Long Term Evolution vs Short Term Monetisation

After a seminar late last year I commented on some of the potential shortcomings, at least in my mind, of the New Zealand Government's decision to invest tax dollars into ultra fast broadband (UFB).

In recent months Telecom New Zealand, now shed of its fixed access networks after the structural separation of Chorus, has announced its plans for a 4G trial.  This Long Term Evolution (LTE) offering is being adopted across the world and promises to have speeds of 300/75Mbps.

Putting this into context the multi-million dollar investment in UFB promises speeds of at least 100Mbps.  The geography and urban distribution of New Zealand mean that this Fibre to the Premise (FttP) rollout will never be committed to every home in New Zealand, the fixed costs would be prohibitive.  The solution is the adjunct offering of the Rural Broadband Initiative (RBI) that will see a hybridisation of the network to include fixed wireless nodes, and ADSL to try and deliver the dream of ubiquitous access.

Of course this means that for consistent delivery of services, of which the killer application has yet to be realised, will typically mean delivery to the lowest common denominator (either fixed wireless or ADSL).  In parallel Telecom will continue its aggressive push into its mobile network and people will become used to increasing speeds on a selection of form factors.  When we consider the impact that fixed wireless and mobile have made in emerging economies where whole countries and generations have skipped the clunky, restrictive, fixed access (copper) networks and jumped straight to mobile with great success, we should ask what will the usage patterns be of the general consumer by the time UFB and its network of regionalised retail service providers are ready to commence service?

Visit any modern city in South East Asia and you will see the average person using their mobile handset (often enhanced with one of the many tablets available today) in-lieu of a traditional land line.  People are being behaviourally locked in to fully mobile access to voice, email, and a growing array of content.  Will people really want to be tied to services provisioned through a set top box? or would they rather have close to UFB speed, and potentially faster, from their handset and tablet platform with its intuitive user interface?

Admittedly there will be some uptake of FttP services in the business sector. However the ability to fully monetise services at a level that is both palatable for the consumer and that generates revenue at a level to meet the return on invest projections will be tough.

Has the Government merely funded a very useful fibre backhaul pathway for Telecom?