Potential Effects of New Zealand's Policy on Next Generation High-Speed Access Networks

Abstract

New Zealands strategy to deploy ultra-fast next generation access networks (NGA) on the basis of fibre to the home (FTTH) to the majority of the population by 2019 involves specific public private partnerships for dedicated roll-out areas that are supported with substantial financial aid by the Crown. This article explores in which way this strategy can be effective and whether it is able to accelerate consumer demand for NGA. Several empirical studies relating to the deployment and uptake of broadband technology consistently reveal factors which are decisive for the diffusion of broadband technologies in developed countries. From the supply-side perspective, the regulatory environment, associated incentives to deploy new infrastructure, and government stimuli can be seen as important determinants. However, the diffusion of a new technology in a given market requires consumer acceptance. The consumer uptake of ultra-fast broadband (UFB) access will depend on the increase in speed in relation to the existing access technology, and the existence of applications requiring this increase. Taking these factors into account, some potential problems with New Zealands roll-out plan can be identified. It seems conceivable that the driving factor for fast broadband uptake in New Zealand is, under the current set of applications, the migration from low bandwidth broadband to higher bandwidths required for video streaming, but not necessarily to ultra-fast broadband. In that sense, a diminishing marginal return of speed may be assumed. Further, the regulatory environment might cause adverse effects for competing broadband networks that are not subsidized, such as the recently rolled out VDSL network and 4G mobile networks. Moreover, the incentives of retail service providers to offer fibre based internet products are not clear cut. Because of vertical separation they are not invested in network deployment. An empirical analysis of recent UFB uptake data could show whether these assumptions are valid.