So what can consumers expect? Data speeds upwards of 100 megabits per second, Internet Protocol TV, direct Voice over Internet Protocol (VoIP) phone services, video conferencing… it’s all going to happen – but probably not before 2008.

A Good Start

When the Telecommunications Amendment Bill, the legislation to unbundle the local loop, was passed last December, the government was triumphant. Communications Minister David Cunliffe heralded a new era. “The bill equips New Zealand for the new digital age – an age where the smart use of technology will determine our continued prosperity as a country and make economic transformation a reality,” he exalted. But by March, the Minister was again singing the sombre song he’d rendered in the House during the bill’s second reading. Brandishing OECD figures showing that New Zealand remains 22nd out of 30 countries in speed of broadband uptake, Cunliffe said we were dragging the chain. The report cited Telecom’s continued focus on providing slower ADSL1 services at the expense of domestic and small business users who wanted higher speeds. Said the Minister: “There is a significant gap between New Zealand’s pricing performance and that of countries in the top rankings of the OECD.” ISPs and consumer groups will tell you that Telecom wants to wring every last cent out of its existing network before facing the expense of major upgrading. The embattled giant is reeling from being forced to separate into three operational units (wholesale, retail and network) and is concerned about its profitability. Group chief financial officer Marko Bogoievski recently told a business audience in Sydney that the cost and complexity of the changes had been underestimated, that the market competitors (ie: other ISPs) lacked focus, and that future investment would be dictated by the potential for returns on the outlay. Telecom’s media releases assert that most New Zealand broadband users are having a “good to excellent experience” while insisting that it is committed to the new environment. A fundamental review of broadband services is due by the end of April, at which time a nationwide plan will be published covering investment plans for the next three years. ISPs will be offered a wholesale broadband product dubbed UBS QOS, capable of transmitting IP telephony and video. The rollout of the high-speed ADSL2+ broadband platform has begun, and it’s hoped to have it installed in 120 exchanges around the country by the end of the year. But then reality kicks in. At present, access to ADSL2+ only benefits those living within two kilometres of the exchange, possessing the appropriately powerful modem and computer, and visiting New Zealand-based sites. The local copper wiring has to be up to scratch as well. “ADSL2+ is just a toe in the water,” says Ernie Newman, Chief Executive of the Telecommunications Users Association (www. tuanz.org.nz).

What’s the Holdup?

Equally frustrating is the delay caused by bureaucracy, represented by the Commerce Commission. In its hands rests a process entitled “Unbundled Bitstream and Copper Local Loop Standard Terms Determinations”. This is mapping out how the changes will be implemented and over what time period. Telecom’s COO Technology and Enterprises, Mark Ratcliffe, expects this process to continue until some time in September. The timeframe for the launch of services is still to be determined, he says, but it is likely there will be some trials prior to the full launch. “Six months ago I would have said that 2007 was going to be the year, but increasingly I’m concerned that it might be 2008 before a lot of the benefits start to flow,” says Newman. Scott Bartlett, General Manager of ISP Orcon, is more blunt: “I am flabbergasted about the fact that our regulator is the one that’s holding this up. We’ve had the government bend over backwards to get that legislation through Parliament within six months. My question I have asked the Commerce Commission several times is ‘Why aren’t you just getting on with it?’” Major ISPs like Orcon, TelstraClear and iHug are investing millions to provide the hardware that will deliver high-speed Internet services. In a bid to speed things up, Telecom and the various industry stakeholders have been working together on the required technical and operating standards through the Telecommunications Carriers Forum. Their work, in contrast to that of the Commerce Commission, is nearly half done.

But even when all the papers are signed and the handshakes exchanged, the technological changes are going to take time. “I think that 2008 is going to be messy, more from a technology perspective than anything else,” says Bartlett. “I think you’re going to find a number of customers on Xtra will still be in ADSL1 land – the same as we have today – because when it comes to investment into DSL networks it really takes a challenger to go out there and create a real difference. Telecom will be progressively rolling out ADSL2, but they’re not going to do that overnight and they’re not going to do it everywhere. You aren’t going to get mass rollout of ADSL2 and VDSL2 (Very High Speed Digital Subscriber Line) until a challenger incumbent like ourselves and iHug can get into the exchanges and start building, and I think that’s what everyone is waiting for.”

Rural vs Urban

Another ISP, ICONZ, has raised an issue that is a sore point for a not insignificant number of New Zealanders; they can’t get broadband because their local exchange just can’t handle it. Wealthy Auckland philanthropist Jenny Gibbs raised a brief flurry of publicity when she complained that she couldn’t get broadband connected to her home in upmarket Paritai Drive. The problem was lack of capacity at her local telephone exchange. Competing ISPs were at her door within hours and her worries were over. But for some people living in rural/provincial areas, high-speed Internet via a DSL network could remain a dream. Sean Weekes, Chief Operating Officer of ICONZ, says only the big ISPs can afford the capital outlay and operational costs of running high-speed broadband. “These costs will also restrict the number of exchanges that are actually used by the larger players, so we do not expect that end users outside of the main CBDs will be provided service that is any different to the service they currently receive,” he says. “Backhaul will continue to remain problematic for those areas not serviced by multiple providers and therefore the divide between rural and urban broadband is expected to increase over the coming years.” For non-urban dwellers, wireless or satellite services may be the only viable option. Some regional wireless initiatives, notably in the Bay of Plenty, have boosted access, but not everyone can afford it. The government is addressing this issue in a review of the Kiwi Share, part of the Telecommunications Service Obligations (TSO) deed that was signed when Telecom was privatised in 1990. The Kiwi Share, which guarantees free local residential phone calls, has always been a thorn in Telecom’s side and has been cited as a major reason why it couldn’t afford the upgrading necessary to provide true broadband services. While the government says it remains committed to the principle of free local calling, it wants to ensure that the Kiwi Share agreement “takes account of fast-changing technologies”. David Cunliffe says the review will decide whether to include rural broadband Internet access in the range of TSO services.

Consumers’ Institute’s Opinion

The Consumers’ Institute (www.consumer.org. nz) has been closely following the oadband services available here for the last few years. “One of the biggest problems is that consumers have no way of knowing what quality of service they’re going to get with a particular ISP until they’ve signed up,” says institute spokesman Marc Wendelborn. “We hope to rectify this. Consumer is currently working with industry and government bodies to come up with an accurate, independent broadband measuring system.”

The Consumers’ Institute also criticises some ISP advertising tactics. “By using excuses such as ‘maximum claimed speed’ and ‘as fast as your phone line allows’, ISPs have been able to avoid giving consumers any guarantee when it comes to the quality of their service,” says Wendelborn.

What is the best ISP?

NetGuide is often asked which ISP has the fastest broadband service. We would love to answer this question, but it’s just not possible. The fact is, you can’t accurately compare the performance of broadband plans for many reasons, including the number of people sharing the same copper wire to the phone exchange, your distance from the exchange and the amount of traffic at a particular time. In the absence of any reliable scientific test, the best judge of an ISP’s performance is customer satisfaction. Last November the onsumers’ Institute surveyed more than 10,000 New Zealanders about their ISP. Inspire was rated the top broadband provider, with an impressive satisfaction rating of 100%. Inspire was closely followed by Actrix, Xnet and ICONZ. The lowest rated broadband provider in the survey was Xtra.

Testing Your Internet Speed

Internet speeds fluctuate constantly. A fast connection one day can be a slow connection another day. All you can do is test performance at a specific time. This is easily done by using online tests such as www.consumerspeedtest.org.nz If you’re determined to get a very rough averaged figure for the overall performance of your Internet connection, it can be done. Go to a speed testing site like www. consumerspeedtest.org.nz Click the ‘Test’ button and record the download speed – shown in kilobits per second. Now, here’s the repetitive bit: repeat this test at various times of the day for at least a week. Make sure you test in what are considered the peak weekday Internet traffic hours of 6-8pm and also at several other times of the day. After at least a week of regular daily tests, work out the average Internet speed over this time. You could compare your results with friends on other broadband plans to see who was fastest.

Healthy Competition

Telecom points out that traffic through its broadband network has increased by 400% in the last two years, driven especially by the advent of video-sharing sites like YouTube and social networking sites like MySpace. Total connections grew 54% last year, broadband revenues grew 13%, but costs grew 23%. “The number of ISPs has certainly gone down and will continue to do so because it’s getting harder and harder to make a profit,” says David Diprose, President of the Internet Service Providers Association (ISPANZ). “Dial-up has traditionally been a profitable service because it costs so little to provide, but broadband is a different matter and there wouldn’t be many ISPs that are making money out of broadband today; most are losing money and it’s only through bundling other services (toll calls, Web hosting, etc.) that they can stay in business. Broadband alone won’t bring the profits in – probably never.” Telecom says over 90% of New Zealanders have access to DSL broadband via its fixed line network. But having access and actually achieving broadband speed are two quite different issues; ask anyone who’s tried logging on at peak times (6- 8pm), when little more than dial-up speed is likely to be available. (See "Testing your Internet speed".)

Freeing up the backhaul, as explained previously, is the key to easing this problem. At present this capacity is “dimensioned” by Telecom, which determines how fast ISPs can deliver Internet services. Under the new regulatory environment, ISPs will have control of that “dimension” and so will be able to provide true high-speed broadband – albeit at a cost. Broadband access charges are around $30 a month for the average consumer, which Diprose says is “pretty much at cost”. Therefore you shouldn’t expect any dramatic price reductions – competition may bring this about in the medium to long term, but for many consumers the early cost benefits will come from taking a bundled package of broadband and a VoIP phone connection, dropping their rented Telecom phone line. At present, while VoIP calls over a broadband line are free, VoIP phones cost an average of $150- 200 and the person you call needs to have VoIP as well. However, Orcon’s Scott Bartlett points out that when the local loop is unbundled, VoIP can be delivered straight from the exchange, so you won’t have to replace your handsets. Otherwise, true high-speed broadband will probably cost from about $40 a month.

Of course, once the speed is available, the anticipation is that more people will sign up because they’ll want to get all those enhanced services; quick downloading of audio and video, Internet telephony and television. “Rather than focusing on basic broadband entry cost, we think customers will be interested in what they can do with their broadband,” says Mathew Bolland, Head of Communications at TelstraClear. Telecom says upgrades to the backhaul network will be implemented at the same time as full-scale migration of ADSL2+. It all comes back to money and while Telecom and the ISPs are already spending heavily and planning to do more, the government is going to face pressure to open its coffers as well. Already $24 million has been spent on the Broadband Challenge, to get more fibre optic cable installed nationwide, and a second stage is promised although details are unknown and likely to depend on the next Budget. “[The government has] done some good things for schools and hospitals and things like that, but it’s been really the tip of the iceberg,” says David Diprose. “Some local communities have actually taken the initiative and have put fibre in, but it’s not happening on a very large scale in New Zealand. I don’t think the government is doing enough in that space; they’re leaving it to private enterprise, who are not doing it fast enough. Today’s copper, if it was used properly, would give pretty acceptable broadband performance to the majority of the country, but there’s no doubt that decent fibre would be even better.” The clock for New Zealand’s proper entry into the global communications network has been ticking for too long – ask anyone in the local industry. Now the drive is on to bring us into the 21st century. “We have to get there,” says Ernie Newman. “This technology is the very foundation of modern commerce and modern-day lifestyle, and one way or another New Zealand has to rapidly move to the point that this kind of service is available, otherwise quite frankly we’ll become a Third World economy.”

Jargon Busters

ADSL1 – The current wholesale Internet service offered by Telecom.
ADSL2+ – Higher-speed broadband service currently being installed in telephone exchanges.
DSL – Digital Subscriber Line – the technology that transmits data over a telephone network.
IP – Internet Protocol – delivery of services (telephone, TV, etc.) via the Internet.
Local loop unbundling (LLU) – The opening of Telecom’s transmission infrastructure to allow all Internet service providers (ISPs) to install their equipment at its exchanges.
Naked DSL – Internet connectivity without a Telecom phone line.
VDSL – Very High Speed Digital Subscriber Line – technology for very fast data transmission.
VoIP – Voice over Internet Protocol – Internet telephone service.