A Look at New Zealand's Internet

Big changes to New Zealand’s internet are currently underway.

There have only been one or two times when I’ve felt like taking to my computer with a sledgehammer. The second was when my digital purchase for Starcraft 2 backfired. The first was when I was sixteen and my internet connection died in the middle of Counter-Strike championship final... just as I was about to clutch. Since that frustrating day I’ve always had a strong interest in making sure my internet connection was top of the line and as safe as houses. But my problem is not unique; in fact in New Zealand it’s all too common. Many Kiwi gamers must daily lock horns with their internet service provider overlords.

It is no longer remarkable that gaming and the internet are like Mario and Luigi or Ratchet and Clank – totally inseparable. If we aren’t using it to battle each other, we are logging in to read about the industry’s latest developments. In today’s modern world of multiplayer gaming, digital distribution and ready access to information the internet is becoming more and more essential. Not just to gaming, but to well... everything.

Our generation didn’t bat an eyelid when France’s constitutional court ruled that access to the internet was a fundamental human right. In fact, most of us nodded our heads in docile agreement. The Finnish went one step further, it’s now a legal right for all Finns to have at least access to a 1MB broadband connection.

Now, I’m going to make a confession – I’m not most of us. I did bat an eyelid when heard this news; in fact I did more than that. I got out of my chair, stomped around the house and raged a little bit. I was mildly angry and very jealous. Finland has only got one million more people than New Zealand; it didn’t seem fair that they were getting great internet while we were missing out.

But my rage quickly turned to curiosity. I wanted to know exactly what was happening with New Zealand’s internet infrastructure. I wanted to know how its nuts and bolts worked and how it could perhaps be changed for the better. Politicians, business leaders, industry groups and consumers have all been clamouring for some serious investment, and progress is now just starting to be made. I resolved myself to finding out what these changes were, and if they were going to result in any noticeable improvements for gamers and the internet services we so desperately rely on.

When it comes to New Zealand’s internet we should probably start off by addressing the elephant in the room: Telecom. Easily New Zealand’s largest internet service provider, it owns and operates the vast majority of our internet network. Originally starting as a government owned division of the New Zealand Post Service; it was sold into private hands in 1990 for $4.25 billion – this sounds like a lot of cash, but it was actually a pretty small fee to pay for control of nearly every telephone connection in the country. Since 1996 it has been providing internet connections to New Zealand homes through its internet service provider, Xtra.

There’s a reason Telecom is the elephant, and there’s a reason its taking up most of the room. The company has a distinct advantage in New Zealand in two crucial ways. Firstly, it has a virtual monopoly on the actual wires and exchanges that our internet physically flows through. Secondly, it owns a fifty percent stake in Southern Cross Cables Limited, the company that owns the only physical cable that links New Zealand to the rest of the world. Basically, Telecom owns nearly all of New Zealand's internet highway, and it controls the border gates. Obviously, this kind of monopolistic dominance has got consumers' backs up, and Telecom has had the dubious honour of being the only company to win the ‘Roger Award’ given to the “Worst Transnational Corporation Operating in New Zealand” not once, but twice.

This market monopolisation did not go unnoticed, and things came to a head in 2006 when David Cunliffe – the then Labour Telecommunications Minister – pushed through the Telecommunications Amendment Bill, which forced Telecom to unbundle their local loop (the wires connecting people’s homes to their local exchanges). The law allowed competitors to rent space in Telecom’s exchanges, meaning customers could directly connect to the competitor’s network equipment, removing the need to deal with Telecom’s network at all.

The result of these technical changes is that competitors (like Orcon or Slingshot) now have much more control over the amount of bandwidth and the speed of the connection that they can provide. The Government’s law was a broadside attack on Telecom’s monopoly, and the hope was that it would result in more competition in the internet market. For disgruntled gamers like me, this meant lower prices and faster speeds.

But there’s a problem. Two, in fact. Firstly, copper wires are a pretty terrible way of transferring data. They are old, slow, and the longer they are the worse the connection will be. Unbundling the local loop didn’t really remove this problem. Secondly, Telecom may have been able to pull a fast one on their competition through their recently announced ‘Cabinetisation’ program.

Now, bear with me here – this might get a little bit technical. Telecom has just announced a $1.4 billion dollar investment in their network. The focus of the investment will be in the installation of cabinets – small boxes on every street that the local homes on that street will connect to. Currently all the homes in a suburb go to a central exchange, using lots of slow copper wire in the process. But after Telecom has finished its cabinetisation program, a smaller number of homes will be connected with copper to a larger number of cabinets – each of which that are connected to the local exchange by nice, speedy, fibre-optic cable.

Think of it this way; instead of everyone slowly commuting to Wellington on individual old, clogged roads, they are instead driving to a train station on every street, and from there, getting a bullet ride into the city. This sounds like great news, and for existing Telecom customers it is. There will be fewer traffic jams at the exchange, and there will be a speedier line to the outside world. But it’s very, very bad news for Telecom’s competitors.

Like everything these days, the problem is to do with cost. Currently, it is worthwhile for a small competitor to stick their network technology in one of Telecom’s local exchanges. With six hundred or so connections coming in, they can be pretty confident that the sixty or so spaces they are selling are all used. However, when Telecom switches to cabinets, there will only be a few high speed lines going into the exchange. Competitors will need to rent both space on those high speed lines, and space in each street’s cabinet. This is a classic economy of scale problem. Small competitors simply can’t afford to stick their own network technology in each cabinet when there might only be one or two homes on that street using their service. The harsh reality is that their customer base is physically spread too thinly to be economically viable. The result of this is less competition – meaning that Telecom’s monopoly might once again be back in force; and high prices, slow speeds and poor service along with it.

This is bad news for gamers. Its very bad news indeed. Less competition is going to mean it will be much harder to find an internet plan with cheaper rates, faster speeds and higher data caps. These are the very things that games are now requiring us to have. As anyone who has Steam or is always having to download PSN updates will know, big data allocations are becoming less of a luxury and more of a necessity if you want to get the most out of your gaming experience. Not to mention the data needed for gaming itself and the speed with which it needs to be transferred.

But there may be some light at the end of the network tunnel. The Government’s “Fibre to the Home” initiative is set to radically improve New Zealand’s internet access. The project is exactly what it sounds like: by 2020 the Government wants to have replaced all those old copper wires with nice, speedy, and always upgradeable fibre-optic cable, going right to your home. This is a pretty expensive project, and its not all happening at once. Sadly, us gamers are the last cab off the rank – with big businesses, retail areas and industry being the main priority. But the plan is going to reach us eventually. The actual task of laying down the fibre is going to be done by a new Government owned company called Crown Fibre Holdings in conjunction with internet companies who are currently bidding for a slice of the Crown Fibre pie. Progress is steady and June’s Budget included an extra $248 million dollars of taxpayer funds to kick start the process.

The introduction of Crown Fibre has already led to some notable developments; the most interesting being Telecom’s announcement that if it wins the contract, it will split into two companies. The first would be “Chorus2” a company which would physically build and maintain the new fibre network. The second would be Telecom’s retail and wholesale business, and would manage internet services. This separation raises its own challenges and the complex regulatory issues that it throws up are probably dealt with better in another article, but Telecom’s organisational separation does indicate that the elephant in the room is getting pretty serious about the Fibre to the Home prize. Steven Joyce, the Minister for Communications and Information Technology is gearing up to make a decision: "by October of this year I'm expecting to see Crown Fibre Holdings' recommendations on preferred investment partners. This should enable new fibre to start going into the ground around the end of the year."

A fibre optic internet cable to every home is an obvious plus for gamers. Hell, a fibre optic cable to every home is an obvious plus for everyone. But, gamers (and the Government) might need to take Telecom’s earnest displays of obedience with a grain of salt.

Clare Curran, the Labour Party’s spokesperson on ICT is critical of Telecom’s announcement suggesting that it could undermine competition for the Crown Fibre contract: "Telecom’s announcement today suggests that a parallel process has been underway for months which could undermine the tendering process. The $1.5 billion being invested in ultrafast broadband is public money and the public has the right to a transparent process on how it will be spent.” In addition to this, Curran has concerns about how Telecom might be able to influence the market if it once again has a hand in the construction of New Zealand’s new internet infrastructure: “Labour has serious concerns about the role an entrenched monopoly could play in slowing down the roll out of broadband in New Zealand and the effect on the goal of affordable and accessible broadband services for New Zealanders.” These are fighting words, and they highlight how seriously our politicians are treating the development of our series of tubes. And for good reason: you can’t have good, solid, economic development without the ability to properly communicate.

So where does all of this technical jargon, political commentary and monopolistic retail behaviour leave us? We can’t deny that as high-end consumers of internet services these new developments are not good news. They are. And we can’t ignore the fact that fibre networks or improvements to our local loops are not going to be beneficial. They will be. But what we as gamers can do, and what we need to do, is improve our understanding of the complex market which provides us with our online gaming goodness. What we want is pretty easy to discern: fast connections, lower pings, stable servers, high data caps (or no caps whatsoever) and above all else, cheap pricing. The difficulty comes in transferring these desires into competitive market realities. And in realising these desires we need to recognise that a role for politicians and the state is inevitable.

But that’s an inherently good thing. Gamers' votes are worth as much as Telecom's and there are substantially more of them. How we develop our internet is not just a debate for one or two big businesses; it is a debate for the computer-chair warrior and the Xbox-live champion. Its a conversation for the hardcore WoW raider and the FIFA-Soccer mum. And it is one that gamers desperately need to lead if we ever want to see instantaneous downloadable content or single digit pings.

And we do. We so desperately, desperately do.