As political pressure over Usage Based Billing continues to keep providers from gravitating towards more stringent Internet Overcharging schemes, western Canadians are enjoying significant victories as providers relax usage caps and increase speeds for broadband service.

Weeks after Shaw Communications announced new packages with increased usage allowances and a few unlimited use plans, Telus has now followed Shaw’s lead and doubled usage caps on many of its Internet plans, slashed overlimit fees by more than half for some, and plans to increase upload speeds for one of its premium plans:

Among the major changes are dramatically increased usage allowances and the reduction of overlimit fees.

Telus customers receive their service from the phone company in various flavors of DSL.  Some older suburban and rural areas still receive speeds averaging 3Mbps, but those lucky enough to be served by VDSL can comfortably achieve the company’s fastest broadband speeds.  The increased usage allowances are welcome news, even if Telus has never strictly enforced any of them:

• High Speed Turbo 25 increased to 500GB, was 250GB;
• High Speed Turbo increased to 250GB, was 125GB;
• High Speed increased to 150GB, was 75GB;
• High Speed Lite increased to 30GB, was 13GB;
• The overlimit fee for High Speed Lite has been reduced from $5/GB to $2/GB;
• Unofficial reports suggest upload speed for Turbo 25 is being increased from 2Mbps to 3Mbps, to be rolled out gradually.

Is Telus following Shaw's lead?

The reduction in the overlimit fee for High Speed Lite was predictable in light of recent political events.  It is difficult to sustain the argument that overlimit fees and usage caps are priced to control network congestion when the lightest users face the most draconian limits and penalty fees.

But unlike their cable competitor Shaw Communications, Telus has not seen fit to offer customers a truly unlimited plan, which presents a problem for some.

“Telus needs to remember they cannot win a speed race with Shaw so they should be lowering prices, taking the usage caps off, and competing with something they can actually win — delivering customers the unlimited service they want at a reasonable price,” says Stop the Cap! reader Abel from Burnaby, B.C.

Separately, Telus also quietly introduced a rate increase for basic home telephone service.  What used to be $21 a month is now $25, an increase of four dollars.

The dramatic plan changes underway in western Canada come in response to political pressure and consumer ire against Usage Based Billing (UBB).  Bell, which provides much of Canada with wholesale broadband access, was seeking to force independent providers to abandon unlimited, flat rate pricing in favor of ubiquitous UBB.  The provocation brought a half million Canadians to sign a petition against metering broadband.

For eastern Canada, thus far little has changed as Bell, Rogers, and Videotron continue with business as usual.

The employees of Sonic.net, a California ISP that threatens to expose the chasm between the cost of providing broadband and the profits reaped from it.

It doesn’t take trillions of dollars to offer world class broadband service in America.  Companies large and small are building gigabit broadband networks to reach customers at prices your local phone or cable company would charge at least $1,000 a month or more to receive, if you consider many charge around $100 a month for 100Mbps.  Now, 700 families in California are going to be offered 1,000Mbps service for just $69.99 per month — including a phone line.

Sonic.net has been in the ISP business for more than 15 years, selling DSL service to California customers at prices that offer value for money.  Most recently, Sonic has been pitching bonded DSL service offering speeds upwards of 40Mbps for the same price it plans to sell its new Fusion gigabit fiber broadband.  For customers who don’t need that much speed, Sonic recently reduced the price for its 20Mbps service to $39.95 per month (including phone line.)

For those in the Sebastopol area lucky enough to qualify for fiber service, Sonic promises unlimited access and an exceptional online experience.

Sonic’s qualifications to run the project are not in question, considering Google selected the company to operate and support the trial fiber-to-the-home network the search giant is building at Stanford University.

Google itself is building an extensive fiber to the home network to serve Kansas City residents and businesses, and promises service at a profitable, but reasonable price.  So has Sonic.net CEO Dane Jasper, whose written views on the state of American broadband explains his personal drive to make Internet access better and faster, without ripping people off with Internet Overcharging schemes or unjustified high monthly prices.

Jasper recognizes much of North America is trapped in a broadband duopoly that delivers all of the benefits to investors, while leaving the continent saddled with slow and overpriced service.  Nine months ago Jasper explained the business model to Benoit Felten, a Yankee Group broadband analyst:

During the construction of this network we have given a lot of thought… to the business model in the US, and how we could do things in a different and more interesting way. The natural model when you have a simple duopoly capturing the majority of the market is segmentation: maximize ARPU [average revenue per user] by artificially limiting service in order to drive additional monthly spending. But fundamentally this is the wrong model for a service provider like us, and we have looked to Europe for inspiration. The model pioneered by Iliad under the Free brand is a better fit, both for us and for our customers.

As the marginal cost of providing more bandwidth or less, and providing [phone service] or not are both minimal, we have adopted a simple flat rate model instead of the more typical US model of “$5 more goes faster”… I believe that removing the artificial limits on speed, and including home phone with the product are both very exciting.

It’s exciting to customers as well, most who give the company nearly five star reviews for excellence, without five-star pricing.  An added bonus: Jasper occasionally responds to customer service inquiries himself.

Reviewing Sonic.net’s blogs and website shows off a company that loves the business it’s in.  If a switch 100 miles away has a problem that interferes with Sonic’s service, you will promptly read about it on the company’s technical blog.

There are houses for sale in Sebastopol, Calif., if you want affordable gigabit broadband.

Jasper’s frustration with the enormous corporate-owned ISPs that dominate the country (and Washington) was on full display in a blog entry in March, answering a question about why American broadband is lagging behind:

[…] In 2003 and 2004, the then Republican led FCC reversed course [on policies guaranteeing a level playing field for broadband], removing shared access to essential fiber infrastructure for competitive carriers and codifying instead a policy of exclusive use and “multi-modal competition”.

This concreted our unique US duopoly: cable versus telco, the two broadband choices that most Americans have today.

In exchange for a truly competitive market, the US received promises of widespread deployment. And, to some degree this has worked. Unfettered by significant competition or price pressure, broadband in at least in its most basic form can now be delivered to most homes in America, albeit at a comparatively high cost to the consumer.

What was given up in exchange for this far-reaching but mediocre pablum was true competition and innovation.

Elsewhere in the world, regulatory bodies followed the lead of the US Congress and separated essential copper and fiber infrastructure from the services and providers who used them, and the result has been amazing. In Asia and Europe, Gigabit services are becoming common, and the price paid by consumers per megabit is a tiny fraction of what we pay here at home.

I won’t deny the innovation that has occurred in the telco/cable duopoly. They’ve got TV, Internet and telephone bundles designed to serve up prime time network shows in over-saturated HD glory, with comparatively middling Internet speeds, all offered with teaser rates and terms that would baffle an economics professor. The clear value of the bundle is to baffle, and pity the consumer who wants to shed a component. At least during the intro periods, it’s often cheaper to take the whole package than just a component or two.

For cable companies, the entrenched interest in the television entertainment portion creates a clear conflict: why should they offer an uncapped broadband connection that can deliver enough video entertainment to allow consumers to cut the TV cord? And if you do drop the TV, up goes the price for even this slow and capped Internet connection, so you pay more either way. And now that telcos have gotten into the television business too, their interest in slowing the pace of increasing broadband speed is aligned as well.

This has yielded a competitive truce in America.

In a slow tide, back and forth, cable delivers a slightly better product, then telco slightly better again, all at the highest possible cost. It is iterative, not innovative, and Americans deserve more. After all, we invented the Internet, right?

Among the giant phone and cable companies providing broadband today are a growing number of innovation outliers — companies challenging the prevailing views that Americans don’t need or want fiber-fast speeds (not at the prices some providers charge), that there is no economic justification for the capital spending required to construct fiber networks when incremental upgrades can suffice (the Wall Street view), or that the best way to drive increased revenue from a maturing broadband market is to throw away today’s flat rate pricing model and establish a guaranteed growth fund collecting tolls on Internet traffic that is sure to rise in the days ahead (Time Warner Cable’s CEO).

Google cannot understand why 1Gbps broadband “doesn’t work” in the United States and intends to construct its own network to prove otherwise.  EPB, a municipal utility in Chattanooga, Tenn. sells gigabit broadband, in their words, because they can.  The concept of a provider offering the fruits of their innovation, even if they aren’t certain how to price or sell the service, is a remarkable and refreshing change from the usual obsession with nickle-and-dime “extras” for add-on features or not selling service that your marketing department does not understand or find useful.

It also exposes the indefensible gap between the cost of providing the service and the price paid to receive it.

Thanks to Stop the Cap! reader Mark for sharing news about Sonic.net’s fiber network.

Arris' C4 CMTS

In the broadband speed race, no technology can deliver consistently fast upload and download speeds and offer ease-of-upgrades like fiber optics, but most of us won’t have direct access to the technology for years to come.  This week, the cable industry will attempt to suggest fiber upgrades may be unnecessary as it shows off some of the latest broadband technology at the industry’s trade show in Chicago.

Arris, a cable broadband equipment manufacturer, plans to demonstrate just how many “cable channels” it can bond together to build an enormous broadband pipeline, which the company claims will achieve “proof of concept” speeds as high as 4.5Gbps downstream and 575Mbps upstream.

Such a demonstration is impractical for actual use with today’s cable systems, because they lack enough free channel space to construct a pipe that large.  But the cable industry is betting heavily on DOCSIS 3 technology to keep them in the game as other technology threatens to win future online speed races.

At the heart of Arris’ cable broadband platform is its C4 Cable Modem Termination System (CMTS). The latest iteration, called Release 7.4, increases support for bonded channels, allows cable operators to manage the IP video demands of their subscribers, and also includes additional “intelligent network” enhancements to manage different types of broadband traffic.

Cable modem broadband technology is based on a “shared network,” meaning every customer connected to an individual CMTS is sharing the same individual broadband pipeline.  Before DOCSIS 3 technology, the maximum “raw bitrate” of that pipe was generally fixed at around 40Mbps — speed/bandwidth shared with every customer wired into that equipment.  If just a handful of customers used their broadband connection at the same time, speeds were consistently fast and reliable.  But during peak usage, too many customers could place demands on that pipe it could not sustain, and speeds for everyone began to drop.

Since most customers didn’t come close to saturating their broadband connection, hundreds of families safely shared the same pipe without noticeable speed declines.  But as high bandwidth applications like online video and file sharing grew, network engineers had to plan on fewer customers sharing the same connection or regularly split some customers off an overworked CMTS.

DOCSIS 3 technology solves many of these problems by letting cable operators “bond” multiple cable channels together to create a much larger, although-still-shared, pipe.  Arris says design improvements in its latest c4 CMTS also help manage the traffic that crosses it in the most efficient way possible to maintain a consistent user experience.

Because fiber optic competitors routinely win the broadband speed race, cable operators have to counter aggressive marketing strategies they themselves have used against dial-up and DSL service from the telephone company.  Demonstrating high speed results, even when completely impractical to deploy, still helps the industry’s marketing efforts against the competition, and delivers fodder for industry lobbyists used to counter claims by broadband advocates that other countries are deploying more advanced broadband networks that allow North America to fall behind.

An artist rendering of Don River Park, part of the mixed-use spaces that hallmark the Toronto Waterfront revitalization project.

About seven years ago, Rochester’s Fast Ferry offered daily service between Rochester, N.Y. and Toronto’s Waterfront.  Tens of millions of dollars later, the Rochester Ferry Company discovered that nobody in southern Ontario was that interested in a shortcut to Rochester, many locals found driving to Canada’s largest city faster, more convenient, and cheaper, and the point of arrival on the Canadian side was hardly a draw — situated in a rundown, seedy industrial wasteland.

By the end of 2006, the ferry was sold and sent on its way to Morocco, the CBC got a barely used International Marine Passenger Terminal (built for the Rochester ferry) to use as a set location for its TV crime drama The Border, and the rundown waterfront was well-embarked on a major reconstruction effort.

This week, Toronto’s Waterfront learned it was getting a broadband makeover as well, with the forthcoming launch of insanely fast 10/10Gbps fiber broadband for business and 100/100Mbps for condo dwellers along the East Bayfront and West Don Lands.

Best of all, Beanfield Metroconnect, the parent company responsible for constructing the network, promises no Internet Overcharging schemes for residents and businesses… forever.  No usage caps, no throttled broadband speeds, no overlimit fees.  Pricing is more than attractive — it’s downright cheap for Toronto:  $60 a month for unlimited 100/100Mbps broadband, $30 a month for television service, and as low as $14.95 for phone service.  Bundle all three and knock another 15 percent off the price.  The provider is even throwing in free Wi-Fi, which promises to be ubiquitous across the Waterfront.

The project will leapfrog this Toronto neighborhood into one of the fastest broadband communities in the world.

Toronto Waterfront Fiber Broadband Coverage Map

“Having this sort of capacity available to residents will allow for a whole new world of applications we haven’t even conceived of yet,” said chief executive Dan Armstrong.

The rest of Toronto, in comparison, will be stuck in a broadband swamp courtesy of Rogers Cable and Bell, where average speeds hover around 5Mbps, with nasty usage caps and overlimit fee schemes from both providers.  DSL service in the city is notoriously slow and expensive, as Bell milks decades-old copper wire infrastructure long in need of replacement.

The public-private broadband project is a welcome addition for an urban renewal effort that has been criticized at times for overspending. Created in 2001, Waterfront Toronto has a 25-year mandate to transform 800 hectares (2,000 acres) of brownfield lands on the waterfront into a combination of business and residential mixed-use communities and public spaces.  At least $30 billion in taxpayer funds have been earmarked for the renewal project, although project managers say no taxpayer dollars will be spent on the broadband project.

Waterfront Toronto’s efforts have been recognized as bringing Toronto’s first “Intelligent Community” to the city with the construction of the open access fiber network.

Still, the public corporation has its critics.  Earlier this spring Toronto city councilman Doug Ford called the urban renewal project a boondoggle.  Other conflicts rage with the Toronto Transit Commission and the mayor’s office over other redevelopment projects.  But the revitalization project’s broadband initiative has significant support, especially among knowledge workers that could eventually become residents… and paying customers.

The 21st century broadband project is also likely to bring broadband envy across the entire GTA, who will wonder why service from the cable and phone companies is so much slower and more expensive.

For broadband enthusiasts, Toronto’s broadband future looks much brighter than yesterday’s failed ferry service, which proves once again that regardless of the technology — slow, expensive, and inconvenient service will never attract much interest from the value-conscious public.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/TVO The Need for High Speed 5-2010.flv[/flv]

Canada’s digital networks are some of the slowest in the world, running between one hundred to a thousand times slower than other countries in the developed world. In this episode of “Our Digital Future – The Need for High-Speed,” Bill Hutchison, Executive Director of Intelligent Communities for Waterfront Toronto describes the sorry state of Canada’s digital infrastructure, stressing the need for major investments in advanced broadband networks.  (4 minutes)

New Zealand’s forthcoming transformation to fiber-based telecommunications infrastructure has some important lessons to teach those interested in improving broadband in North America.

While Ottawa and Washington depend on the private sector to deliver 21st century broadband, other countries are recognizing private providers alone may not be able to deliver the essential networks of the 21st century, especially in smaller communities and rural areas still bypassed by even 20th century broadband.  For Korea, Japan, Australia, New Zealand, Singapore, and beyond — government and the private sector are working together to deliver advanced fiber-optic-based networks that will likely power broadband for at least the next decade or more.  More importantly, they are doing so on terms that best serve the interests of the public, not just a handful of shareholders and investment bankers.

Priority number one is getting advanced networks built.  Marketplace realities, particularly in North America, constrain private companies from taking risks on fiber networks that will take more than a few years to realize a healthy return on investment.  Without that essentially-guaranteed payback, many providers refuse to think in terms of “revolutionary” broadband, relying on incremental “evolutionary” upgrades instead.  That formula has also allowed many providers to ignore rural America, deemed too costly to wire.

In a country like New Zealand, these rules also apply, but in spades.  Not only do Kiwis face a broadband experience that resembles service offered in the U.S. a decade ago, they are also punished by a lack of international capacity.  With just one international provider delivering nearly all of New Zealand’s connectivity with the United States and beyond, prices are high and data caps are low.

Domestically, many Kiwis have traditionally had just one realistic choice for broadband service — Telecom New Zealand’s DSL technology.  Although competitors have been allowed to resell DSL service over Telecom’s network, the limitations of the technology remain a constant problem for every provider on that network.

New Zealand has decided the best way to handle these challenges is to transform the telecommunications foundation across the country, starting with a new public-private fiber broadband network.  NZ’s National Broadband Plan, dubbed “Ultra Fast Broadband,” establishes as its foundation the principle that broadband is too important to allow the country to languish waiting for private providers to step up.

Rosalie Nelson from IDC – the independent market intelligence advisory service, explores the pro’s and con’s of a nationwide fiber network for New Zealand.  But it’s a lesson not just applicable to broadband in the South Pacific.  Stop the Cap! is sharing this video seminar with our own Viewer’s Guide to help draw parallels to broadband closer to home. As an added bonus, you will come to understand different broadband technologies we regularly discuss.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/IDC Ultra Fast Broadband.flv[/flv]

IDC analyzes New Zealand’s new Ultra Fast Broadband — National Fiber Network in this seminar with Rosalie Nelson.  It’s definitely a long view, but you will gain enormous insight into the challenges of delivering the next generation of broadband, not only in New Zealand, but in other countries around the world.  (39 minutes)

Stop the Cap! Viewer’s Guide

To help draw comparisons with broadband in the South Pacific with that in the United States and Canada, we bring you this viewer’s guide to follow as you watch.

Part One

Nelson

In part one, Nelson explores the recent history of telecommunications in New Zealand, particularly focused on Telecom New Zealand, created from the former state monopoly for landlines and data circuits.  Although the company began to open its network to competitors several years ago, the biggest transformation came in the last few years.  New Zealand experienced its own version of the Bell System breakup, only this time that transformation came from the New Zealand government, not the courts.

When complete, what was once a single company became three — one for wholesale access, namely by independent competitors reselling service over Telecom lines, retail — the public face of the company that continues to market service under the Telecom brand to consumers and businesses, and Chorus, the entity that maintains Telecom’s infrastructure.

In North America, the equivalent would be the breakup of AT&T or Bell, with competitors allowed to lease access to their respective networks at prices and terms that could not favor either parent company.

While the debate rages over whether broadband expansion came as a result of Telecom’s breakup, or in spite of it, one thing everyone agrees on: New Zealand is one of the fastest growing broadband markets in the OECD, with a growth rate of nearly 35 percent every two years.

New Zealand’s telecom market is perhaps five or more years behind the United States and Canada.  The rapid erosion of landlines for mobile or Voice Over IP service is only just starting in New Zealand.  Telecom, like many phone companies in North America, still depends on the enormous pool of revenue landline service provides.  Even as landlines decline domestically, phone companies like AT&T, Bell, Telus, Verizon, Frontier, and CenturyLink still treat this revenue as the critical foundation on which other products and services can be offered.  It will be years before this base revenue erodes to the point of irrelevance.

In Western Europe, VDSL has a significant head start in delivering next generation broadband. Similar to AT&T's U-verse or Bell's Fibe network, this technology delivers fiber to the neighborhood, but relies on traditional existing copper wire phone lines to reach individual subscribers.

Telecom is also highly involved in the mobile market.  Just as in North America, when we talk about industry investment in  networks, wireless is usually the largest recipient, sometimes at the expense of the landline network.

IDC, which is independently analyzing New Zealand’s forthcoming transformation to a fiber-based network, is excited about the transformational aspects of such a network, and recognizes public investment may be the only way to execute its rollout in a world where short term results and recouped investment can make all the difference between a green light and a red one among private providers.

Part Two (begins at 7:30)

In the second part of the video, Nelson succinctly explains some of the different technologies we talk about regularly on Stop the Cap!

For instance, most telephone and cable companies both use fiber cables for at least part of their network.  Telephone companies like Frontier use fiber between their headquarters, local exchanges (a/k/a central offices), and occasionally even to remote exchanges, used to reduce the amount of copper wire between your home or office and their exchange.  Many phone companies, including AT&T, use what Nelson calls “cabinets” to contain the interface between fiber and copper networks.

These are often dubbed lawn refrigerators — big four foot metal boxes installed on top of a concrete slab or attached to the side of a telephone pole.  On one end, fiber optic cable from the central office arrives.  On the other, individual copper wire lines exit, connecting to every customer up and down the street throughout the neighborhood.  With additional fiber, phone companies selling DSL Internet access can increase speeds and offer service where it was not available before.  AT&T can use a more advanced form of DSL as a platform for its U-verse service.  Bell’s Fibe service in Canada is another example of this technology in use.  CenturyLink is also deploying it for some of their service areas.

Cable companies use fiber to deliver their signals out to individual towns and parts of cities.  From there, coaxial cable travels to homes and offices, on which we receive television, telephone, and broadband service.  In large parts of Asia and Europe, cable television is much less common than it is in North America, so it’s a technology more unique to North America than to Europe or the Pacific.

Nelson also reminds us fiber is increasingly important for cell phone companies too, which use the technology to support the increasing amount of traffic that passes through cell towers.  Fiber can help keep mobile broadband speeds at a reasonable level during peak usage periods.  Where fiber isn’t available, the maximum amount of data that can travel between the cell tower back to the cell phone company’s data center can be significantly lower.

Nelson’s larger point is that there is a very real cost-benefit analysis to explore when considering whether the next generation broadband network should be 100% fiber-based, such as Verizon’s FiOS network, or a combination of fiber and more economical, already installed copper wire, such as AT&T’s U-verse.  The initial expense of providing 100% fiber, direct to the home, is greater than repurposing part of our existing landline network.  But with current technology, fiber can deliver a faster and more reliable level of service, and is future-proof.  It also requires less maintenance once installed.

Part Three (begins at 16:20)

In the third part of the video, Nelson explores the political landscape in New Zealand, and with some minor differences here and there, the gap between the telecommunications market in Canada and New Zealand is not too different.

Xtra, the ISP owned by Telecom New Zealand, remains the country's largest service provider.

While the United States broke up the Bell System in the mid-1980s, Canada still relies heavily on behemoth Bell/BCE to deliver broadband access throughout the Atlantic provinces, Quebec, and Ontario.  SaskTel and Telus deliver service to central and western Canada.  Cable companies, primarily owned by Rogers, Shaw, and Videotron deliver service in major Canadian cities and nearby suburbs.

In New Zealand, Telecom was the former state-controlled monopoly telephone company.  In recent years, that monopoly has been broken up, but broadband still relies heavily on Telecom’s landline network to deliver Internet access, primarily by DSL.  In the past, Telecom was -the- Internet Service Provider.  But now the company must sell access to their last mile network to all-comers at a regulated wholesale access rate.  Canadians will recognize this kind of wholesale access policy — Bell has one for independent service providers to this day.

In the United States, things are a bit different.  While there are instances of competitors providing DSL through landlines owned by familiar phone companies like AT&T, Verizon, CenturyLink, Frontier, and Windstream, very few customers know about them.  Instead, cable television is the more familiar competitor, and the two players regularly beat each other up in marketing campaigns.  If you ask an ordinary American consumer what companies sell broadband service, they will typically answer with the name of the telephone company and the cable company, if one serves their area.  They are unlikely to answer Earthlink, which sells service over some telephone company and cable lines.

Some of Nelson’s anaysis about the changes in policy relating to the Ultra Fast Broadband network are no longer in effect with last week’s decision to abandon the “regulatory holiday” concept.  The government’s original fiber network proposal has been modified repeatedly to fit into the business realities of the New Zealand ISP market.  Some examples include recognizing the value and importance of the existing copper wire network, which will remain relevant in some rural areas not scheduled for wireless or fiber access — and will of course also be in operation as the fiber network is built.  The government is also trying to promote private investment, and under pressure from large telecom companies, the government in power is looking for ways to assure investors of a return on their investment.  Critics have charged the government leaned too far towards providers in effectively handing them at least eight years of monopoly service under a “regulatory holiday,” without oversight by the all-important Commerce Commission.  A revised proposal seeks to guarantee investors a certain level of return, even if prices drop in the future, but retains regulatory oversight.

Big Phone Companies...

This policy is unique to New Zealand, and has not been tried in North America.  Canada’s national broadband plan is long overdue and the one in the United States relies on some government stimulus money to incrementally expand broadband in unprofitable rural areas, but relies mostly on private providers for the bulk of the expansion.  The Federal Communications Commission is exploring revamping its rural subsidy currently charged to every telephone line in the United States with the hope of diverting money to broadband development in rural areas.  Private providers are expected to upgrade their networks through private investment for most of the rest.

New Zealand is proposing a totally new way of delivering broadband service with the establishment of an independent company responsible for the fiber network — a company not affiliated with any Internet Service Provider.  That would make Telecom New Zealand no more or less important than any independent provider.  Each ISP will succeed or fail based on price and value-added services, because the basic network experience is likely to be the same regardless of the provider selected.  Some may deliver speed boosting features or sell content to customers.  Others may deliver cheaper, slower speed plans for budget-minded customers.  Some might even bundle free tablets or computers in return for fixed-length contracts.

But Nelson explains there is a risk.  Once a fiber network is in place, it effectively becomes a utility, and it may or may not be able to earn sufficient revenue to embark on innovative new technologies that venture capital might otherwise afford.  Because of market dynamics, for the same reason very few North Americans cities have more than one cable and one phone company, investors are unlikely to pour money into a competing technology if a fiber network is dominant.

...Often Think and Act Alike...

For a legacy phone company like Telecom, past regulatory requirements are also under review at the request of the telephone company.  Telecom argues if a national fiber network is to be established, Telecom should be freed of its regulated responsibility to continue investing in its copper network, and the facilities used to support it.

This is similar to arguments AT&T and other phone companies have been making in their efforts to secure deregulation at the state level, for but different reasons.  AT&T, as an example, argues that their aging copper wire network and its upkeep is a responsibility it agreed to in a different era, when landline service was ubiquitous and virtually everyone had a traditional phone line.  Phone companies argue that as landline disconnections accelerate, the regulatory responsibilities assigned to it are no longer fair, and requires the company to continue investing capital in a network fewer and fewer customers are using.  They argue investments would be more appropriately spent building next generation broadband and wireless networks.

AT&T might have a point, except for the collateral damage impacting rural customers, which AT&T may decide to abandon for the same reasons the company uses when it won’t provide broadband in rural areas — return on investment considerations.  Those investments AT&T seeks to make would disproportionately benefit urban customers, at the expense of rural ones.

Part Four (begins at 29:15)

In the fourth part, Nelson explores the impact of the fiber project on Telecom, which is considering restructuring itself to compete under the new broadband model.

Nelson argues the company’s revenues are expected to be flat in the near future and predicts Telecom will be forced to begin a cost-cutting program, simplify its business, and target growth areas.  Nelson ignores the most common strategies providers have used in this arena, however.  In addition to job cuts, the other common way to increase revenue is to raise prices. Chorus, which administers Telecom’s broadband network, is the only real money maker inside Telecom these days, and that comes from broadband demand.

...Even When They Are Thousands of Miles Apart.

Nelson, like investors, opposes anything resembling a price war in New Zealand, one that could come as copper-based DSL providers slash prices to remain competitive with service on the much faster (but likely more expensive) fiber network.  She sees such competition as a “war of attrition” where shareholder value is lost, along with incentives for further private investment.

Nelson’s final question ponders whether Telecom, still a dominant player in the New Zealand market, has the ability to change and adapt fast enough to the country’s fiber network.

Conversely, we wonder if Telecom will attempt to throw up roadblocks in an effort to curtail the new network as a defense strategy against those required changes to its business model.

We also wonder how much return on investment will be sufficient for investors.  For some, anything short of “the sky is the limit” may fuel investment of a different kind — into special interest campaigns and lobbying to ensure there is no limit on the money they can earn from a network that could have a monopoly position in the marketplace.