Axia NetMedia Corporation
Broadband
Investment Initiative
Response to the Draft Proposal for
Comment
New Zealand Government
Written by: Axia NetMedia Corporation
Date: April 27, 2009
This document is the property of and proprietary to Axia NetMedia Corporation. This document is confidential
and contains information which is commercially sensitive to Axia and is not to be copied or reproduced, nor its
contents disclosed to any other company or individual other than to those employees and contractors of the New
Zealand Government who have a bona fide need to review this document for the purpose of evaluation and
have been informed of its confidential nature.
TABLE OF CONTENTS
INTRODUCTION.......................................................................................................................................................... 1
AXIA’S EXPERIENCE ................................................................................................................................................................. 1
NEXT GENERATION NETWORKS ................................................................................................................................................. 2
COMMENTS ON THE BROADBAND INVESTMENT CABINET PAPER ............................................................................... 3
FRAGMENTATION ................................................................................................................................................................... 3
COMPETITION ........................................................................................................................................................................ 3
PRICING ................................................................................................................................................................................ 3
TELECOM’S IMPACT ................................................................................................................................................................ 4
SUMMARY OF COMMENTS ....................................................................................................................................................... 4
AN ALTERNATIVE APPROACH ..................................................................................................................................... 6
OBJECTIVES OF THE NZBCO PUBLIC PRIVATE PARTNERSHIP ............................................................................................................ 6
PASSIVE VERSUS ACTIVE BASED OPEN ACCESS .............................................................................................................................. 7
WIRELESS TECHNOLOGIES AND THE NZBCO ................................................................................................................................ 8
NZBCO BENEFITS TO THE WIRELESS MARKETPLACE ...................................................................................................................... 8
OUTCOMES FOR IPTV ............................................................................................................................................................. 8
OUTCOMES FOR VOIP ............................................................................................................................................................. 9
GLOBAL GATEWAY ACCESS FOR THE NZBCO................................................................................................................................ 9
SUMMARY OF AXIA’S APPROACH ............................................................................................................................................. 10
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Introduction
Axia NetMedia Corporation is pleased to respond to the Cabinet Paper outlining the Broadband
Investment Initiative Proposal for expanded fibre infrastructure for New Zealand. Axia would like to
both submit our observations on the current draft proposal for your consideration and also briefly
describe our vision for the New Zealand market and how Axia might participate in that vision.
The New Zealand Government’s plan to create a network to support ultra-fast broadband to 75% of
New Zealanders is both progressive and visionary. Very few countries around the globe have
undertaken national level fibre initiatives to build out such critical broadband infrastructure. Alberta
(Canada), France and Singapore are three examples of other jurisdictions that have launched similar
large scale initiatives. In the case of France, they adopted a national funding and regulatory
structure but chose to implement the broadband infrastructure on a regional ‘fibre backbone’ basis.
In Singapore, the political, geographic and economic landscape is such that a structurally separated
national Fibre to the Premise (FTTP) approach is most appropriate.
In New Zealand the government has concluded that a “market failure” condition exists in the current
telecommunication market. Affordable, ubiquitous and high-quality broadband services are not
consistently available to all New Zealanders and it has become apparent that the current
telecommunications market does not have the incentive or means to provide such services. In order
for 75% of New Zealanders to truly benefit from access to ultra-fast broadband infrastructure, Axia
believes it is necessary for the government to facilitate the creation of this broadband infrastructure.
A transformed telecommunications sector is dependant on lowering the barriers of entry to all
interested participants in the web services sector. Although fibre installation requires a significant
capital investment, small niche players and new market entrants in web services benefit greatly from
access to state-of-the-art wholesale transport and connectivity services. In this context, web
services are any service or application that runs over top of the Next Generation Network. Therefore,
telephone calls/voice, television/video, internet search, social networking, video conferencing, e-
government (i.e. e-health, e-education, etc.) and software as a service applications are all Web
Services.
Axia’s Experience
Axia has Next Generation Network (NGN) initiatives in Alberta, France and Singapore. The Alberta
SuperNet was Axia’s first NGN implementation. It utilizes the Community Interconnect model that
Axia is proposing as the base of the NGN. The Alberta SuperNet proved the concept that if a
government facilitates the creation of a wholesale broadband network infrastructure, uses that
network for their own broadband needs and at the same time makes the network available to the
whole market, then the knock-on benefits to the economy are many times the value of the up-front
investment and recurring services commitment.
Axia is also building and operating 13 regional broadband networks in France under a variation of a
Public Private Partnership (PPP) model called a Délégations de Service Public (DSP). These Open
Access DSP networks in France have more of a regional character than the SuperNet. Rather than
the focus being solely on connecting all communities in a jurisdiction, it goes one step further and
creates a fibre backbone within a community. Once again Axia, through its joint venture company
Covage, offers broadband services on an un-conflicted Open Access basis to Local Access Service
Providers of all types – DSL, WiMax, 3G/4G mobile carriers and FTTP.
Axia led the OpenNet consortium which was recently awarded the FTTP Network Operating Company
(NetCo) project in Singapore. OpenNet is responsible for creating a fibre grid that connects every
one of Singapore’s approximate 1.4 million residences and businesses. Axia surprised the global
communications sector by demonstrating that a brand new metropolitan FTTP grid can be built for
the low network access fees of $15/month for residential and $50/month for non-residential.
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Next Generation Networks
Axia’s Open Access Network model is a flexible technology and commercial framework that allows it
to be fully tailored to the specific requirements of a particular jurisdiction. The core principles of the
model such as un-conflicted open access, structural separation from the services sector, and a
common rate structure with no additional tariffs on distance, are all specifically designed to address
the fundamental issues facing governments today in their telecommunication sectors. These core
principles combined with a flexible set of economic and regulatory ‘levers’ in the model allow Axia to
address the specific demands from a government.
Axia only builds state-of-the-art high-performing fibre optic networks. When “passive” fibre networks
are combined with leading “active” electronics they create a Next Generation Network (NGN). NGNs
are characterized by utilizing Internet Protocol (IP) to deliver full duplex and symmetrical broadband
services. IP is the accepted standard of the technology world, allowing disparate systems and
networks to be integrated together in a proficient and economical manner. Full duplex means that
the bandwidth travels in both the uplink and downlink directions at the same time. Symmetrical
means the downlink speeds are identical to the uplink speeds. NGNs also create the ability to define
various Qualities of Service (QoS) suitable for a wide variety of applications. Various QoS levels are
critical to enabling emerging IP services such as High Definition IPTV, Voice over IP (VoIP) and High
Definition videoconferencing. Incumbent telcos are simply not capable of creating true Next
Generation Networks since everything they do has to integrate with aging legacy copper
infrastructures. Axia’s Next Generation Networks deliver Real Broadband™ with the following
characteristics:
• Guaranteed bi-directional capacities from 1 Mbps to multiple Gbps;
• Unlimited throughput with no additional fees tied to download or upload aggregate
throughput; and
• Guaranteed service levels, monitored 24 hours a day, 7 days a week to ensure the network
is always available.
• Optional rate structures to cater to different transport / connectivity needs.
• Provide the ideal backhaul network for advanced wireless services.
Axia welcomes the opportunity to respond to the outlined Cabinet paper. It is an imperative
component to a successful tender process to truly engage the industry and its stakeholders in an
effort to build the best possible solution for New Zealand. Axia would encourage the Minister of
Communications and Information Technology to continue to engage the sector throughout the
process to ensure the best possible solutions are being brought forward.
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Comments on the Broadband Investment Cabinet Paper
Axia fully supports the government’s broadband objective of accelerating the roll-out of ultra-fast
broadband to 75% of New Zealanders. Specifically, the focus in the first six years on priority sites
such as schools, health services, green field sites and businesses is an approach that looks to
leverage the benefit of ultra-fast broadband as quickly and as widely as possible. Furthermore, it is
an approach that is perfectly in line with Axia’s proven open access Next Generation Network model.
In addition, Axia believes that combining evolving wireless connectivity with the properly structured
next generation fibre grid solution can create extended high performing broadband to the vast
majority of the remaining market.
However, Axia believes that the investment approach adopted by the New Zealand government’s
Broadband Investment Initiative will present some significant challenges in the government fulfilling
its objectives for the initiative. Specifically, limiting the mandate of the proposed Crown Fibre
Investment Co (CFIC) to the provision of dark fibre on a regional basis will likely lead to unintended
consequences. Some of the challenges that we believe will result from the commercial market
response are summarized below.
Fragmentation
The proposed investment approach is likely to lead to a very fragmented fibre market in New
Zealand. Given New Zealand’s population, with up to 25 Regional Fibre Companies (RFCs) in the New
Zealand market it will lead to a complex and potentially inefficient market for New Zealand Internet
Service Providers (ISPs) and Application Service Providers (ASPs). It is likely that each RFC will have
different inter-connection terms and conditions and more importantly different dark fibre prices. The
net effect will be price disparity in end-user services between the larger and smaller communities
and significant complexity in obtaining access by service providers.
Competition
The proposed structure and mandate of the CFIC and the associated RFCs will impact the
competitive landscape of both the dark fibre market and the ISP/ASP market. The natural-monopoly
character of dark fibre means that the “winning” RFC in a particular region will end up being the only
wholesale fibre provider in that area. Given the economics of fibre and the demographics of the New
Zealand market you simply will not have competing fibre providers. In the ISP/ASP sector the
government stated the flexibility of dark fibre as one reason the CFIC will restrict its mandate to dark
fibre. However, the other side of that flexibility is the capital and operational cost and complexity of
building an “active network” on top of the dark fibre. The vast majority of the New Zealand
communities are simply not big enough to support multiple “active network” companies. The market
structure is also set up to enable large well funded ISPs to enter a region and push out any smaller
market players. Once the smaller service providers have gone out of business the dominant players
will have an effective monopoly with the ISP sector. The economies of scale attributes of an
integrated passive and active network with the appropriate regulatory governance provide a higher
performing lower cost service to end-users unless they reside in metropolitan markets like
Singapore.
Pricing
Dark fibre is notoriously difficult to price. The fantastic capacities and capabilities that fibre offers
also mean that from a capacity point of view a single pair of fibres could service the needs of an
entire jurisdiction. An RFC could have two dark fibre customers – one a niche ASP targeting the
education market and the other a large integrated ISP serving 50,000 customers. In this case how
should an RFC price its dark fibre? The RFC must be able to build a sustainable business model, but
if as described above it ends up with just one or maybe two ISP/ASP customers in a region then their
ability to create a sustainable business is significantly limited. Dark fibre pricing on a per end user
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per month basis can work but breaks down if the fibre grid goes beyond local access within a high
density community.
Telecom’s Impact
Throughout the Cabinet paper it is acknowledged that New Zealand Telecom (Telecom) will continue
to pursue the broadband market as it sees fit and may, or may not, participate in competitive bid
process for RFCs. Furthermore, Telecom’s obligations under its Operational Separation Undertakings
will have a continued impact on the fibre and telecommunications market in New Zealand. From both
an ISP and capital markets perspective, having Telecom in the market in this way creates a
significant element of risk and erodes critical economies of scale advantages of fibre networks. For
the ISP/ASP market, Telecom poses a significant competitive risk. Telecom has the market power,
products and service bundles to compete very aggressively in any regional market that it chooses to.
While the short-term impact of such competition is reduced prices for the end-user, over the medium
to longer term, small and medium ISPs do not have the resources to survive such aggressive
pressure that can be directed on an individual market by market basis. They ultimately go out of
business or sell out to Telecom. The long-term impact is reduced competition with Telecom
continuing to dominate the market. From a capital markets perspective, Telecom poses a significant
risk to any private capital that would be invested in a RFC. The fact that Telecom can compete by
utilizing its own network, or by utilizing an RFC’s services, means that the market opportunity for the
new fibre infrastructure is significantly compromised by the Telecom Fibre to the Node (FTTN)
network. Operationally separating Telecom only creates a “mirage” and does not mitigate this risk
from the capital market’s perspective. Fibre-to-the-Premise (FTTP) networks are economically viable
with high penetration and a financial white elephant at penetration rates of less than 50%. The
combined effect of these risks will result in the public capital markets viewing the RFCs as too risky
unless offset with very large grants.
Summary of Comments
The root cause of the challenges we see with the proposed approach is the splitting of the passive
network from the active network. The geographic and demographic reality of New Zealand makes it
extremely difficult to build a commercially viable business on fibre alone. The only situation where
separating the passive fibre company from the active services company is in large, very densely
populated metropolitan areas. Even Auckland would not qualify in this regard because it is needed to
build the economies of scale in a national solution. New Zealand's sparse population and challenging
terrain require a broadband company to leverage the economies of scale available through a national
fibre grid combined with the provision of completely open access transport and connectivity
bandwidth services. We acknowledge the government's provision to allow RFCs to potentially provide
"lit services". However, this approach still suffers from the segmentation and scale issues described
above. Furthermore, the Government currently has no plan to regulate the price of these lit services.
We believe unregulated prices combined with New Zealand's market dynamics will lead to predatory
behaviours followed by inefficient market pricing dynamics. The Government’s rationale of limiting its
participation to the fibre infrastructure level and leaving the market to price the fibre and broadband
services is well intentioned, but it does not fully recognize the need to combine passive and active
services to create necessary economies of scale. Furthermore, the proposed approach does not fully
address the natural monopoly nature of these fibre Next Generation Networks save only the
competition with copper. This competition is simply not workable because each party needs the vast
majority of the market for the network economics to be attractive to the end-users. Success from an
investor’s point of view turns into an effective monopoly from their customer’s point of view. Axia
proposes that it is completely appropriate to regulate the services of a Next Generation Network
provider.
In Axia’s experience, the argument that selling dark fibre as opposed to lit services is a more flexible
and desirable approach to the ISP/ASP sector is simply not true. IP has emerged as the global
standard communication protocol. With ultra-fast duplex and symmetrical Layer 2 and Layer 3
bandwidth services with guaranteed service levels, an ISP or ASP can do absolutely anything that it
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desires. This quality of service allows market participants to differentiate and customize its services
in any way. It is true that dark fibre is preferable when compared to the typical bundled and
deliberately limited bandwidth services that are available from an incumbent Telco, but that is not
the level of services provided by a truly open access Next Generation Network company. Axia would
like to propose an alternative approach to achieving all of the Government’s objectives for the
Broadband Investment Initiative while remaining completely consistent with the Government’s
defined principles for the Initiative.
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An Alternative Approach
The ultimate objective of any jurisdiction should be a ubiquitous fibre grid that at the very least
connects every single community onto the fibre grid and provides a vehicle to transition to FTTP to
the vast majority of residents. Axia proposes that the best way to achieve this objective is to create
a New Zealand Broadband Company (NZBCo) whose mandate is to offer ultra-high speed, truly open
access and un-conflicted broadband services throughout all of New Zealand. The NZBCo would offer
wholesale Layer 2 and Layer 3 bandwidth services anywhere on the fibre network. These wholesale
services would either be purchased by a service provider at a point of presence (PoP) in a
community or right to the premise where FTTP has been rolled out. The scope of the NZBCo must
include active services to address the challenges identified previously and create a viable world-class
service for the rest of the market to utilize. The application and web services sector would then use
NZBCo's bandwidth services to create the voice, television, video, and application services that will
drive New Zealand's digital economy into the future.
The NZBCo must be structurally separated from the rest of the application and web services market.
This approach eliminates any customer conflict and facilitates a truly competitive web services sector
that is going to deliver the innovative voice, video and applications services to New Zealanders.
Undeniably, the copper telephone network will not meet the communication demands of the future.
If the telecommunications market was completely efficient, the copper network would simply be
'turned off' as the FTTP network was rolled out. This would obviously require Telecom to be acting
rationally and be directly involved in the new NZBCo. In Axia's opinion, the New Zealand
Government's $1.5 billion commitment to create ultra-fast broadband infrastructure is enough to
develop a means of pulling Telecom into the process and ensuring that it acts in a rational manner
that is in the best interest of New Zealand. Axia led the Singapore OpenNet solution that ultimately
brought SingTel into the NGN and is expert in these commercial issues.
NZBCo would be a PPP that would leverage the Government's investment in broadband infrastructure
with private capital. The governance structure of the PPP would create proper Government
representation and oversight to ensure the Government's ability to align public policy and public
interest with the activities of the NZBCo. The private capital in NZBCo would bring with it the
market focus, efficiency and customer service to ensure appropriate returns on the capital
investment. It is possible for the NZBCo to still utilize the RFCs envisioned in the Government's draft
proposal. In this case the RFCs would lease or sell their fibre assets to the NZBCo. This way, the
NZBCo would fully utilize any existing modern fibre assets, or new fibre contributions by power
utilities, minimize overbuild, and create a seamless fibre grid with a single nation-wide wholesale
broadband rate structure.
With the NZBCo providing the transport and connectivity services that serve as the building blocks to
a digital economy, the rest of the ICT sector will address the various elements of the complete
communications and web services value chain. We provide an overview of the various elements of
the Next Generation Network below.
Objectives of the NZBCo Public Private Partnership
The Government’s objective of providing ultra-fast broadband to the majority of New Zealanders is
achievable under the appropriate structure of an un-conflicted open access network. New Zealand’s
diverse geography and size lend to unique challenges, however ultra-fast broadband should be
available on an open access basis where price and services are available on an equitable basis
regardless of geographical location.
Axia supports a two staged solution that creates a self-sustaining NGN active fibre grid for New
Zealand that interconnects all but the most remote communities. This first phase delivers Next
Generation services through FTTP for national and regional government key sites including all key
Learning, Health and Security locations (i.e. Schools, Hospitals/Clinics, Police Stations and regional
and national government offices) and we propose that it provide FTTP for new property
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developments. For the commercial sector, Axia’s proposes to offer truly un-conflicted Next
Generation wholesale services to the Local Access Service Provider (LASP) and Web Services
markets. Axia creates the appropriate environment for competition and flexibility in Local Access
technologies and services. This phase would also include specific measures that cater to the
extension of 3G and 4G wireless technologies to wider coverage and higher performing bandwidth
services.
This approach transforms the market and creates a competitive playing field between Telecom and
other industry players. It optimises the value of competition in both the wired and wireless services
to the government and the end-user. The NZBCo would accomplish these outcomes by creating the
economies of scale that are possible through a nationwide fibre grid and then offers the benefits of
those economies of scale to the rest of the market. The second stage of the rollout builds FTTP in
any market, including and beyond the 25 designated communities, where the joint public and private
governance of the NZBCo determines that deployment would be feasible and in the public interest.
Passive versus Active Based Open Access
Passive based services provided on an Open Access basis have many advantages over traditional
vertically integrated networks. However, if active services are based on the right standards,
protocols and services with the appropriate regulatory oversight, these active services can add
significant value to what is provided by simple passive or dark fibre services.
Suitable Active Technologies for Open Access
An IP based network combined with an MPLS core allows for flexible transport of a wide variety of
services and protocols and is the ideal solution for an active Open Access Network. These
technologies have been proven as the ideal solution for transporting triple play services. Symmetrical
throughput and prioritized traffic treatment are key advantages of IP networks that is unmatched by
competing technologies.
The combination of IP and MPLS also allows for virtual separation of traffic on the same network
from end-to-end. This is a critical characteristic as the Wide Area Network (WAN) can now connect
locations on a shared infrastructure with security and privacy similar to that of a private leased line.
Virtually all wireless and wired protocols can be successfully transported through an IP/MPLS based
network using frame encapsulation. This is accomplished by encapsulating these native frames of
various types in an Ethernet frame for transport over the IP/MPLS network.
Benefits of Active Open Access
Providing active open access services provides a significant reduction of barriers for potential retail
service providers when compared with passive services. The cost of entry into the marketplace is
drastically reduced when comparing active and passive services. Operational costs are also
significantly reduced as the majority of the network footprint is maintained and operated by the NGN
operator. Small communities which may not be profitable to serve with a passive NGN become
profitable and attractive markets for niche players with an active NGN. Active services connect every
community to a “New Zealand auction market for services”. Passive services do not.
A passive NGN also promotes monopolies in local markets. As it is impractical to deploy fibre in a
manner that would allow and promote local competition at the fibre level, monopolies will be formed
in small markets that extend to the web services sector. Active services promote the opposite in the
critical web services sector as the active services connect the end-user to the menu of services of
their choice from any supplier in New Zealand and beyond. The end-user gets the advantage of
shared economies of scale in the transport connectivity sector and is protected by regulatory
oversight. The end user also gets the ultimate in competition and choice from the Web Services
sector.
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Pricing Outcomes
Through Axia’s experience in jurisdictions around the world including France, Singapore, Canada and
Australia, a whole new next generation fibre infrastructure can be created in a jurisdiction for less
than the annual cost of services in that jurisdiction. The retail price target for these next generation
network solutions should be to deliver better voice and video performance plus higher quality and
quantity ISP services for no more than the end-users current spend. Our experience is that a
Community Interconnect fibre grid can be organized so that ISPs and ASPs are able to purchase
network access from a community point of presence for $5-10 per user for residential users and
$10-20 per user for commercial users. The bandwidth charge then ranges from 50 cents per Mbps
per month to several dollars per Mbps per month depending upon the quality of service of the
bandwidth.
The incremental cost of FTTP within the community that already benefits from the Community
Interconnect fibre grid is in the range of $20 to $35 per month per resident. As a result for $40 to
$50 per month an end user can purchase a transport connectivity service that enables both higher
quality and quantity internet, voice and video services. ISPs and ASPs would overlay voice, video
and applications services at a marginal incremental cost to the end user. The end result is higher
performance for no more cost.
Wireless Technologies and the NZBCo
Wireless local access solutions can be a cost effective method of local access distribution where fibre
is not yet available or economical. State-of-the-art wireless technologies such as 3G/4G and evolving
WiMax can deliver ultra-fast broadband speeds wirelessly. These solutions can be used where fibre
local access is not economical to deploy. WiMax is emerging as the new standard for fixed wireless
local access distribution.
IEEE 802.16m is the new WiMax standard and the IEEE aims to finalize its definition by December
2009. A primary goal is to increase channel capacity to 1 Gbps (currently ~40 Mbps). IEEE plans to
define this access technology compliant with ITU 4G specifications. This emerging standard along
with evolving 3G/4G technologies are becoming the dominant fixed and mobile wireless delivery
standards.
Many options for delivery of services via point to point wireless systems are available as well. At this
time, these systems offer superior performance to that of point to multipoint. These systems can be
used as NGN backhaul to smaller remote communities and/or individual customers with high
bandwidth demands that do not have direct fibre connections. Due to higher capital costs these
systems are typically associated with high grade applications.
NZBCo Benefits to the Wireless Marketplace
Regardless of technology used, Wireless operators typically do not have access to affordable
backhaul services. As wireless services grow in penetration and bandwidth the wireless backhaul
infrastructure becomes over taxed and non-viable. NZBCo services will meet this need reducing
backhaul costs and spurring the growth of rural providers and the overall advancement of the New
Zealand’s wireless infrastructure. This will become increasingly critical as wireless technologies
improve because backhaul requirements will see large scale increases. Inexpensive backhaul is
therefore critical to enabling the wireless industry to progress. The NZBCo would also provide co-
location and tower space where appropriate. Again this would be focused on materially reducing
fixed deployment costs and stimulating growth, innovation and competition. Axia’s international
experience indicates that backhaul rates on a truly open access un-conflicted Next Generation
Network can be cheaper than existing backhaul rate structures by a factor of 10 or more.
Outcomes for IPTV
Axia believes that IPTV will become an important application in FTTP deployments due to the
efficiencies and innovative features which can be offered over a standards-based IP integrated
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infrastructure. End users will see the evolution from the one way standardized television broadcasts
of today, to fully customer centric, “watch what you want, when you want, and on the device that
you want with your choice of advertising targeted at you or no advertising at all” experiences. With
the elimination of delivery barriers, new content types and providers will emerge providing a much
richer choice of experiences. This will be a particularly more functional experience for New
Zealanders.
Innovation and competition will be based on creativity, customer participation and interest.
Evolutions of today’s YouTube will provide user generated content in high definition. Customers will
participate in live interactions through two way and many-way experiences. They will choose and
purchase programming that includes only the content they want, providing a customized mix
suitable to their particular interests, and any given time, and with a much wider choice of specific
interests. Customers will also have the ability to channel that content to the device of their choice,
whether it is a television, computer, laptop, or mobile PDA/phone.
IPTV will soon become the standard means of delivering video content and already provides superior
quality, performance, experience, choice and access than the existing broadcast technologies. IPTV
head-end infrastructure can be added to the NZBCo and offered as a wholesale service to providers
for $8-10 per month per subscriber.
Outcomes for VoIP
VoIP is quickly becoming the standard means of delivering telephone communications. However,
VoIP is much more than an inexpensive means of transporting telephone calls than legacy
approaches. As part of a converged quad-play approach built on a next generation network, voice
communications built on VoIP become less about telephone calls (place to place), and more about
communicating between people. In fact with a fully integrated next generation solution, a customer
need not know or care about which device to use to communicate in a certain way. He/she should
simply decide what communication style is appropriate (IM, email, voice, video, etc) and let the
network choose the appropriate technology based on the location of the other party and what types
of communication they are willing to receive at any given time.
Companies that are currently in the VoIP business include international carriers such as Skype and
Vonage. The availability of an open access fibre grid would guarantee that local VoIP service
providers would emerge in the New Zealand market. With the type and quality of broadband services
we are suggesting NZBCo would provide, these local service providers can implement full-service
VoIP solutions for $5-$20 or less per month. Once the phone system is an application on the network
the price for international connectivity drops dramatically.
Global Gateway Access for the NZBCo
Ensuring efficient and easy accessibility to Global and Internet Gateway services is a critical
component of any Next Generation Network. This can be accomplished in several ways including
regulated access, including Global/Internet Gateway services as a component of the NGN or relying
on competition within existing services. Axia submits that the NZBCo should provide access to a
Global Gateway and its related services at a price that maximizes the benefits of the NGN aimed at
removing this as a barrier to new retail service providers.
If an NGN does not address this, the Global and Internet Gateway services may act as a significant
barrier and stifle the benefits of a national NGN. These services provide the critical last link to the
rest of the world that can not be omitted from an NGN solution. Currently, international gateway
services make up approximately 20-30% of the cost of a residential internet service. NZBCo would
work with both the Government and industry to bring down these gateway services costs for the
benefit of the entire ISP and web services market.
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Summary of Axia’s Approach
Axia acknowledges the New Zealand Government's desire to minimize its 'participation and impact'
in the free market while still ensuring that a critical broadband infrastructure is available to the
entire New Zealand market. Axia's proposed NZBCo is completely aligned with both the
Government's objective for its Broadband Investment Initiative and the principles by which it wants
to achieve this objective. The NZBCo would:
• Operate as a PPP that balances commercial returns with the greater public good to deliver a
vital digital infrastructure to New Zealanders;
• Maximize leverage on public sector investment by creating a vehicle that would attract
international private capital;
• Be fully open to appropriate regulation of its rates and services thereby guaranteeing that
excess profits are returned to the network for the benefit of all;
• Pay equivalent market value for all suitable fibre assets and utilize flexible fibre acquisition
approaches to minimize or eliminate overbuild and infrastructure duplication;
• Create a transition plan from the existing legacy copper network to the new fibre grid in an
organized and methodical way;
• Provide active open access services at attractive rates with no volume discounts or
geographic preferences given and,
• Leverage the full economies of scale and benefits of a next generation fibre grid and pass
those benefits onto the New Zealand market.
Axia NetMedia Corporation is very interested in working with the New Zealand government to create
the best possible Next Generation Network solution for New Zealand. We would be happy to discuss
any element of our comments or approach with the Government at the appropriate time. We look
forward to continuing our participation in the Government’s public process for its Broadband
Investment Initiative.
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