Gigatown: New Zealand towns race to a fibre future

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January 13, 2014

…the town will attract new businesses and talent to the area, lead in fibre services innovation and improve the quality of life of its residents faster than any other town in New Zealand.

A 2013 Ericsson study found that doubling the speed of broadband can contribute 0.3% to GDP growth in an economy. The study notes that the benefits of faster broadband can be derived from a number of factors including increased productivity, innovation, increased and better access to services and healthcare, and environmental effects including more efficient energy consumption. With the deployment of ultra-fast fibre broadband in New Zealand we can expect to see similar socio-economic benefits being realised locally. Network Strategies’ study for the Wellington Regional Council found that fibre services offer the potential for transformative change in business processes and models.

“Gigatown”, a competition being run by Chorus, will give one New Zealand town the opportunity to be the first in the Southern Hemisphere to access 1Gbit/s broadband. This access will be provided for three years to consumers of the winning town at the same retail price as what would be paid for the maximum speed of 30Mbit/s in other ultra-fast broadband (UFB) areas, placing the winner at a significant advantage over the rest of New Zealand. Additionally a NZD200,000 development fund will also be provided to the winning town and Alcatel Lucent will support the town’s entrepreneurs / innovators in introducing new services to be delivered over the UFB network.

So what is required to win the competition? Chorus will award the prize to “the town that wants it the most” and therefore is seeking to measure the “drive, enthusiasm and determination to be Gigatown” in two ways:

  • firstly by listening to the town with the loudest voice on social media – here points can be earned by using the hashtags allocated to each town (in planned UFB areas) on popular social media sites (Twitter, YouTube, Instagram, Flickr, Facebook, WordPress and Tumblr)
  • secondly by tallying up the supporters for each town that sign up on the Gigatown website.

Points will be adjusted relative to the town population size (to ensure a level playing field) and the five towns with the most points as at 30 September 2014 will face off against each other in the finals. A representative from each of the five towns will get the opportunity to visit Chattanooga (discussed below) to observe the benefits of fast broadband services. As at 20 January 2014 Wanaka, followed by Oamaru and Masterton were at the top of the leader board. The closing date for the finals has not yet been announced.

Councils and local authorities across New Zealand are, or at least should be, battling fiercely to ensure that a town within their area wins the competition. Examples of towns or regions benefiting from fibre services include Chattanooga (Tennessee, United States), Cornwall (Britain), Hudiksvall (Sweden) and Stockholm (Sweden).

Chattanooga is an example being used by Chorus to demonstrate the potential benefits that 1Gbit/s benefit could offer residents of Gigatown:

… Chattanooga was one of the first cities in the world to roll out a fibre to the premise network offering gigabit connection speeds to homes and businesses. This has been credited with playing a role in attracting a swell of economic investment into Chattanooga, including the expansion of Volkswagen’s Chattanooga plant and the establishment of facilities. … Chattanooga has also become a digital innovation centre that is driving development of next generation fibre applications. … Chattanooga’s fibre optic network has been emulated by a handful of other cities in the US and it is studied internationally as a model of how to build the smart cities of the future.

Community-owned utility EPB (Electric Power Board) has deployed a smart grid that provides symmetrical fibre broadband access of 1Gbit/s to every resident and business in Chattanooga. It services 170,000 households and businesses enabling the provision of triple-play services (television / video, Internet and telephony services) alongside power. According to a study published in the Journal of Applied Business Research it is estimated that the smart grid network will generate 3600 jobs and more than USD580 million (NZD839 million) in economic value over the first 10 years in Hamilton County (population of approximately 350,000 people). Note that part of Chattanooga lies within Hamilton County. The investments in the network are also expected to generate USD300 million (NZD434 million) in savings from reduced outages. For a further discussion of how the deployment of fibre networks by electric utilities benefits the company as well as the communities they serve, see our accompanying paper.

Early indications from the Superfast Cornwall project in Britain also suggest the region’s businesses are benefiting from the availability of faster broadband which will lead to economic benefits for the region as a whole. The independent research has been labelled one of the first of its kind exploring economic impacts of fibre on British SMEs (small and medium enterprises). After using superfast broadband for between six and 12 months, amongst surveyed SMEs:

  • 58% said that their business is growing because of the new technology
  • 26% said that the company had either created or safeguarded jobs as a direct result of efficiency and innovation benefits delivered through fast broadband
  • 37.5% experienced new sales of which 24% had been involved in new trade overseas.

While the study notes that economic benefits will take time to be fully realised and are likely to vary according to industry sector, benefits are being experienced by businesses now:

SFBB [superfast broadband] is revolutionising the workplace and the way SMEs conduct business. It provides a vehicle that changes how they communicate, how often they communicate and with whom, creating potential for new markets and empowering dispersed collaboration and access to international markets that could not have occurred before. … Within the SME community we found compelling evidence of significant business innovation, the creation of new revenue streams and an enthusiasm to embrace the exciting opportunities that are possible with fibre connectivity.

According to a November 2013 media release the Superfast Cornwall fibre broadband network had passed 82% of the region (206 000 homes).

In Hudiksvall, a town of approximately 15,000 people in Sweden, FTTH (fibre-to-the-home) networks were initially deployed in 2004 to address the town’s population decline. As a result the region has experienced an annual increase of 6% to 14% in the number of businesses between 2004 and 2009. A new research centre has also been established in the region.

Stokab is a fibre network owned by the City of Stockholm (population of approximately 881,000 in 2012), providing access to of up to 1Gbit/s broadband to about 90% of residents and almost 100% of businesses in the area. Stockholm boasts of being the most knowledge-intensive region outside of the United States with its Kista area housing the largest concentration of IT researchers in northern Europe. Stockholm is a city “bursting with opportunity” according to Stokab.

A 2013 analysis undertaken by ACREO estimates that the socio-economic return on the fibre infrastructure, since Stokab was founded in 1994, has been SEK16 billion (NZD2.7 billion). ACREO notes that this estimate is based on a few quantifiable effects and the actual return is expected to be considerably larger. Some key findings of the study include:

  • the “job value” created is estimated to be SEK7.7 billion (NZD1.3 billion)
  • supplier industry activity has delivered over SEK5 billion (NZD0.8 billion)
  • cost savings for the municipality have been SEK2 billion (NZD0.3 billion) between 1996 and 2012
  • the deployment costs of a 4G network have been reduced
  • property values in Stockholm have increased
  • lower broadband prices have delivered savings of approximately SEK75 million (NZD12.5 million) yearly for businesses
  • Stokab’s profits have enabled it to reinvest
  • new services and innovation have been enabled.

Given the emerging overseas evidence on the socio-economic benefits of fibre broadband, the winner of Gigatown will place itself at a significant advantage over the rest of the country in the race to a fibre future. We can expect that amongst other benefits, the town will attract new businesses and talent to the area, lead in fibre services innovation and improve the quality of life of its residents faster than any other town in New Zealand.

Note: All prices were converted to New Zealand dollars where relevant using 2012 Purchasing Power Parity (PPP) rates sourced from the World Bank.