Excited about the Chorus #Gignation service? I’m not.

With no additional profit to be made, network changes required, and no current demand driven case to be made for the service being required, I can’t imagine any ISP greeted the news of the new Gbps UFB service from Chorus with any real enthusiasm.

For every ISP in NZ, this new service will increase demand on existing backhaul and router/switch ports which will result in additional costs.

For Spark, Vodafone and Vocus this is more of a logistics issue, money won’t be a limiting factor, but they will need to allocate resources to remedy any choke points in their networks.

For smaller ISPs they now need to make a call as to whether they will provide this service nationally, and the answer to that question will be determined by their access to cash or credit.

User behaviour on the new Gbps circuit won’t be any different from that on the existing 200Mbps UFB service. Just like the 200Mbps service, the majority of users will immediately run a speed test, and a fair number of those will tweet the result. After that, usage is dictated by application demand and will match what ISPs see on current UFB services. But it is that initial behaviour that drives user experience and their willingness to talk, good or bad, about their ISP.

ISPs now need to increase 1Gbps UFB handovers in regional locations to 10Gbps, and those handovers have to terminate on 10Gbps capable hardware, and they then need to have sufficient backhaul to their core nodes, and of course then they need sufficient burst capacity on their international transit pipe.

This story isn’t too different to the one we faced when UFB speeds first increased from 30Mbps/10Mbps to 100Mbps/100Mbps except that the rate of change, and the scale of the change, is an exponential increase against previous iterations, and the change from 1Gbps interfaces to 10Gbps is an expensive one.

My view is that business focused ISPs can’t exist long term without having tier one access to the UFB providers in every region, that of course is why DTS pursued that strategy from day one. This new service makes that strategy more expensive to maintain, and makes it even harder for new entrants to pursue a similar approach.

I wonder if Stuff Fibre factored the costs associated with this new service into their 1st year budget?

No more money to be made

ISPs won’t make more from selling this service, but they have to sell it in order to compete effectively. The cost to ISPs from Chorus for this service is $10 more p/month than the existing 200Mbps option. Market pressure is too strong to allow much margin to be added to that, and any that is added will be unlikely to do more than offset the additional costs mentioned above.

The game changer?

UFB tail extensions were due earlier this year but were delayed, initially to October, but now it looks more likely to see these released in early-mid 2017.

It looks as though a charge of $3.89 will be added to the cost of each 1Gbps/500Mbps UFB circuit sold, which may well make it more affordable for smaller ISP’s to sell nationally, given the tail extension option only requires 5 handovers nationally for universal access to Chorus (in comparison, DTS currently has 24).

Plenty of questions remain around the tail extension service though, so it is a bit early to make a call on its suitability for business users.

Anyway, I have network upgrades to plan, so that’s enough writing for now.

Brendan Ritchie

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