BAY OF PLENTY COUNCILS
BROADBAND BUSINESS CASE STUDY
SERVICE PROVIDERS - MILESTONE 6
April 2007
GDI
Ground Floor, 201 Wickham Terrace
PO Box 782 Spring Hill, Qld 4004.
Telephone: +61(7) 3832 1222
Facsimile: +61(7) 3832 1212
Email: [email protected]
Bay of Plenty Coluncils Broadband Business Case Study – Milestone 6
Contents
1
INTRODUCTION ............................................................................................................. 3
2
PURPOSE ....................................................................................................................... 4
3 TELECOMMUNICATIONS SERVICE PROVIDERS – HISTORY, TECHNOLOGY
AND UNCERTAINTY ............................................................................................................. 4
3.1
HISTORY .................................................................................................................... 4
3.2 TECHNOLOGY.................................................................................................................. 5
3.3
UNCERTAINTY ............................................................................................................ 5
4 TELECOMMUNICATIONS NETWORKS – SEPARATE NETWORKS, NATURAL
MONOPOLIES AND LOCAL OWNERSHIP .......................................................................... 7
4.1
4.2
4.3
5
SEPARATE NETWORKS ............................................................................................... 7
NATURAL MONOPOLY ................................................................................................. 7
LOCAL OWNERSHIP .................................................................................................... 8
TELECOMMUNICATIONS PROVIDERS INVESTMENT CRITERIA............................ 10
5.1
5.2
5.3
RISK ........................................................................................................................ 10
OPERATIONAL COSTS ............................................................................................... 11
ENGAGEMENT OPTIONS ............................................................................................ 11
6
SUMMARY OF SERVICE PROVIDERS INVESTMENT REQUIREMENTS ................. 15
7
CONCLUSIONS ............................................................................................................ 16
Appendix 1 – Summary of Interviews with Suppliers
DISCLAIMER
This document has been prepared by Gibsons Digital Innovation (GDI) from information provided by the client and from other
sources. Our procedures do not necessarily include confirmation of validation procedures of that information and this document is
provided to the client for its exclusive use and benefit only. No other party should rely on it for inferences or forecasts made
therein. GDI accepts no responsibility to such parties.
In addition, certain inferences and forecasts have been drawn and made on the above basis although every effort has been made
to ensure that such inferences and forecasts are reasonable, no responsibility can be accepted by GDI for eventual outcomes.
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1
Introduction
This document is part of a project and series of deliverables required by Bay of Plenty Councils to
develop a broadband business case study for the Bay of Plenty region. The project recognises that
a wider geographic availability of broadband services is an economic enabler, and that a lack of
these services is increasingly an economic disabler.
The report is the sixth of 15 deliverables, culminating in the final report on the business case for
the provision of broadband infrastructure in the region. This report and its relationship to other
reports in the project are illustrated in figure 1 below:
Figure 1 – Deliverables Structure
Deliverable A6 is the Subject of this Report.
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2
Purpose
This document describes the options under which suppliers of telecommunications services might
engage with the Bay of Plenty region to help build the core infrastructure and deliver broadband
services.
Interviews have been held with eleven national and regional providers to identify their views on the
Bay of plenty region and the changes to the investment environment that would encourage further
investment.
This deliverable will assist in developing an approach to the market for broadband services and
associated infrastructure if councils decide to actively develop better broadband infrastructure for
the region.
3
Telecommunications Service Providers – History, Technology and
Uncertainty
3.1
History
In most developed countries operating in a competitive environment, the telecommunications
suppliers can be divided into two types:
i)
The Incumbent Telco (Telecom) who has been formed under government
ownership to establish essential telephone and other services, often about 100
years ago. This organisation has been progressively corporatized and finally
privatised, and because of its long history, has achieved market dominance in all
areas of telecommunications.
In some areas of growth such as mobile telephony and broadband services, the
incumbent can find the infrastructure they have developed over many years is
unsuitable for these modern services, and they are faced with heavy reinvestment
in new technology platforms.
At the same time, other providers will seek wholesale access to parts of the
incumbent’s network infrastructure, to reach their customers more cost effectively,
and the government will force the incumbent to act in both a wholesale role for its
competitors, and it will continue providing retail services for its customer base.
Under these circumstances of rapidly changing technologies, requirements for
reinvestment, managing growing competition and acting as a wholesaler, it can be
concluded that the incumbent telco has a number of conflicting pressures applied
by the market, government and shareholders.
ii)
Other Providers face a very large and well established incumbent telco in
Telecom, and may feel that access to Telecom infrastructure at the right price and
to the areas where they wish to offer service to their customers is difficult to
achieve.
However, these newer providers have an advantage in that they can invest in
modern infrastructure immediately on their market entry, and potentially gain a
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competitive advantage, if they can develop or have access to an infrastructure that
will reach into areas of demand they wish to serve.
3.2 Technology
This very large difference in ownership of infrastructure can lead to market disadvantage for the
‘other providers’, especially in regional areas where access costs are higher and demand density
much lower than in cities, resulting in reduced return on investment for these providers if they were
to attempt to build new network infrastructure – for example, into the Bay of Plenty.
However, as stated in section 3.1 ii) above, new market entrants often have the advantage of new
technology investments and little or no legacy network equipment that costs too much to operate
and which does not efficiently deliver new services.
If new generation equipment is chosen and deployed effectively over low cost network access,
these other providers can develop successful businesses, introduce new products quickly and
bring competitive tension into the market – all good outcomes for the consumer of
telecommunications services and for economic development.
3.3
Uncertainty
The government is aware of these commercial and technology based pressures and will intervene
where practical to ensure new market entrants have reasonable access to Telecom infrastructure.
At present, the government is in the final stages of planning the separation of the Telecom network
infrastructure from their retail activities, in order to improve access to that Telecom infrastructure
which could not economically be duplicated in New Zealand. The details of this separation are
unclear yet and may range from a requirement for an operational separation (essentially
separately accounted business activities) to perhaps the removal of ownership of the local access
network assets through a sale or other process.
This change to the structure of Telecom could have significant impact on the telecommunications
market place in New Zealand, and even when the detail of the government changes are known,
the necessary changes may take some time to implement – perhaps several years.
This leads to considerable uncertainty in the market, with greater than usual caution regarding
investment in infrastructure. In the interviews held with most of the national and regional
telecommunications service providers, all were clear on the following points:
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i)
Regional areas do not offer adequate return on investment where they
have to build new infrastructure and/or use Telecom infrastructure at
current wholesale rates.
ii)
Services demand is spread over large areas and so is expensive to reach
when access to an area is achieved.
iii)
Many councils in New Zealand have quite different interpretations of the
Resources Management Act (RMA) and there is sometimes considerable
cost in negotiating with multiple councils for the installation of infrastructure.
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Bay of Plenty Coluncils Broadband Business Case Study – Milestone 6
It is apparent that the ‘other telcos’ in New Zealand have a number of legitimate reasons to view
regional infrastructure investment with caution, and we suggest that while these conditions of
uncertainty and high costs apply, little if any investment in alternative networks will be made.
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4
Telecommunications Networks – Separate Networks, Natural
Monopolies and Local Ownership
4.1
Separate Networks
It is unlikely that the Telecom network that interconnects the larger cities could be duplicated
economically to offer Telecom competitors low cost national access. This leads to the view that
Telecom enjoys a ‘natural monopoly’ in terms of the core network and that it will probably never be
challenged through the construction of a duplicate national network. We note there are other
national networks in place – none as extensive or well provisioned as Telecom’s – such as that
owned by Kordia (Previously known as Broadcasting Corporation Ltd) and others owned by
TelstraClear and FX Networks. These networks do not match the Telecom network, especially for
its reach to all the homes and business premises in New Zealand.
4.2
Natural Monopoly
Section 4.1 described the extent and capacity of the Telecom network as being so great that it is
unlikely that a duplicate competing network could be built economically. Hence the Telecom
network is termed a ‘natural monopoly’ in that it cannot expect a viable competitor, even though
there are numerous smaller networks in place and used by competitors. This is the basis of the
government’s move to declare a wider access to the Telecom network for other service providers –
the Telecom network should be more widely available.
However, there are a number of reasons to expect that while this initiative will improve the
competitive nature of the telecommunications market in New Zealand, it may not meet all the
needs of the Bay of Plenty, or other regional areas:
i)
The plans for separation are not yet resolved, so their effectiveness is as yet
unclear.
ii)
There may be a relatively long period of transition to whatever form the
network separation takes – the current intention is for completion by 2010,
but there is doubt in some quarters that this is a realistic timeframe.
iii)
The intention is to provide a common broadband network, and to allow open
access to the ‘local loop’ – the copper lines providing telephone service and
ADSL broadband. The common broadband network does not exist in the
Bay of Plenty in terms of reach or capacity at present, so further investment
is required.
The local ownership of the core network would accelerate the development
of this common broadband network.
We conclude that while the separation of the Telecom network in some way from their retail
activities is a positive move, the Bay of Plenty will not achieve low cost access to the Telecom
network quickly, and that the Telecom network in the region may not meet the needs of other
broadband providers due to a relative lack of capacity, and suitability for the delivery of broadband
services.
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The deployment of the core network described in this and previous papers is will assist and
accelerate operational separation of Telecom for the Bay of Plenty region.
4.3
Local Ownership
Previous deliverables A2 – A4 have suggested a need in the Bay of Plenty for a regional ‘core’
network that interconnects the major metropolitan areas with a duct and cable system that offers
an ‘open access wholesale’ network.
This would allow very low cost access to the major population centres for any service providers,
and assist in the connection of backhaul access to the region from Wellington and Auckland.
Figure 2 illustrates the core network schematically:
Figure 2 – Core Network Topology
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The orange triangle is the ‘core’ network that might be owned by the region and which would allow
very low cost access between Tauranga, Rotorua, Whakatane and Kawerau, and facilitate a link
through Opotiki to the East Cape. This network would consist of as a minimum:
i)
At least one buried 100mm duct that can carry a relatively large number of fiber
optic cables.
ii)
Where a duct might not be practical initially, a cable installed along an aerial route
or direct buried would permit interconnection of users’ cables in the duct.
The connection between Rotorua and Tauranga offers national fibre diversity between Wellington
and Auckland via the Bay of Plenty. This will be of value to the State Services Commission Shared
Services Network (GSN) and potentially to TelstraClear and FX Networks.
Deliverable A4 described a strategy to deliver this network at low cost which would translate to low
costs for service providers and a positive although modest Return on Investment (ROI) for the
investors in the network.
We liken the core network to the traditionally council provided public infrastructure – water,
sewerage and storm water systems. In many ways this core network is similar – the ducts are
passive 20+ year assets, and installation and maintenance is similar to the more traditional
infrastructure.
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5
Telecommunications Providers Investment Criteria
5.1
Risk
The risks facing service providers planning to invest in new infrastructure are summarised in table
1 below, with special reference to the Bay of Plenty. We suggest mitigation strategies for each risk.
Investment Risk
Explanation
Mitigation
Distribution network
Fast changing distribution
Secure licensed wireless spectrum for the Bay of Plenty – this
technology
technologies mean
controls signal to noise ration problems of unlicensed radio
reinvestment every 2-3
systems, and may ensure the investment produces a positive
years
ROI for the full 2-3 years.
Assist with access to Council buildings, towers etc at low
costs
Ensure consistent interpretation of RMA across the Bay of
Plenty
Aggregation of demand to provide assured revenues for a
fixed period, and fast revenue start up.
Regional Access
ISPs can’t get out of their
Core network will open up much of the Bay of Plenty to wider
own ‘back yard’ because
geographic reach of broadband services, thereby increasing
inter regional costs are
the size of the available market for service providers.
too high
Telecom Operational
Unknown
Separation
timings for access to the
costs
and
Develop and provide the core network which can be used by
any provider, including Telecom if they wish.
current Telecom network
Revenue Generation to
A provider needs
Aggregate demand at confirmed pricing and period for partner
Cover Investment costs
revenues to cover
service providers. Note, for other service providers, the
infrastructure costs
reduced regional access costs will incline them to compete
(Opex and Capex)
more in a wider region.
Inconsistent RMA
If councils have widely
Establish a region wide RMA policy on infrastructure
Interpretation
differing interpretation of
requirements.
telecoms infrastructure
installation requirements,
the cost to deploy
infrastructure across a
multi council region will
be high, and initial set up
time will be extended.
Table 1 – Service Provider Risks
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5.2
Operational Costs
The costs of delivering a service are largely operational and are described in table 2, with
approaches that can be taken by councils to reduce the costs to suppliers. Where operational
costs can be reduced for suppliers, investment in more infrastructure is practical.
Operational Cost
Explanation
Cost Reduction Option
Regional Backhaul
The cost of wholesale access to the
A condition of tendering council and central
internet is relatively high in the Bay of
government demand should be a new wholesale
Plenty region. ISPs have estimated
access infrastructure into the region, certainly
they pay 30% more than competitors
from
operating in the Auckland region for
Wellington via Rotorua.
Auckland,
and
preferably
also
from
example.
Regional Access
High leased circuit costs tend to make
The core network is intended to reduce intra
intra
regional costs for service providers.
region
services
expensive,
limiting the reach of service providers
Distribution Network
The
equipment
Councils offer low cost rental access to buildings,
Costs
accommodation, radio towers, lease
towers to encourage the delivery of broadband
of
services. When the core network is in place,
cost
Telecom
operational
of
ducts
costs
for
etc
make
distribution
these costs will reduce as well.
networks relatively high.
Table 2 – Reducing operational Costs
5.3
Engagement Options
Demand Side Economic Development
There are a range of ways to engage with telecommunications service providers that will offer
some or all of the benefits set out in tables 1 and 2. The following diagrams illustrate the
partnership options:
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Figure 3 – Engagement Options
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Councils can attempt to support the wider deployment of broadband infrastructure in their region,
or preferably and more powerfully across the whole Bay of Plenty region, in three generic ways:
5.3.1
Facilitation
This option is limited to assisting service providers to gain a better understanding of the
opportunities and risks of investing in the region, and making their normal interactions with
councils seamless and effective. These council based facilitation activities include:
i)
Detailed Demand Data. Showing the location of demand on maps, the location of
available council infrastructure, and contact details of local community groups that are
willing to work closely with suppliers.
ii) Infrastructure Access. Councils usually have infrastructure such as buildings, towers,
masts, water tanks etc that can accommodate broadband infrastructure such as
electronic equipment and radio antennae. If councils were to adopt a policy of cost
recovery for access to this existing infrastructure, and published the location,
specifications (height, power availability, room size etc) in an easily accessible
document, service providers can readily assess their installation options.
iii) Consistent and Favourable RMA Interpretation. A recurring concern from services
providers interviewed is that all through New Zealand, Councils interpret the RMA
widely and differently when it comes to the approval process for telecommunications
infrastructure installation (cabinets, towers, masts, antennae etc). Where there are
multiple councils to engage with over a regional infrastructure project, the process of
consultation can be time consuming and costly. The suggested approach is to achieve
a regional consistency of approach so that an infrastructure deployment encounters the
same requirement across the region. At the same time, it is preferable that any
restrictions on infrastructure deployment be as reasonable as possible while
maintaining protection against unsightly or dangerous installations.
These and other initiatives can be taken by councils to make the region more easily dealt with
by telecommunications service providers and to somewhat raise the perceived ‘value’ of the
region for investment.
5.3.2
Contracted Suppliers
In this second engagement model, a number of more binding levels of commitment are suggested
that councils can adopt that will reduce the cost of entry to the region, potentially substantially. The
following initiative should follow those set out in 5.3.1, ‘Facilitation’, and should all be done
together as part of a relationship with a competitively chosen supplier for the region.
i)
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Endorsement as ‘Preferred Supplier’. As the result of a competitive selection process for
a provider willing to invest in the region to extend broadband infrastructure to new
areas, council can consider for a limited time, the right to claim to be the council’s
‘Endorsed Supplier’ for the region. This has value for marketing purposes for the
supplier. If chosen, this option should have limited duration and be based on the
committed delivery of new broadband services in the council area. Council would
require approval of all marketing material before release.
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Bay of Plenty Coluncils Broadband Business Case Study – Milestone 6
ii) Rent Access to Core Network. The core network has been described in earlier
deliverables and consists of ducts and/or fibre optic cables. In this case the preferred
supplier would have preferential access to the core network in the council area, or
across the Bay of Plenty region preferably to supply services to the council or a number
of councils (preferably all) in the region. The first use of the core network might be to
replace existing council communications circuits between council offices, and secondly
to share services (such as GIS, library or rating applications) between councils. In the
case of this option, the preferred supplier provides a managed service to the council for
a fixed term using the core network at a price below current costs, and in return for the
use of the core network, they are required to assist in the development of the core
network where some construction might be necessary to fill in ‘gaps’.
iii) Aggregated Demand. This is the attractive part of an offer to a contracted supplier – the
certainty of a contract for the supply of telecommunications services normally required
by council and central government in the council area. The two forms of demand are:
a. Council demand between council sites, and between councils where shared
services are deployed. In this case we refer to data network requirements,
telephony services requirements, and potentially video conferencing requirements
as well.
Councils in general are tending to use telecommunications services in many
innovative ways to better communicate with the public, as well as to improve
internal processes.
These imperatives lead to a growing need for telecommunications services, all of
which can be delivered over a broadband service. By preparing a forecast for intra
and inter council demand over say a five year term, a council may have a
considerable value of demand to broker investment in infrastructure into its region.
b. Central government, through the State Services Commission, has aggregated the
broadband demand of many centrally funded departments and brokered this
demand to create new broadband infrastructure.
The result has been the development of the Government Shared Network (GSN)
that provides a fibre network between Wellington and Auckland with a capacity of
1GB/s.
Discussions with the State Services Commission indicate an extension of the GSN
into the region is of interest, based on the central government (Health, Education,
other government departments) broadband region in the Bay of Plenty.
Later deliverables for this project assess the value of MUSH (Municipal, University,
Schools and Hospitals) demand.
5.3.3
Partner Variants
This third engagement model takes councils and other appropriate bodies in the region to another
level of involvement with the delivery of broadband services in the region. It is likely that with the
initiatives suggested in sections 5.3.1 and 5.3.2 that some but not all of the core network and
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backhaul capacity for Auckland and Wellington can be constructed, largely on the basis of demand
aggregation and medium term commitments to the preferred supplier.
We recall the likely investment strategy from deliverable A4, ‘Funding Investigation’ shown below
in figure 4:
Figure 4 – Core Network Investment Strategy
This strategy suggests there will be a ‘gap’ in capital requirements to build the core network and
that this will be closed with a combination of central government funding and regional investment.
Councils and other interested parties in the region may be interested in equity in the core network
$x required.
Other organisations have similar needs for low cost quality communications in the region,
specifically power authorities who need to control their substations along their distribution routes
with digital communications.
For example, we are aware that Horizon Energy is planning to invest in communications capacity
from Whakatane through Opotiki and up the East Cape.
Arranging a cooperative project between the relevant councils and Horizon Energy would lower
costs for all parties and extend the core network into the relatively poorly served East Cape region.
5.3.4
Engagement Options - Conclusions
Councils have considerable leverage in their ability to influence the telecommunications market,
especially if all the councils in the Bay of Plenty were to aggregate their demand and present a
united position to the telecommunications industry. In the same way, this combined approach
could draw in the demand of central government departments across the whole region, thereby
creating an attractive inducement to the industry for greater investment.
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6
Summary of Service Providers Investment Requirements
The following list summarises positive approaches that can be made by councils and more
powerfully, the region as a whole, to reduce the cost of entry to the Bay of Plenty and mitigate
risks that might threaten the viability of a new infrastructure investment. These responses are
summarised from the interviews with suppliers reported in appendix 1.
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i)
Improve RMA Consistency
ii)
Aggregate demand and offer for fixed term
iii)
Jointly seek central government and private funding
iv)
Develop the core network to reduce costs
v)
Facilitate competitive backhaul access to the region.
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7
Conclusions
Service providers are not currently willing to invest in broadband infrastructure in the Bay of Plenty
region because of the relatively high cost of serving the region.
This report has discussed a number of ways Councils can influence the investment decisions of
service providers, and reports on interviews with eleven national and regional service providers
seeking their investment criteria.
We conclude that councils can positively influence the investment criteria of service providers, and
that the Bay of Plenty region, acting as one entity in this case, can strongly influence suppliers,
especially through demand aggregation (assured revenues) and access to the core network
described in previous deliverables.
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Appendix 1 – Supplier Interviews
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List of Companies Interviewed
Telecom
Mike Schwalger
[email protected]
0800 108010
TelstraClear
John Davenport
Principal Network Architect
[email protected]
+64 29 912 5870
Steve Jackson
Retail Manager
[email protected]
09 912 4550
029 912 4550
Neil Stevenson
Corporate Development Manager
Ihug
David Diprose
[email protected]
IPStar
Tony Hill
Country Manager
[email protected]
+64 21 662-000
Vector Communications Ltd
Russell O'Brien
Business Manager
[email protected]
+64 21 770 756/+64 9 978 8248
David Robinson
New Opportunity Technology Manager
[email protected]
+64 21 653 692/+64 9 978 8236
Callplus
FX Networks
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Graham Walmsley
[email protected]
0800 225575
Dave Cronin
Roger De Salis
[email protected]
+64 4 498 9640
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Bay of Plenty Coluncils Broadband Business Case Study – Milestone 6
Kordia (BCL)
Susie Stone
Group Corporate Affairs Manager
[email protected]
021 899 202
09 9166400
Murray Goodman
Business Manager
[email protected]
+64 9 916 6492
Raj Unniakrishnan
Business Development and Strategy Manager
+64 9 166 403
Netsmart
Paul Horak
Operations Director
1 Elizabeth St, Tauranga
+64 (0) 7 571 1367
Shaun May
Sales Director
EOL (Enternet On Line)
Spirit Wireless
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Terry Cole, Tivon Cole Directors
Level 4, Harrington House, Tauranga
+61 (0) 7 577 0066
Maurice French
Director
PO Box 15622 Tauranga
+64 (0) 7 985 6129
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Bay of Plenty Coluncils Broadband Business Case Study – Milestone 6
Questions Posed
The questions posed of the interviewees were as follows:
1. What Infrastructure did they already have in the region?
2. What coverage and network services could they provide into the region?
3. What plans did they have for infrastructure in the region?
4. Which areas within the region were considered uneconomical and what would be
necessary to initiate an investment decision for deployment?
5. Did they have an interest in MUSH demand aggregation?
6. Did they have an interest in specific health/education initiatives?
7. Did they have an interest in greenfields sites – engagement rules?
8. What was their position on a wholesale open access approach to broadband networks?
9. What could Councils do to assist entry to the region?
10. Are Council regulations any form of limitation to deployment of infrastructure in the region?
11. Would access to council infrastructure (buildings, towers, water tanks, ducts etc) be
effective in lowering overall costs to deliver new services?
12. Would access to detailed spatial data on the region be of value in determining business
case viability for investment in the region?
13. Technology preferences:
a. Backhaul – eg, microwave, fibre, HFC etc
b. Distribution – eg, xDSL, Wimax, fibre etc
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MINUTES OF MEETING
MEETING NO.
1
Meeting with Telecom
VENUE:
Telecom NZ, Hereford St
DATE/TIME:
22 January 2007, 1300
PARTICIPANTS:
Mike Schwalger (MS)
Gaz Maroof (GM)
Consulting Engineer
SUBJECT:
Bay Of Plenty Business Case Study Project – Telecom NZ
MS has the responsibility for project feasibility
assessment, but not for detailed economic
assessment, which is handled by other areas of
Telecom.
Until there can be a decision by Telecom on their
involvement/assistance in the project, MS is to be
the single point of contact into Telecom.
Telecom unable to provide much of the
information requested in the letter from
Environment Bay of Plenty, for reasons of
commercial confidentiality.
MS believes most broadband strategies neglect
demand stimulation for broadband services and
focus too much on asking for extended
infrastructure coverage. Increasing demand helps
to justify infrastructure demand.
Telecom wants to do FTTP in more subdivisions.
Telecom will make announcements in the coming
months on new access initiatives.
Telecom will cooperate with other infrastructure
owners where their network might not deliver
service all the way.
Telecom would consider providing exchange and
active cabinet locations if asked.
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Ian Gordon (IG)
Bay of Plenty Coluncils Broadband Business Case Study – Milestone 6
MINUTES OF MEETING
Telecom
Meeting
MEETING NO.
2
VENUE:
Telecom NZ, Hereford St
DATE/TIME:
11 April 2007, 0900
PARTICIPANTS:
Mike Schwalger (MS)
Gaz Maroof (GM)
Miles
McConway
Consulting Engineer
EBOP
Paul Stoddard
Head of Research
Venturing
SUBJECT:
&
Bay Of Plenty Business Case Study Project – Telecom NZ Engagement Models
Minute
Action
1
Telecom would consider projects with different
engagement models.
2
Telecom understands the project.
3
Telecom would cooperate with other network
providers where this was appropriate.
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Meet again in 4 to 5 months
Bay of Plenty Coluncils Broadband Business Case Study – Milestone 6
MINUTES OF MEETING
MEETING NO.
1
Meeting with TelstraClear
VENUE:
Smales Farm – Takapuna, Auckland
DATE/TIME:
18/12/06; 2.00pm
PARTICIPANTS:
John Davenport
Gaz Maroof
Ian Gordon
TelstraClear
SUBJECT:
Bay of Plenty Broadband
Minute
Action
Pegasus project in ChCh typical greenfields site.
Using blown fibre pipes alongside HFC. Becomes of
interest over 100 to 150 homes.
‘In fill’ or brown fields sites would be served with
Wimax – using Alvarian equipment. Trialling in
Takapuna at present – service offers 8M upload and
download capability.
Market responds to higher speed offerings (10M).
Generally triple play approach on Hybrid Fibre Coax
network, double play (internet, telephony) on
wireless
TelstraClear resells Sky, and offer additional TV
content
Issues are restrictions on infrastructure – tower
height and shape. Auckland councils in general have
not been as helpful as required.
RMA and it’s interpretation might be issues to
infrastructure rollout
Page 23
Commercial In Confidence
Suggest need a policy on
antenna ‘rules’ before going
much further – Action
Council and Soft Options
Bay of Plenty Coluncils Broadband Business Case Study – Milestone 6
MINUTES OF MEETING
MEETING NO.
1
VENUE:
Ihug, 128 Newton Rd
DATE/TIME:
11 January 2007, 1000
PARTICIPANTS:
David Diprose
SUBJECT:
Meeting with iHug
Bay Of Plenty Business Case Study
Minute
Ihug is a focussed ISP, concentrating solely on the
residential market at present. (7% market share of
dial customers, 10% of broadband customers)
Ihug delivers a streamlined suite of products and
broadband services are being delivered mainly
using the TCNZ DSL network. Others are used, but
not as widely. This is as
the costs associated with maintaining operating
relationships multiple network providers are
significant;
TCNZ and ihug have automated provisioning and
fault systems to allow zero-touch provisioning of
services;
TCNZ offers coverage over 90% of NZ in target
market for ihug; and
With Local Loop Unbundling, this strategy offers
ihug latitude, as ihug is looking to invest into DSL
infrastructure, similar to its previous parent iiNet.
Backhaul is third party infrastructure, and ihug is
agnostic as to provider, and the key considerations
are reliability, security and cost.
However, with the change in ownership (now owned
by Vodafone), this emphasis may change to include
business, and also expansion of the suite of
products. This would increase ihug's interest into
the use of alternative networks
Ihug is not looking to change strategy as this is
profitable business.
Therefore, much less interested in using a new
network provider's services.
Key components of any such relationship include
Page 24
Commercial In Confidence
Gaz Maroof
Bay of Plenty Coluncils Broadband Business Case Study – Milestone 6
Minute
Scale of service delivery, national would be
preferred
Alternatively, national standards for operations
interface (provisioning, fault, billing, statistics and
reporting)
Zero touch provisioning and fault management is
essential with supplier. Ihug has the ability to build
such interfaces from it's operations perspective
Ability to generate and maintain margin for all
parties
With Local Loop Unbundling, ihug is looking to
invest “$ 10's of millions” into DSL infrastructure,
using particular ROI considerations. Therefore DSL
is ihug's preferred technology platform. However
this choice is only due to cost implications.
GM to check iinet website
for statistics
There would be a need for backhaul services, and
this would be any form of infrastructure. However,
streamlined delivery processes are key for ihug.
There is no strong preference for backhaul
technology.
Demand GIS information is valuable to ihug
Today, areas which are un-economic for ihug
include those which are low density rural
areas and those which are served by remote
cabinets, rather than the exchange (due to
likely customer numbers and density, than
the issue of getting access to cabinets)
Ihug is agnostic towards Aggregation and
Mush today, but this may change with time.
Vodafone direct contact would be valuable
Page 25
Commercial In Confidence
DD to forward contact
within Vodafone
Bay of Plenty Coluncils Broadband Business Case Study – Milestone 6
MINUTES OF MEETING
MEETING NO.
1
Meeting with IPStar
VENUE:
IPStar
DATE/TIME:
17 January 2007
PARTICIPANTS:
Tony Hill
Gaz Maroof
Joel Martin
IPStar NZ
SUBJECT:
Bay of Plenty Broadband
Minute
Action
Outlined project. IPStar are interested
Services from IPStar
Wholesale provider working with a small number
of service providers. Prefer to maintain few
relation ships and focus on making these
successful
IPSTAR to provide details on
request
VOIP tested successfully
Number of business models deployed in NZ
- retail only consumer based
- corporate
-use IPStar as back haul wireless distribution
-resellers to smaller entities
NB most installations are single dish per customer
rather than radio reticulated local networks
IPStar provides a national IP carriage network
only constraint is a low look angle to the satellite
Current technology supports up to 4 Mbps down 2
Mbps up per dish
New wholesale Services possible in the near future
Page 26
Commercial In Confidence
IPSTAR to provide details on
request
Bay of Plenty Coluncils Broadband Business Case Study – Milestone 6
Page 27
Minute
Action
keen to work with Councils in developing markets
in their regions
Project to keep IPStar informed
on
progress
and
other
questions
Ability to reconfigure pricing of CPE and service
dependant on particular plans that may be
constructed. IPStar NZ has some ability to work
with their service providers
Project to keep IPStar informed
on
progress
and
other
questions
Commercial In Confidence
Bay of Plenty Coluncils Broadband Business Case Study – Milestone 6
MINUTES OF MEETING
Meeting
with
Communications
Vector
MEETING NO.
1
VENUE:
Vector Centre, Newmarket, Auckland
DATE/TIME:
11/4/07; 11.00am
PARTICIPANTS:
David Robinson
Gaz Maroof
Vector
SUBJECT:
EBOP
Bay of Plenty Broadband
Minute
1
Vector Communications offer services in Auckland
and Wellington and are looking to expand their
service offerings into other geographies in NZ
2
Vector is committed to an open access wholesale
model, alongside their retail service offerings.
3
No plans for Bay of Plenty region at present, but
supportive of the project and willing to be actively
involved if the approach engaged with a local
partner.
4
In partnership with North Shore City Council, have
a budget of $6.1m for infrastructure rollout.
Offering immediate connectivity to approx 45
schools, Council libraries and office buildings.
5
Interested in exploring different propositions and
engagement models for expanding their presence,
where a viable business case can be developed.
Page 28
Miles McConway
Commercial In Confidence
Bay of Plenty Coluncils Broadband Business Case Study – Milestone 6
MINUTES OF MEETING
MEETING NO.
1
VENUE:
Callplus
DATE/TIME:
18/12/06; 4.00pm
PARTICIPANTS:
Graham Walmsley (GW)
SUBJECT:
Gaz Maroof (GM)
Bay of Plenty Broadband
Minute
Action
1
Outlined project, timelines
2
Callplus has an extensive set of
services that it operates nationally.
retail
These services are deployed primarily on
TCNZ DSL bandwidth, which Callplus resells.
Callplus does not have 3.5 GHz spectrum in
the Bay of Plenty region which can be used to
deploy WiMAX networks in the region.
GW to keep GM informed of
progress
Callplus is currently operating a WiMAX based
service in Northland.
However, the uncertainty surrounding the
upcoming auction process for 2.3 GHZ
spectrum by the MED has placed a constraint
on Callplus investing into equipment, until
this issue is resolved.
3
Page 29
Callplus is keen to work with Council in
deploying broadband services, but, any
investments are subject to Callplus business
case criteria for ROI and revenue.
Commercial In Confidence
GM to keep GW informed of
progress
Bay of Plenty Coluncils Broadband Business Case Study – Milestone 6
MINUTES OF MEETING
MEETING NO.
2
VENUE:
Callplus
DATE/TIME:
11/4/2007 2.00pm
PARTICIPANTS:
Dave Cronin (DC)
Meeting with Callplus
Gaz Maroof (GM)
Callplus
SUBJECT:
EBOP
Bay of Plenty Broadband
Minute
Action
1
Outlined models and project
2
Callplus has an extensive set of retail services that it
operates nationally.
These services are deployed primarily on TCNZ DSL
bandwidth, which Callplus resells.
Callplus also has a WiMAX network capability
Callplus can also design and implement
networks and has significant expertise.
3
WiMAX
Callplus does not have 3.5 GHz spectrum in the Bay of
Plenty region which can be used to deploy WiMAX
networks in the region.
Callplus is currently operating a WiMAX based service
in Northland.
This service offers voice and data, and the integration
of voice offered some challenges.
However, the uncertainty surrounding the upcoming
auction process for 2.3 GHZ spectrum by the MED has
placed a constraint on Callplus investing into
equipment, until this issue is resolved.
Page 30
Miles McConway
Commercial In Confidence
Bay of Plenty Coluncils Broadband Business Case Study – Milestone 6
Minute
4
Page 31
Action
Callplus is keen to work with Council in deploying
broadband services, but, any investments are subject
to Callplus business case criteria for ROI and revenue.
Commercial In Confidence
Bay of Plenty Coluncils Broadband Business Case Study – Milestone 6
MINUTES OF MEETING
MEETING NO.
1
PROJECT NO.
VENUE:
EOL - Tauranga
DATE/TIME:
23 January 2007
PARTICIPANTS:
Terry Cole
EOL Meeting
Gaz Maroof(GM)
Ian Gordon (IG)
Tivon Cole
SUBJECT:
EOL Interview
Minute
Action
Started in 1995 in partnership with Tauranga Council
Completely a wireless broadband provider – stopped reselling ADSL
12 months ago
Customers include government
industry incl primary producers
agencies,
local
government,
Approx 63 access points and 25 repeater sites
Technology refresh every 2-3 years
Delivery technologies are WiFi for higher density demand and
proprietary system for more remote connections.
Not experiencing service quality problems with this choice of
technologies. Confident of the vendor quality.
Regional access via TelstraClear – two circuits and looking for
supplier diversity – possibly
Significant demand for VPNs – cost a fraction of what would be
charged by Telecom with conventional data services
VoIP planned as a product
RMA restrictions have minimal impact in infrastructure build
CPE costs generally set at <$100 after rebate
Positive about PPP model with local government
Can offer preferential access to Civil Defence, low or zero cost to
visitors to the region, traffic light control, video camera services for
councils etc
Page 32
Commercial In Confidence
Bay of Plenty Coluncils Broadband Business Case Study – Milestone 6
MINUTES OF MEETING
MEETING NO.
1
PROJECT NO.
FX Meeting
VENUE:
DATE/TIME:
29 January 2007 1800
PARTICIPANTS:
Roger de Salis
Gaz Maroof
Ian Gordon
Sales Manager
Murray Jurgeleim
SUBJECT:
FX Networks
Minute
Action
FX keen to work with Councils
FX working with GSN to build network and has a
number of sites and PoPs in the BoP region
FX is an Intercity wholesale open access provider
who wishes to work with local resellers to provide
high capacity bandwidth services and VOIP
aggregation services into the NZ market
FX is rapidly expanding their network in the
North Island and also into the South Island
The major issue seen by FX is that of local
resellers wanting to aggregate bandwidth on
their own account rather than reselling FX
product. This includes VOIP services.
VOIP Services are based on a FX designed
and implemented VOIP network
Page 33
Commercial In Confidence
R de Salis to forward details
Bay of Plenty Coluncils Broadband Business Case Study – Milestone 6
MINUTES OF MEETING
MEETING NO.
1
PROJECT NO.
VENUE:
MED
DATE/TIME:
29 January 2007 1100
PARTICIPANTS:
Frank March
Meeting with MED
Gaz Maroof
Ian Gordon
Mile McConway
Tim Barrable
EBOP
Whakatane DC
Senior Policy Analyst
MED
Ralph Chivers
Peter Macaulay
Digital
Challenge
Programme Manager
Dean Riley
Tauranga CC
SUBJECT:
Minute
Action
MED remains positive and warm towards innovative
projects seeking to establish Wholesale Open
Access networks or Urban Fibre networks in
regions.
MED has few resources left in the Broadband
Challenge fund for seeding new projects (about $
4.5 million)
MED is focusing on the issues related to rural
broadband
availability
and
under-served
communities at present.
MED is seeking budget approval for a number of
useful items for people developing Urban Fibre
projects such as a toolkit containing business
modeling tools and the like. It is believed that a
budget of $ 350,000 is appropriate for this item,
from the Broadband Challenge budget.
Page 34
Commercial In Confidence
Bay of Plenty Coluncils Broadband Business Case Study – Milestone 6
Minute
Action
The Nelson Marlborough Loop project is a
successful example of what has been
achieved. (Osmond Borthwick is contact)
Peter Macaulay to forward
details of Swedish project
Others include Palmerston North, the North
Shore and the West Coast.
MED has been visited by Swedish team who
built a network in Stockholm
MED activity includes:
“Five Networks” group is being set up to
liaise between the 5 major national networks
being built in NZ at present, including Health,
Education, KAREN, GSN Broadband Challenge
Liaison between Local Govt NZ and MED into
the issues associated with inter-council
standards, policy statements and the like
Project Director has completed his contract
and is leaving the project.
The GSN project is seen as a key element of
the Urban Fibre Network thrust
Page 35
Commercial In Confidence
Bay of Plenty Coluncils Broadband Business Case Study – Milestone 6
MINUTES OF MEETING
MEETING NO.
1
Netsmart Meeting
VENUE:
Netsmart
DATE/TIME:
23 January 2007 1630
PARTICIPANTS:
Paul Horak (PH)
Gaz Maroof (GM)
Operations Director
Shaun May (SM)
SUBJECT:
Netsmart Meeting
Minute
Action
Eight years in business
Largest provider of rural broadband in the region
Telecom beat Netsmart out of the metro areas on
aggressive pricing
However, the high end business market is opening
up for Netsmart (Internet, VPN etc) so we assume
Telecom is not meeting the needs of this market.
Spectrum policy of central government (RSM) is
damaging to smaller ISPs – the only alternative
appears to be the use of unlicensed spectrum, and
this resource is degrading with increasing usage
and plethora of equipment use. Netsmart believe
their ability to deliver quality service will reduce to
a point where they cannot continue to invest in
infrastructure.
CPE costs are a barrier for customers – Netsmart
believe their market would expand considerably if
the cost of CPE could be reduced to under $100,
through a subsidy of some sort. Netsmart aware
of the HIBIS fund in Australia that has successfully
reduced connection costs and driven demand in
regional areas.
Comment on a wholesale network in the region –
yes – would have value.
Competitive access to Auckland for wholesale
bandwidth is a vital weakness of the region.
Telstra Clear, Telecom and BCL (Kordia) all have
fibre to the region, but is fully used or not offered
Page 36
Commercial In Confidence
Ian Gordon (IG)
Bay of Plenty Coluncils Broadband Business Case Study – Milestone 6
Minute
Action
in truly competitive wholesale arrangements.
Netsmart are aware of the cost and practicality of
establishing a direct microwave link to Auckland
for their own use. Estimate 50% of their internet
costs lay with the BoP - Auckland backhaul costs.
Discussed a peering exchange in the BoP – would
be an interested contributor to further discussion.
Could be part of the core infrastructure concept,
possibly as a data centre for local services delivery
as well?
Interested in fibre cables in each city and access
to them – again, potentially via the core network
concept.
Page 37
Commercial In Confidence
Bay of Plenty Coluncils Broadband Business Case Study – Milestone 6
MINUTES OF MEETING
Project
Wireless
–
Spirit
MEETING NO.
1
VENUE:
Spirit Wireless, Kati Kati
DATE/TIME:
12 February 2007, 1400
PARTICIPANTS:
Maurice French (MF)
Gaz Maroof (GM)
Director
SUBJECT:
Environment Bay Of Plenty – In Confidence
Minute
Action
Outlined project, timelines,
associations, from Spirit
history
and
Spirit has a history of operating and
consulting in wireless, and operates a kiosk
Internet service for venues in the region.
Spirit has 3.5 GHz spectrum in the region
which can be made available on a lease basis
to the BOP region to operate radio networks.
Page 38
Spirit is looking to be a service provider on
BGAN (Intelsat mobile broadband data
service similar to Satfone service).
MF to provide details of NZ
service
Spirit is keen to work with Councils in the
BOP region in developing broadband
GDI
will
keep
informed of progress
Commercial In Confidence
Spirit