'New Zealand's uptake of broadband will continue to languish until three issues are addressed - price, competition, and the effects of the Kiwi Share'. That was the reaction of the Telecommunications Users Association (TUANZ) to Telecom's recent announcement that it's aiming at having 100,000 households connected to broadband by the end of next year.

"That New Zealand is 25th in the OECD for broadband uptake and sinking fast is an economic disaster that must be addressed," says TUANZ chief Executive Ernie Newman. "As a small and isolated trading nation we have to be the first to pick up technologies that remove the disadvantages of distance, not the last. Announcing targets will not in itself make the slightest dent in the problem - the real barriers have to be removed."

Although at $69 per month the cost of JetStream is only slightly more than Sky Digital ($55.54 a month) and cheaper than a daily flat white coffee, Newman contends the first barrier to a massive consumer shift to broadband is price. At $69 a month with a usage cap, he describes Telecom as being "too greedy" and says to get more users aboard it must drop the price and remove the cap - positioning JetStream as a mass-market product, not a niche one.

At Telecom HQ in Wellington, rural solutions manager Seager Mason sounds a little war weary discussing the pricing of JetStream. He says one reason many people haven't signed up for the service is simply that they don't know it's arrived in their region yet (check availability at www.jetstream.co.nz), but in an ironic twist, he says the problem for Telecom (and any other provider looking to offer a hi-speed internet service), is that the huge popularity of the internet in New Zealand has proven to be a double-edged sword.

Why? Internet access prices here are the cheapest in the world. Xtra for example, charge NZ$27.95 for unlimited dial-up. Australian ISP Telstra Big Pond, by comparison, charge A$38.95 (about NZ$45.00) and in the States giant ISP America Online charges US$23.90 (approximately NZ$42.00). The free ISP services of a couple of years ago were a clever manipulation of the interconnection deal between Telecom and Clear - and were unsustainable - but they did drive the price of access down, and it hasn't risen much since.

The result says Mason, is that even where JetStream is available, only about 5% of subscribers have signed up for it, the rest being reluctant to make the jump from paying the very inexpensive $27.95 for unlimited dial-up access - to around $65 per month for JetStream. So what does this mean for nationwide hi-speed internet access? Simply that Telecom needs to see that an area is financially viable before they'll install the service.

Interestingly however, Mason says the numbers required to make the business case aren't huge. Three of four businesses or 27 home users signing up is enough for Telecom to put in JetStream he says. And you can be pro-active. "We had a situation recently where a guy wanted JetStream at his bach," he says. "We told him what the story was so he went door knocking and got enough people in his area to commit to it for us to put the service in."

All well and good says Newman, but more needs to be done. "Telecom claims to have put in the infrastructure to make broadband available to a large part of New Zealand," he says. "This is commendable. It now needs to eliminate the pricing and marketing barriers so that New Zealand starts to move forward and Telecom itself gets a return on its investment."

July 2003

Ernie Newman