Friday 27 February 2009


This article was published by David Ware the Managing Director of Teamtalk - a listed Telco that also owns CityLink and Araneo. It sets out the possibilities of Broadband and the pitfalls of some of the options and gives a glimpse of the future.

Sick of hearing about the government’s broadband strategy yet? Well you had better brace yourself because there is a lot more to come. Given that there is one and a half billion dollars of our money up for grabs and the possibility that the Telecommunications industry is going to be stood on its head we shouldn’t be surprised that every lobbyist, every so-called industry expert and every economist worth their salt is coming up with an opinion. It’s a feeding frenzy out there with the telecommunications companies throwing money at these bottom feeders like drunken sailors on shore leave.

The problem is that this stuff really matters. If the government gets its right it will do far more for our economy than all the investments in roads and other infrastructure put together. If they screw up, well they might as well have flushed the $1.5 billion down the toilet.

The broadband zealots will have us believe that putting broadband everywhere will transform our economy, we’ll fly back up the OECD league table and we will all live happily ever after. They tell us we’ll be working in a weightless economy producing software and ‘content’ (to you and me that means making movies, video games and the like). And we will all be video conferencing al the time They quite correctly point to countries like Korea where this transformation has happened.

In the opposing corner you’ll hear luddites shouting that the only thing that this investment will do is make it easier for folks to download pornography.

If the government gets it right then the reality will be somewhere in between. If we screw up the luddites will have the last laugh and will be saying “I told you so”.

So lets take a look at some of the benefits that we can reasonably expect from this investment..

Peter Jackson spent a small fortune getting super high speed Broadband out to his Miramar campus. Its how he links Miramar with Hollywood and it makes it that much easier for him to make his make movies here. Now just imagine if everyone involved in the video production businesses could have access to similar services? The dream that our ad agencies have of producing television commercials for Singapore for example would become a reality. There’s no question that this industry, and web design etc would get a massive boost. The benefits will extend to all sorts of business that use the internet – and unless your are involved you’d be amazed at how much business is dependent on the internet these days.

But what’s in it for the rest of us other than faster access to Trade me?

In the US President Obama wants to make US healthcare more efficient by computerising all health records – we can’t even begin to think about getting these benefits until we’ve got this broadband stuff sorted.

Properly implemented this broadband investment will drive down all telecommunications costs. It’s not just your internet charges that will go down. Cell phone networks for example are built on top of broadband so lower cost broadband will lead to lower cost mobile calls.

The impact on how we educate our kids could be massive. Get it wrong and we could be consigning our economy to a rural backwater.

So this is a big challenge for our government and one they’ve got to get right. Unfortunately its not just a question of deciding where to invest the money. There is a whole bunch of regulatory stuff that needs to sorted at the same time.

The first decision the government will be making is should they invest with the incumbent telecommunications companies or do they look elsewhere. An investment in Telecom for example is the fastest way to get broadband out there but it would do little for price and nothing for innovation. Its simply locking in the status quo and would probably harm us all in the long term.

But if you’re not going with the major operators where do you turn? This stuff isn’t simple, its not like running a bit of water pipe or power cable? Can the small broadband operators be trusted with such a big investment?

The previous government was keen for local government to take a big role in all of this. But not all councils are renowned for their commercial acumen and their ability to innovate and move fast; traits that are essential in broadband operators.

Getting the regulatory scene correct is absolutely vital. Everyone agrees that just tossing in $1.5 billion isn’t enough to make this happen by itself, so the government also needs to clean up the regulatory environment. For example its simply to expensive to dig up every street in the country so accommodations may need to be made with the existing utilities so that operators can run their cables through the pipes that are already in the ground. To date the incumbent telco’s have done a pretty good job of ensuring that the myriad of little regulations that make the telecommunications industry tick are firmly weighted in their favour. Making changes in this area isn’t going to be easy.

So how is the government going so far? Well the good new is that they haven’t tried to shoot from the hip and rush this one. They’ve given the role to Steven Joyce - one of the most commercially savvy ministers we’ve got - and Bill English who is as pragmatic as you can get, and they’ve been doing a lot of listening and little talking. So far so good.

At $1.5 billion, you’ll have to agree its one hell of a role of the dice. And given the importance of this stuff it really is something that everyone needs to get to grips with. This stuff is way to important to be left to the geeks and the spin doctors.

No comments: