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French expert: NZ Government drove too hard a UFB bargain Monday, 23 September 2013, 10:38 am Article: Digitl

Benoit Felten. Photo by Peretz Partensky, creative commons
Commenting on the controversy surrounding Chorus and the UFB in his Fibre Revolution blog French telecommunications analyst Benolt Felton describes the copper price debate as a 'quagmire'.

He says:

...the government got an amazingly good deal out of Chorus and other LFCs, probably too good.

Felton says the $1 billion invested by the New Zealand government works out at around €500 (NZ$800) per household for 75 percent coverage.

His chart, shown below compares this with other government investments in fibre networks. He says : "Obviously, the more of the territory you want to cover, the more expensive it gets as urban density decreases."

NZ gets more fibre for less money

Felton was recently in New Zealand doing some work for Chorus, so he isn't and entirely independent outsider.

He points out New Zealand's government gets 75 percent coverage for the same cost per household that gives Malaysia 20 percent coverage. As he points out building costs are lower in Malaysia than New Zealand and that the NZ government's money isn't a subsidy, it's an investment with an expectation of return.

 

 

Felton says Chorus isn't using its copper revenues to pay dividends instead of investing in fibre. There are hard targets with stiff penalties for the deployment and Chorus is hitting the targets. Deployment costs have turned out to be higher than expected, but the deployment continues. He says:

Put simply, the current level of copper revenues ensures that fiber deployment is possible. Take it away or reduce it dramatically and either the UFB doesn’t happen or Chorus goes belly up or the government has to commit a lot more taxpayer money at no return.

Switch off copper

So how does Felton think the government can get out of the quagmire? He suggests the government switches off the copper network in areas where the fibre is installed forcing customers to move to the new network.

He says Chorus can't afford to finance the UFB roll-out without decent revenues from the copper network and that there's no incentive for retail service providers to move customers from copper to fibre when there's a wholesale price difference between the two networks. If that happens, Chorus goes bust, New Zealand gets no benefit from UFB.