I’ve had several comments in response to yesterday’s news that TelstraClear has launched a 25Mbps broadband service in Wellington, with plans to eventually offer a 100Mbps service on its Wellington and Christchurch hybrid fibre coaxial [HFC] networks.
Not surprisingly, much of the feedback has been around the price of the 25Mbps service: a whopping $230 per month for the plan which includes a 120Gb of data.
The good news is TelstraClear says we can expect that price to come down.
My NZ Herald article on the subject is here, but I thought readers might like to read more of what TelstraClear CEO Dr Allan Freeth had to tell me – he had some interesting and enlightening comments which I couldn’t fit into the original article.
In short TelstraClear is rebranding the broadband service on it fibre-enabled HFC network as ‘WarpSpeed’. The 25Mbps WarpSpeed service (details here) has been available in Christchurch for a while and is now available in Wellington.
The company’s press release on this announcement is here.
Freeth admited to me that the Christchurch service has not been a big seller:
We’ve had 25Mbps sitting in a city of 250,000 people and we’ve had less than 20 people take it up. It’s an expensive product because under the present DOCSIS2 [Data Over Cable Service Interface Specifications]configuration it’s cost us quite a bit of money and it takes quite a lot of ‘node capacity’ to provide it to those customers so we’ve priced it accordingly, because if 500 people said they wanted it then we’d have a problem.
So what’s happening now?
We’re upgrading the whole network to DOCSIS3 so speeds from 25Mbps up to 100Mbps will be introduced progressively, partly in relation to the upgrade – it’s going to take a few months to do – but also very much in relation to the demand that’s out there. We’ve found the demand for 25Mbps, which is priced quite heavily – although we’ll be looking at that price point – has been somewhat limited. It’s mainly been the very heavy gamers, or people who are using quite large files at home. But we know that [demand] will build as people fully understand what they can do.
He says the DOCSIS3 upgrade will be completed this calendar year. Once that happens TelstraClear is likely to offer 25, 40 and 50Mbps plans, but hasn’t set pricing for those plans yet. It will do so once the upgrade is completed.
There’s a capacity issue on DOCSIS2, so the [TelstraClear technical] guys have done some clever things with the network to enable the 25Mbps to be delivered. As 25Mbps becomes a much more common element that people want, that price point will come down, and the price points at the higher end, for the very fast speeds, which eat up a lot more capacity on the network, will be priced accordingly to demand.
But it’s a case of how fast do you want to turn it up, and a lot of that will depend on demand. We have to re-architect both networks again – we put an overlay over both networks, then the question becomes: what speed do you want to tune it for how many customers? So we won’t be providing 100Mbps packages from day one because no one wants them, nor do they want to pay for them at the moment, but what it does is it puts that capacity in place and it’s simply a matter of if there’s demand for it from businesses or from customers then we can provide it.
We haven’t quite worked out what the packages should be – maybe 25, 40, 50Mbps over the next year or so. We will leave it at that and see how demand goes, and what people are using it for as well.
Freeth says outside of Wellington and Christchurch, /telstraClear’s focus is on local loop unbudling rather than expanding its HFC footprint.
We’re in 20 exchanges now and we’re going to be in 40 in another couple of months and we’re going to be in 70 next year. We’re already selling heavily into those exchange areas on unbundled local loop with ADSL2+ and VDSL will be coming on-stream as well. So we will be competing when we start migrating customers over to our unbundled local loops later this year. We’ll be competing very heavily in those cities both on Telecom resold products but also on our own products as we use the unbundled local loop from those 70 exchanges. We’ve taken the opportunity in this particular project of basically reconfiguring and restructuring our whole consumer portfolio so when we launch later in the year we’ll probably be relaunching a whole set of products across the consumer base.
An HFC build in Auckland would not be economic, he says.
But we’re still looking at partners. The best example the government has got of the type of thing they’re trying to encourage is the Northpower initiative with us in Whangarei, where Northpower put the infrastructure in and we put the electronics in, and provide the services. We’re still in very serious discussions with a lot of utility companies about what exactly are their aspirations, do they have a clear demarcation between being a utility company or a lines company and being a telco, and if we understand each other we’re very clear to pursue those. But our own builds of either HFC or fire beyond where we’re now is pretty questionable on a mass-scale basis. But certainly on a partnership basis, I think we’ve already demonstrated we can do that pretty effectively.
We’re reasonably confident about being able to compete on the sort of patchwork nature that we’ve been doing.
Freeth says he remains convinced the findings of the Castalia report – jointly commissioned by Telecom, Vodafone and TelstraClear late last year – remained correct. One conclusion of the report was that there wasn’t much demand for high-end services, because customers simply weren’t prepared to pay for them.
What we’re doing [with the DOCSIS3 upgrade] is future proofing. We’re doing two things. The first is we very much believe in the finding so of the Castalia report but we’ve also noted that Government doesn’t, and if they do they’re not going to admit it. We are concerned about the $1.5 billion we have [invested in our network over time] and about overbuild by companies that certainly don’t have the business disciplines that we have, and we have to meet, so this type of investment is future proofing.
A lot of these upgrades you can’t do in graduations. So for $10 million, in both [Wellington and Christchurch] we can put in the big step, but tune it back to where we think the demand will sit.
We know there won’t be the demand at the high end, but we’ve put it in so that in future if people want it we’re going to be able to provide it. [Secondly] there is absolutely no reason for government, local bodies or anyone else to build fibre to the home to get 100Mbsp because the network’s already in place.
