Wednesday, August 1, 2012

The Internet in New Zealand

With today's announcement that Pacific Fibre had folded, I can't help but feel bitter disappointment. It always had challenges - the least of which, from my perspective, was raising capital. Let's consider that for a second. The capital isn't that hard. They needed $400,000,000. That's $100 per person in New Zealand. Okay - that's a little hard, but I don't think it's at all insurmountable.

The bigger challenges? The drivers for Internet - i.e. what gets people using data - are troublesome in New Zealand. In terms of legal content, your options are... well... Sky and Quickflix. Sky has pretty much sewn up media rights here. It still irks me that they got the rights to the Olympics though I have to say, the coverage on Prime has been pretty damn good (with the notable exception of the opening ceremony - which I just couldn't watch. WAY too much advertising). What really had me upset was the fact that 3 News had to blur out a screen showing the opening ceremony in the background of one of their stories.

To put this into context, I could pay another $10 / month for 50GB. I have used up 10GB in the last 2 weeks. It's just not worth $10 / month for data I can't really use.

Quickflix is one of many services offering anti-features. i.e. what really frustrates me about the recording industry is that instead of using technology to add value, they do their very best to take value away under the term DRM (Digital Restrictions Management or, less accurately, Digital Rights Management). Buttons.

And of course, they don't support Linux or other Free (Libre) operating systems. Want to take advantage of their services? Make sure you have Windows or Mac OSX.

The cable has to be profitable... If people aren't using data, the cable is effectively pointless.

But what does this all mean? Pacific Fibre were attempting to add a second cable from New Zealand to the rest of the world. Currently we have 1 cable (I don't think that's technically true but it's true that any lines out of New Zealand are owned by one entity - of which Telecom own a majourity holding) out of the country. It's got huge capacity - our needs are easily served.

The problem isn't technical. Instead, the problem is a social one. The cost of our Internet is a symptom of the fact that there's absolutely no competition. Add to that the regulatory holiday that the government (why the hell did all of those people vote National?!?) gave to Telecom and we're in an extremely bad position.

So the government's 1.5 billion ultrafast broadband project is very likely pointless as well. It's a way to get Sky content and not much else. It's a far cry from the sort of content and services that we should be expecting with that sort of speed. Could we be seeing less tweets as the price of data via the Internet becomes more and more prohibitive? The question is, is the National government going to see this as a failing of the project and make moves to rectify the situation?


  1. I have to call you on your first assumption, Nevyn. We can raise half a billion, sure - but what other areas of our economy (including highly needful ones) lose the benefit?

    I'd have liked it to go ahead too, and I definitely believe that internet connectivity and speed are key to delivering economic value.

    Can our country afford half a billion right now? Maybe. If we can raise that, shouldn't we give it to Christchurch, where people can't live in their own houses? That's where I'd rather my hypothetical $100 went.

    1. Definitely going to disagree on this one.

      The money for a second International data pipeline would be an investment - i.e. those investing are looking for a return. That $100 / person was simply an attempt to put it into perspective. Personally, in my current circumstances, I would probably throw $1,000 toward it - just to see some competition in wholesale rates which would hopefully result in a financial gain in the form of savings over a long term. I would be after savings rather than more value (which is the way it was more likely to go...).

      As for Christchurch, I think we've all thrown quite a bit of money toward it. Last year I found myself wanting to give more and being tapped out. The various fundraising efforts were phenomenal BUT it was all done in a relatively short amount of time. The sort of money put into that effort is quite different i.e. we aren't looking for any sort of return and so the justifications, particularly around amount, are quite different.

      For the record, I don't think the reason Pacific Fibre issued are the reasons this didn't work. That particular problem isn't insurmountable in which case, I would look for the other issues - the biggest for me being a lack of drivers.

      They had $170,000,000 worth of pre-sale contracts though the terms of those contracts is undetermined. Vodaphone, for example, made up $100,000,000 of that over 10 years. 10 years is quite a long time really and given that iHug, now Vodaphone (via their broadband offerings), is New Zealand's 3rd biggest ISP, that amount doesn't actually seem like a huge amount. There's only one other ISP likely and in a position to equal or top that amount - TelstraClear. So less than half of the initial investment in returns within the first 10 years (without taking into account the expenses).

      It's all a very grim picture except - It's important infrastructure and it's use is only going to grow. Making it an unknown but probably positive quantity. I don't think that most investors, those looking for long term, relatively safe, investments would have turned their nose up at this... Not being able to show real drivers probably would have them hesitating...

    2. Sean had left a message though it appears to have since disappears. I had a response:

      "I can't fault you on your logic. You win"

      Given that the response has since gone, you'll never know what it is that I can't fault him on. Such a pity :p

    3. "I can't fault you on your logic. You win"

      That's more than enough. Who cares what the discussion was about, or its importance? :P

  2. Knew you would. :D

    When you made the "we" involved about the country as a whole (using a $100 per person metaphor), you changed the grounds of your discussion.

    Your illustrating you could offer more ($1000) and that only exposes the large number of people for whom getting enough food to eat comes before investing in a future benefit.

    Putting aside my socialist hat - if we're *not* talking about charity or volunteerism, why shouldn't business invest in Christchurch in preference to Pacific Fibre right now? Isn't having all of our cities as viable economic units a valuable immediate goal?

    I agree with your comments on the value of this as an infrastructural investment, but don't see the grim picture you paint. A good idea was run up way too fast - infrastructure takes time.

    I wouldn't want to comment on their "real reasons" for failure - those questions are impossible to answer without documentation, and speculation on assumed facts leads to error.

    Not sure if it's very grim... I think problems created by bandwidth limitations can be intelligently worked around. Successful communities are about the challenges they solve, not the challenges they face.

    Identify for me specific things we could be doing with Pacific Fibre in place that are being prevented now. Are people dying? If business is suffering, what aspects and how? Isn't the real pain being felt from the global economic crisis right now?