must find a way to stem the flow of investment going towards legacy technologies, such as aDSL, that merely serve to prop up regimes and revue streams from the past, while masquerading as advances in technology and services.

A radical simplification of our communications networks is required. For example, charging through the introduction of pure subscription-based services is now feasible. In such networks subscribers are provided with a particular bandwidth connection to the network, at a fixed cost, independent of the use they make of the connection. Communication services are already provided in this way internally in large organisations where users of their local area networks are charged through a fixed subscription, often on a per network outlet annual charge basis. Why not adopt the concept of a LAN for New Zealand? This would be similar to the vision held by Dawson Donaldson, Director General of the Post Office 1960-1962, when he said, "Local subscribers should be able to call ‘without fear of fees' the centre that meets their social, domestic and business needs".

The challenge for New Zealand is to unleash the potential of communications networks. Since the privatisation of telecommunications in New Zealand, investment in the communications networks has been largely undertaken by commercial enterprises. In consequence New Zealand's fundamental communications infrastructure is now privately owned, and not directly available for exploitation for the benefit of New Zealanders. If New Zealand was large enough to have created a market at the level of the fundamental infrastructure (largely the fibre networks) we might have expected progress could be made through normal commercial enterprise. Unfortunately this is clearly not the case and New Zealand cannot afford to wait until the conditions are conducive to the creation of an effective market.

In broad terms New Zealand has two options to make progress:

1. For the Government, national and regional, to work with the telecommunications companies in a forward-looking plan for a renewal of telecommunications in New Zealand that would see the adoption of a philosophy that saw data communications (as opposed to just voice transport) as the fundamental building block of a network, and include a radical overhaul of tariffing.

1. The Government to take a lead and build an advanced national data network backbone interconnecting with regional telecommunications infrastructures. In this scenario the Government would own the underlying infrastructure - the glass fibre cable - just as the Government owns the rail network. Commercial enterprises would build their businesses on top of the fundamental infrastructure, thus avoiding expensive and unnecessary duplication of physical network. This is the approach taken in Sweden (see http://www.itkommissionen.se)

Reliance solely on commercial market forces is not an option that will provide the advances needed. The need for intervention is amply demonstrated by the fact that the latent potential of telecommunications infrastructures in New Zealand is not being made available to benefit New Zealand. It has been variously estimated that only between 5% and 10% of the potential bandwidth of the existing trunk fibre infrastructure is currently used, but the charges made for use of the bandwidth are some of the highest in the world, limiting the uptake.

The Government has recognised the problem in data communications for the Research and Education sector through their significant support for the establishment of an advanced data network for research, education and innovation in New Zealand. We believe that the need for access to affordable advanced services, such as access grids and data grids, exists in the commercial sector and the wider community. The Government, through its Digital Strategy, could move to ensure such services becomes generally available, and are not limited to a select few.

Building Capability

New Zealand requires a skilled workforce, with opportunities to gain experience in the use of advanced networking technologies and services, if we are to extract the benefits an advanced network environment can bring to research and commercial activities. It is vital that there be a programme put in place, alongside the development of advanced network infrastructure, to develop the capability of New Zealanders to effectively build, manage and use advanced networking. As New Zealand is starting from behind all other advanced countries in access to advanced networking, it is doubly important that a focus is put on education and up-skilling in effective exploitation of the new environment.

Specific Comments

The Role of Government

The Digital Strategy focuses on the government's role in stimulating competition. While it is acknowledged that this is an important role we believe that commercial competition alone will not deliver the results needed in a timely fashion. As noted above there is need for a basic change in thinking about communications services, and it is unlikely this will happen in the near term without direct intervention from the Government. This appears to be accepted already with Government's strong financial support for the establishment of an advanced network for research, education and innovation.

Recommendation: The Government closely monitors the data networking environment and intervenes where necessary to ensure that advanced network services are made accessible and affordable.

Benchmark targets for broadband speed by 2010

We believe that the targets are both reasonable and, with the right strategic and technical approach (over the longer term legacy copper based technologies will not deliver the required results), achievable. (See articles from CANARIE, the Canadian advanced network organisation, at http://www.canarie.ca/canet4/library/customer.html). In particular we support the use of fibre right to the end-user, providing the basic infrastructure to support virtually unlimited bandwidth for future applications. This is the approach taken in Japan where more than 1,000,000 homes are now served by fibre, and with over 80,000 new fibre connections being made each month. This is real future proofing, and with the right approach, can be less expensive than deployment of copper. Some initiatives in New Zealand are showing what can be done; these include the Counties Power initiative in the north and the Network Tasman initiative in Nelson. Continued investment in legacy systems to retrofit advanced services is ultimately an expensive path that will not serve New Zealand well in the future.

Actions

We fully support the actions listed and in particular wish to emphasise the need to ensure the emergence of comprehensive regional networks able to support health, education and other community services.

Challenges

BROADBAND PRICING AND UNBUNDLING OF THE LOCAL LOOP
The holding of the local loop by one dominant player in the market has demonstrably limited development. From a pure efficiency of use of resources perspective it is clearly wasteful to build multiple local loop infrastructures, each connecting to the end-user premises. To avoid this either the local loop (legacy or newly built) could be in the hands on Government, local or regional, or the holder could be regulated to enable sharing of the resource. A failure to address this issue would seem to almost certainly guarantee sub-optimal solutions.

Recommendation: The Government identify a mechanism to provide a fair and neutral platform for the delivery of advanced network services to every home and business. This may involve revisiting local loop unbundling.

MOBILE
There is more room for optimism that the market in mobile services, with the two main players in the market having roughly equal shares, will ensure pricing continues to fall along with the falling cost of provision. The main concern would be whether two players are sufficient to create a market. International benchmarking should continue to help show how New Zealand is performing.

ENSURING ADEQUATE INVESTMENT
There are a number of local regional initiatives using up-to-date technologies that indicate regional New Zealand is investing directly in their own communication infrastructure. The major inhibitor to investment in such initiatives is the commercial power of the major incumbent telecommunications provider. Care must be taken to ensure that unfair commercial behaviour is recognised and dealt with effectively to raise the confidence level for other investors.

Recommendation: Every opportunity should be taken to support well-founded regional network developments.

SERVICES IN REMOTE AND RURAL REGIONS
The market on its own will not provide services that remote regions wish to have. However effective use of different technologies, including fixed wireless and satellite services, will provide reasonably cost effective services so that no part of New Zealand should be isolated from advance communication services. A Probe type process may be sufficient to ensure investment is maintained in this area.

PROJECT PROBE, THE ADVANCED RESEARCH NETWORK, AND E-REGIONS
With the rise in interest in access to high quality high bandwidth communications at reasonable prices we are seeing a telecommunications renaissance, driven from the bottom up. Innovative regions such as Southland have recognised the importance of first class communications infrastructure to their region, and moved to ensure they have it. There is a natural synergy between the regional initiatives and the advanced network for research, education and innovation. This has been shown overseas in Canada, a growing number of States in the US, and in the UK, where regional education and health bodies are connected into the research and education advanced networks. We believe that this will be a natural path for New Zealand to take.

As noted above we believe that Government intervention will be required to obtain the advanced networking New Zealand should have. We believe that a national private/public sector initiative will be required to build a 21st century infrastructure based on fibre services to the end user. If the benefits of the Advanced Research, Education and Innovation Network initiative are to be extended equally to regions and to all public institutions including schools, libraries, hospitals, health care providers and local authorities then it is imperative that Government take a guiding hand in the development of regional optical networks.

Recommendations:

• The Central Government should ensure that all public institutions, including schools, hospitals, health care providers and local authorities, have access to the Advanced Research, Education and Innovation network by 2008.
  
• Central Government should examine private/public sector partnership models employed elsewhere in the world, such as in the Alberta Supernet, for extending advanced networks services to all regions in New Zealand.
  
• A regional unbundled fibre infrastructure fund be established to encourage the development of regional fibre networking initiatives. The proposed fund would, in the first instance, provide financial assistance to local and regional authorities for network engineering, and business case studies to direct capital investment with the private sector. This is consistent with the Probe I policy framework.