Download Weekly - Rural expansion in Chorus Capex plan

Friday, 10 November 2023, 6:52 pm
Article: Digitl

Rural expansion, resilience feature in Chorus capex plan

Chorus plans to spend $234 million expanding its fibre network into rural areas and a further $93 million on resilience. Yet the company says it needs policy and regulatory certainty to ensure investors can recover their investment and earn a fair return before it can press ahead.

The fibre wholesale company outlined its medium-term capital expenditure plans at last week’s AGM. Chorus proposes to invest a total of $1.5 billion between January 2025 and December 2028. The company has submitted the plan to the Commerce Commission for approval.

Its $1.5 billion figure could include spending $234 million extending the network further into rural New Zealand. That would deliver fibre to the gate of another 40,000 premises.

Building resilience

The company earmarked a further $93 million for spending on increased network robustness to face emerging resiliency challenges.

Speaking at a Chorus stakeholder event in Wellington on Wednesday CEO JB Rousselot says the weather events of early 2023 “have brought network resilience into sharper focus”.

He says: “It’s abundantly clear that safeguarding infrastructure is not just a technology requirement, it’s a social obligation.”

Rural expansion and resilience investments fall into what Chorus describes as the discretionary part of its spending plan.

Call for certainty

In a thinly-coded message to the government and regulatory authorities, Chorus says this spending depends on ‘certainty’. The company argues that it needs to know the regulatory setting won’t be changed to undermine the return it makes on its investment.

At the same time Chorus wants the government to ensure the open access wholesale fibre broadband model isn’t undermined by vertically integrated wireless networks.

The company also wants to see more regulatory flexibility to cope with a fast moving industry where changes can happen almost overnight. An example of that would be the recent rapid adoption of low earth orbit satellites.

Demand-driven investment

A further $700 million of capex is demand-driven spending based on forecasts. This includes money for fibre installations, connecting green field sites and expanding Hyperfibre.

Over $250 million of this represents the investment needed to cope with data demand (see next story).

Simpler business

Chorus chair Mark Cross told the stakeholder event that since the completion of the UFB programme in December last year: “We’ve effectively transformed into a predominantly fibre digital infrastructure company. We’re a lot simpler and that’s the way we’re heading”.

He said while New Zealand is regarded overseas as somewhere others can learn about running fibre networks, the change of pace is relentless and others are forging ahead of New Zealand in terms of coverage, uptake and offering multi-gigabit services. In parts of Europe service providers are aiming for 99 or even 100 per cent coverage.

He says: “Google Fibre recently announced it has introduced 20 gigabit speeds to residential customers coupled with the latest WiFi 7. We met operators in Europe offering multi-gigabit services.”

JB Rousselot: “More decisive on copper withdrawal”

At Wednesday’s Chorus stakeholder event JB Rousselot looked forward to the end of the copper network.

He says: “The copper network has been the backbone of New Zealand’s telecommunications for many years. However, with the transition to new technologies, it is becoming clear that this legacy technology is nearing its end of life.”

Rousselot and Chorus Chair Mark Cross were recently in Europe. There they learned that Norway has retired its entire copper network and Sweden is around 80 per cent of the way to that goal. Spain aims to complete copper withdrawal next year.

“Each of these countries has fibre coverage and uptake close to where New Zealand is. It demonstrates that we need to move more decisively in the same direction.”

One overlooked aspect of copper withdrawal is that it helps telcos deliver on carbon emission reduction targets.

There is a lot more going on in the industry at the moment. Look out for a special extra edition of the Download Weekly on Monday November 13.

Traffic peaks as new Fortnite released

Kurt Rogers, Chorus’s network strategy manger, reports the largest ever traffic peak on the fibre company’s network happened this week as the latest chapter of the popular Fortnite game was released.

Chorus network traffic hit 4.6 Tbps at 9pm on November 3. That was 1.5 Tbps or 50 per cent higher than the previous evening’s traffic peak.

The game updates are released at 4am Eastern US time, when local networks would normally have a low load. This coincides with peak time for data traffic in New Zealand, yet the network coped without a glitch.

Rogers says the PC version of the game requires a 32GB download. Customers on Fibre Max, that’s plans that download at 900+ Mbps take five minutes to get the upgrade. Customers on Chorus’ most popular 300 Mbps plan get the game in 15 minutes.

He says this compares with the Australian experience where customers on the NBN’s 50 Mbps plan take an hour and a half to download the game. Times would be similar for many users on fixed wireless broadband plans.

ComCom joins Pacific Island regulator network

New Zealand’s Commerce Commission is a founder member of the Pacific Island Network of Competition Consumer and Economic Regulators or PINCCER. The group has been formed so that regulators from the region can share intelligence, techniques and best practices.

PINCCER includes regulators from New Zealand, Australia, Cook Islands, Fiji, French Polynesia, Kiribati, New Caledonia, Papua New Guinea, Samoa, Solomon Islands, Tonga and Vanuatu. Regulation is in its infancy in some of these nations, but all the countries involved face common issues.

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Sky acquisition deal off

Sky says the preliminary expression of interest from an unknown buyer hoping to acquire the business is going nowhere.

In October the pay TV and broadband service announced there was a “confidential non-binding preliminary expression of interest” from a third party considering buying all the Sky shares.

This week the company received an updated expression of interest which proposed a price below Sky’s board’s estimate of the business’s value. At this point the board terminated discussions with the potential buyer.

Upbeat AGM: Sky chair Philip Bowman told the company’s AGM that the business had a positive start to the 2024 financial year and it is on track to meet its numbers.

Post-merger 2degrees shows mobile market momentum

The latest Telcowatch report notes a sizable increase in 2degrees’ share of the mobile market largely at Spark’s expense. The report for the third quarter of 2023 says 2degrees picked up an extra 4.4 per cent of the market to give it an overall share of 24 per cent.

During the quarter Spark’s share dropped 2.2 per cent to a 34 per cent while Spark’s Skinny business lost 1.7 per cent of market share to land at 7 per cent of the total. One New Zealand’s share dropped 0.4 per cent to 35 per cent.

Spark remains the dominant mobile player. When Skinny is added to the parent brand, the business commands a 41 per cent of the total.

In its commentary Telcowatch notes that Spark’s market share, that’s the parent brand without Skinny, has fallen consistently over the past five quarters.

2degrees gets tick for climate goals

2degrees has had its climate goals verified by the Science Based Target Initiative, a project established to help businesses set emissions targets in line with climate science and Paris Agreement goals.

The telco has committed to reducing greenhouse gas emissions 43 per cent from its 2022 level by 2030. It says that three quarters of its suppliers will have similar science-based reduction targets by 2028.

Recently 2degrees joined the Climate Leaders Coalition.

Another Provincial Growth Fund would be great for rural connectivity

New Zealand First’s deal with Jacinda Ardern’s 2017 Labour government saw Shane Jones overseeing a $3 billion pot of money for projects outside the main centres.

The Provincial Growth Fund supported a number of extensions to both the RCG’s mobile network build and the UFB fibre network along with related projects. Thanks to PGF money, thousands of rural New Zealanders now enjoy the same level of service as their urban cousins thanks to that spending.

While the incoming government says it is interested in improving rural connectivity, it has told the sector that improved communications is not a spending priority and money needs to be found elsewhere for further projects.

That was before it was clear National and Act would need to cut a deal with NZ First. It is unlikely the new government would use the PGF name, but a similar pot of money for rural development could go a long way to fixing the rural-urban digital divide.

In other news

Singaporean-owned, Australian telco Optus was back in the news for all the wrong reasons when it suffered a major outage on Wednesday leaving millions of customers without phone or internet connections. This follows a major cyberattack in September 2022 when criminals accessed personal information on around 40 per cent of all Australians.

The story was everywhere. There’s an interesting background story at the Australian Financial Review. It turns out Optus didn’t keep the minister up to date.

CommsDay had comprehensive coverage of the outage. Today’s newsletter, which is not published on the web, leads with Major telco drawn into gov’t inquiry into Optus outage. Graham Lynch’s story starts:

“The scope of a federal government inquiry into the Wednesday Optus national net- work outage is likely to widen to incorporate all the major telcos in a sign that the ramifications of the event will reverberate across the entire sector”.

Meanwhile RNZ’s Morning Report asked the TCF’s Paul Brislen if we can expect to see a similar outage here. He thinks not.

At the ITP’s Techblog Peter Griffin writes about the cost of the internet being offline for a day. He says it would cost the world US$43 billion and the cost to New Zealand would be NZ$158 million.

Customs revives pre-pandemic plan to digitise tariffs writes Rob O’Neill at Reseller News. The New Zealand Herald’s Chris Keall writes about new technology-infused ways of watching the Melbourne Cup.

Rural expansion, resilience in Chorus capex plan was first posted at billbennett.co.nz.

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Bill Bennett

Freelance journalist.

Auckland-based Bill Bennett writes technology and business stories that are directly relevant to New Zealand readers.

His emphasis is on telecommunications, but he also covers other aspects of technology and business. You can find his features in the New Zealand Herald and hear him regularly on RNZ Nine to Noon and the NZ Tech Podcast.

Bennett's The Download Weekly newsletter is published every Friday. You can sign up for it here. If you want to support his work, you can make a donation to his PressPatron account.

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