Sir John Key, Steven Joyce, Graham Mitchell and others look back at the decade-long project that delivered fast broadband to every major city and town in the country. Bill Bennett reports
In the last few days, Chorus engineers ran fibre down the last street in Wellington, wrapping up the first stage of the Ultra-Fast Broadband (UFB) network build.
What was planned as a 10-year project to connect three quarters of New Zealand’s population to fibre finished ahead of schedule. And it is performing well.
The most obvious performance measure is customer uptake. When the UFB project was being drawn up in 2009, the planners expected one in five people with access would eventually take up the service.
Today, around 55 percent of people who can connect have already done so. This number continues to rise.
Looking back, the decision to build a fibre network seems like a wise and timely investment in critical infrastructure.
Yet the decision to build wasn’t always obvious, nor was it always accepted as wisdom. In fact, in 2009, many considered the project to be too risky.
There is some context here. In 2009, the 2008 Global Financial Crisis was still troubling governments and central banks.
Sir John Key was then in his first term as prime minister when the government’s plan to build the network was formally announced.
He says at the time there was concern about national debt levels and whether increased welfare spending would see them rise further. Even so, he says, “there’s no doubt that spending even more on infrastructure was the right thing to do.
“In hindsight, the economy turned around and we got back into surplus faster than anyone thought. National debt levels didn’t rise that much because we had zero budgets.”
Key says company shareholders tend to be supportive of big capital spending programmes so long as they are convinced they are getting value for money and the company delivers. The challenge was the same for UFB.
“UFB was an ambitious programme. We executed it really well. You can contrast this with the NBN (National Broadband Network) in Australia. I spend a lot of time in Australia and the Australians are jealous that we delivered this fantastic outcome while they are still battling.”
“The Australians are jealous that we delivered this fantastic outcome while they are still battling.”
Key says the first challenge his government faced when planning a fibre build in New Zealand was topography.
“It’s straightforward enough in the metropolitan areas like Christchurch, but once you step outside the cities you are into difficult terrain where there are limited letter boxes and lots of space. It’s not efficient, it’s difficult and expensive,” he says.
“Even in Auckland, it’s hard compared with places like South Korea or Hong Kong. There you are going up big high rises, connecting every floor. There’s massive density. We don’t live like that in New Zealand.”
Add in the consenting process and in comparison with elsewhere, building a New Zealand fibre network was always going to be relatively slow.
Key says one of the reasons for getting the government involved in building UFB was that if the job had been left to the market no one would have done it.
He says: “When governments get involved in things, it has to be a public good. It’s easy to make the case if it’s a road that everyone drives on, or a hospital everyone uses.
“Fast broadband is a harder argument to make. So then I thought: it’s not just about what people do at home, it’s also for the commercial sector.”
Key could have left the build to the market. However, he says the economics were just too big and the risks were too great. There is a long period of time when companies investing in such a network are unlikely to get returns as they wait for customers to switch over.
There were plenty of arguments against getting the government involved though. He says: “People said by picking a winner you’ll get it wrong. They said you won’t need a fibre network, it will all be mobile. The point they were missing is that the two are complementary. You need fibre to run wireless networks, without fibre you don’t have strong enough Wi-Fi.”
SPREADING THE BENEFITS
Another reason for government involvement was to make sure the benefits of the technology were spread around the country.
“We wanted to ensure there would be development outside of Auckland. This takes the pressure off major infrastructure. Without Wi-Fi, a place like Tauranga might not grow, with it, it will grow fast because it’s a great place to live.
“It’s all about connectivity. People think that means airports and roads, but data connectivity is now the most important.”
As for many of us, digital connectivity is an important part of Key’s life. He says: “I’m on a number of boards now. While I
fly to a great many board meetings, I am also constantly using Skype or Zoom to communicate. I can attend a meeting this way from my iPad in my house and I don't need to fly to San Francisco.”
Key was prime minister when the decision to build the UFB was made, but says his then communications minister Steven Joyce did a lot of the work. “He was always about attention to detail. Even if something wasn’t in his portfolio, you could always rely
on him being across the Cabinet papers and understanding them. He was the perfect person to do it.”
Joyce first landed the job of being the National Party’s fibre expert when he was Key’s campaign manager for the 2008 election.
He says he had a call from Key: “John said, ‘We’re under a bit
of pressure to come up with a fibre policy. What do you reckon?’
I said the main thing is to make sure it is do-able. He then asked me what it might cost and I told him that one or two people had said it would cost about $1.5 billion.
“I said: ‘Would you like me to check this?’ So I asked a few people I knew, including my own brother, who is a software engineer. We sat down and tried to work out if you could do
75 percent of New Zealand for $1.5 billion.
“We did some maths and realised it was broadly correct. So I rang John back and told him I think it’s do-able. We talked about whether it should be fibre-to-the-home or whatever. John made the call and the policy was announced.
“Then after the election he said: ‘Do you want a ministry?’
I said yes, so he said ‘I’m giving you transport and ICT because you know a bit about that area, and I want that Ultra-Fast Broadband network built’.”
WHERE TO SPEND $1.35BN
One of the challenges facing Joyce as the project got underway was deciding where to put the money. Early on, $150 million of the $1.5 billion was set aside to improve schools’ broadband, leaving $1.35 billion for the rest of the network build.
Joyce says: “$1.35 billion isn’t a massive amount of dough when you think the current government’s Regional Growth Fund is
$3 billion. We had people arguing for backhaul [the moving of data from nodes to a central hub] to be subsidised; there were those who wanted international bandwidth to be subsidised.
“We had to narrow in on two things: did it need to be the last mile and did it need to be fibre anyway?”
In Joyce’s view, if there was likely to be any market failure, the last mile was the best candidate “because that’s the expensive bit with the toughest return”, he says.
As for choosing fibre, he says there was an internal debate about this. The government looked at wireless. However, he says, “we considered whether wireless and cellular would at some point get to be as good as fibre. It seemed possible, but you’ve always got the contention issue. That is, the competing use of another wireless connection.
“Another point is that if you build wireless networks, you still need fibre to support whatever it is. The faster and more ubiquitous those wireless networks are, the closer they have to be to fibre for backhaul.”
Key says while planning for UFB there were people who told him the government was investing in the wrong technology, that it would all be wireless in the long term. He says: “While wireless dominates mobile, we knew that wasn’t right.”
One fear was that New Zealand would lock itself into a technology that quickly became obsolete. Joyce says: “Generally, what happens when a technology becomes obsolete is a new technology appears with superior performance that people really want.
“We couldn’t envisage one. Fibre is ultimately limitless. The electronics you stick at each end of the line determine how much you can push down it. That wasn’t really a problem.”
Picking the wrong technology was one risk. Another was uptake. Key says: “There was a risk we’d build it and people wouldn’t use it. I always thought we would be building it for applications that we didn’t know existed but one day would.”
Another risk facing the government concerned delivery. To reduce the uncertainty, Joyce established Crown Fibre, now Crown Infrastructure Partners (CIP), and hired Graham Mitchell as its CEO.
Crown Fibre was a new kind of government organisation, designed to act as a private sector front-end for the government to interface with industry. Its aim was to mitigate risks, especially when it came to negotiating contract terms.
Mitchell says, “Crown Fibre was set up when the government wanted someone to commercially execute. We all came from the private sector, and we had a private sector board. We had private sector negotiating expertise.
“We were government employees effectively operating as the private sector front-end for the government. We worked hand-in-hand with the government, but we had commercial industry experience at the negotiation table and private finance experience.”
TELECOM HAD TO BE SPLIT UP
Mitchell says the key risk was that Telecom New Zealand – now Spark – was very much against the UFB project. The government’s whole policy hinged on getting the telecommunications industry, which effectively meant Telecom, to participate in the network build. To do that Telecom had to be split. At the time, Telecom dominated the sector and appeared to hold many if not most of the cards.
He was aware that the amount of government money on offer, by now whittled down to $1.35 billion, wasn’t that large. Another part of Crown Fibre’s job was to set a wholesale price for a fibre connection that was attractive enough for the retailers to sell and get end-users taking up the service.
If that wasn’t enough of a Rubik’s Cube challenge, Crown Fibre also had to guard against a cost blow-out and ensure the quality of the build was robust enough. Mitchell says in the early days some of the build quality was “fairly ropey”. To get around this, he says Crown Fibre had to take much more of a hands-on role than it originally thought necessary. He says his organisation found itself overseeing the quality, adopting standards and even playing a health and safety role.
UFB has been so successful that the initial plan has been extended twice. The National government found more money, and the fibre wholesale companies have been keen to grow their footprint. By 2022, 87 percent of the population will have access to fibre.
Mitchell says the project’s expansion is one of the most pleasing things that has happened. He says fibre now reaches 405 towns and goes down to small settlements that might only include a few hundred people and is priced for everybody. This is an achievement not matched by other countries.
“I always had a suspicion that it would go really well. When we were planning we had to come up with some numbers, not the worst case scenario, just conservative figures. We hoped they'd be higher, but 20 percent sounded right at the time.”
A GREAT ENABLER
“I see world-class fibre connectivity as one of the great enablers and actually one of the great levellers.
It doesn’t matter where in the world, or in New Zealand, you live – if you have access to fibre internet then you can build a global business, access the best in health, education and entertainment services, and stay connected with your family wherever they are.
We still haven’t fully realised all the potential of fibre broadband, but I’m immensely proud to
have been a part of bringing
New Zealand to the position of being one of the five best connected countries in the world.
Some of the specific memories that stand out include hearing from doctors in Canterbury about how fibre connections to West Coast medical centres enabled them to assist in the treatment of a very young baby in her own community, removing the need to fly her and her mother to Canterbury, and away from support networks, for her treatment.
Also, seeing a classroom of kids on Great Barrier Island being able to access a wider range of subjects than they ever had before thanks to their new connection.”
LOCAL BANDWIDTH PROBLEM OVER
“The UFB network has led to a massive improvement in the connectivity available to Kiwis and means that for many households the old local bandwidth problem is over. UFB is a great success.
A few issues remain for New Zealand telecommunications. First, making sure that those areas still without decent services get access to them. Then making sure the roll-out of 5G doesn’t get hijacked or harmed by some of the anti-science critiques that swirl around us. To me, it seems likely competition between various access modes is here to stay.
Driving further competition in mobile markets, making sure the new fibre regulatory framework works as planned and ensuring fibre unbundling has a chance to flourish are other issues that need attention.
The tender approach, the structural separation and the bang-for-buck attitude got us a massive improvement in broadband infrastructure for a very reasonable cost to the taxpayer – and without creating ongoing problems of vertical integration or network neutrality. Take-up is way ahead of schedule too.
We should be enormously proud of how well our approach has worked. Steven Joyce, as a key architect of this approach, deserves our thanks.
We are doing well. The contrast with Australia is hugely instructive. And ours was also a bigger and more comprehensive change than most other countries have tried.
The tendering approach and the way the PPP (public-private partnership) accelerated the roll-out compares well with pure private-industry outcomes and has lessons for other areas. It will be interesting to see if in its evolution from Crown Fibre to Crown Infrastructure Partners (CIP), the new CIP makes use of the same approach in partnering with other industries. I hope it does. It worked really well for the UFB network.”
LEADING THE WORLD WITH FIBRE-TO-THE-HOME
“When the UFB network was first planned, TUANZ was a key advocate for improving connectivity.
We were pushing for a solution like fibre-to-the-home. Obviously that advocacy worked well because the new National government came in and took it on as policy.
Now we are seeing the fruits of that work. The UFB puts us in a world class situation. Fibre-to-the-home is world leading. If we look elsewhere, such as to Australia, it was in front of us at the time, then it had a change of government and the fibre-to-the-home build was called off. That was a missed opportunity for them.
From a project perspective, the UFB has been successful in terms of delivery. It has also been reasonably successful when it comes to uptake, at 50 or 60 percent.
What we’re still missing is the next step. We have world class connectivity, and we’ve done well on the residential front with the Rugby World Cup and the Netflix effect, but what will we do to make the most of the UFB network in developing our economy? Can we create new businesses and export opportunities?
We’re keen for the Rugby World Cup to be a success. People might then think: ‘If I can do this to watch the rugby, I should be able to do other things and create a business’.”
SAME-PRICE DIGITAL CONNECTIVITY FOR ALL
“Being connected has become an essential part of our everyday lives. We know that improving digital infrastructure improves people’s lives. It ensures that New Zealanders, regardless of where they live and work, can experience all the benefits that faster broadband brings.
As Minister, it’s exciting to be part of this transformation, and see people increasingly embrace the benefits that come with fast, reliable broadband.
UFB delivers speeds of up to 1000Mbps, which means quicker uploading and downloading speeds, and a more reliable connection. This increased capacity and speed is especially useful at work, school and home when there are multiple people online at the same time.
When the Government’s UFB programme is complete, New Zealand is expected to be in the top five OECD countries for digital connectivity. But, more importantly, it’s helping close the rural/urban divide so that people in smaller centres, like Greymouth, Tokoroa and Pukekohe, have access to the same top-class broadband technology available in the big cities, and at the same prices.
It’s encouraging to see the number of New Zealanders connecting to UFB. The latest statistics show that 78 percent of New Zealanders have access to a UFB connection, and 52 percent of those (that is 820,761 homes and businesses) have now connected. I look forward to seeing UFB uptake rates for the most recent quarter when they are released soon.
Alongside the UFB programme, the Government’s Rural Broadband Initiative Phase 2 (RBI2) and Mobile Black Spot Fund (MBSF) are also underway. RBI2 is increasing the availability of enhanced broadband access throughout rural New Zealand, and the MBSF is delivering new
mobile coverage to about 1,400 kilometres of state highway and over 160 tourist sites.
Combined, these programmes are boosting broadband and mobile services around the country and will significantly contribute to making New Zealand a world-leading digital nation.”