Will VDSL2 be enough for an ultra fast broadband network?

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February 17, 2009

VDSL2 will not reach enough customers without significant additional investment on top of current cabinetisation plans

The telecommunications industry and major broadband users wait with baited breath for the New Zealand government’s NZD1.5 million broadband decision. Will Telecom New Zealand’s recent VDSL2 announcement help?

In 2008, we were engaged by InternetNZ (an advocacy group that aims to promote the Internet in New Zealand) to research options for providing 100Mbit/s broadband to 75% of New Zealand homes. The options examined in this study were generally consistent with the National Party’s pre-election policy of spending NZD1.5 million of public money to fund a FTTH network to read 75% of homes.

In our report, published by InternetNZ in early December, we estimated the price of a Chorus/Telecom VDSL2 solution as being NZD1.2 billion (see Exhibit 1 below), which is the investment required over and above the cost of cabinetisation as part of Telecom’s separation obligations. The bulk of this investment would be used to push active cabinets closer to the end-user to allow VDSL2 services to operate at the required speeds. A smaller investment was required for upgrading existing ADSL(2+) cabinets to VDSL2.

Exhibit 1: Total capital investment requirements (NZD) for FTTN/VDSL2, GPON and active Ethernet [Source: Network Strategies report for InternetNZ]


For much of 2008, Chorus, Telecom’s access network operator, was running VDSL2 tests on its network, which it called a soft launch. This was completed late last year, after which Chorus recommended that VDSL2 be made available for general release.

Vodafone was running its own VDSL2 tests as part of the Chorus trial, and Telecom recently announced plans for its own VDSL2 services in ‘key metropolitan areas’ (it has listed more than sixty suburbs, cities and towns within its rollout plan).

The Government has not made any announcements on its broadband plans since the election, except to confirm that it has NZD1.5 billion of funding available. So is Chorus jumping the gun and potentially pre-empting a FTTH network with its VDSL2-enabled network?

Well, not exactly. Telecom is providing 50Mbit/s at up to 1km from the exchange or cabinet. We do not believe this will meet the Government’s requirement of mass-market ‘ultra fast’ broadband for residential users. In addition, cabinet areas are designed to provide 10Mbit/s (or better) ADSL2+ services to most lines, and thus line lengths may be much longer than the 1km maximum for 50Mbit/s. Most customers will therefore not be able to receive the 50Mbit/s service. Furthermore, VDSL2 will be a premium product. While retail prices have not been announced, it is likely they will be similar to TelstraClear’s VDSL2 BizNet products, which cost NZD200 per month for 15Mbit/s download speed and NZD400 per month for 30Mbit/s download speed, excluding data allowance.

In short, VDSL2 will not reach enough customers without significant additional investment on top of current cabinetisation plans, nor will it be targeted at the mass market. In addition, it may not provide the Government’s required ‘ultra fast’ broadband speed. However it does offer an improvement over current available products for minimal additional investment, and it will be available from this year. And depending on the Government’s broadband announcement, it may also provide additional competition for a new network, which can only be good for the end user.