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You don’t have to read between the lines to sense the bitter disappointment of wireless broadband provider Woosh Wireless, fibre network operator FX Networks and state-owned infrastructure player Kordia at missing out on a juicy Government contract to push high-speed internet services out to the rural sector.

The press release today lamenting the Government’s decision to opt for a consortium of Telecom and Vodafone to undertake its $285 million rural broadband tender makes no bones about the fact that the unsuccessful rival bidders see this as a mistake:

’This is not the right decision for rural New Zealand,’ Kordia chief executive Geoff Hunt is quoted as saying.

’The opportunity to quickly close the digital divide with urban New Zealand has been lost. Effective and future-proofed wireless communication requires critical investment in the latest technology and the upgrade path that it will offer. Sadly the government has chosen to invest in what they know – copper and 3G, both of them well down the path to obsolescence.’

Communications minister Mr Joyce, in his own release on the rural broadband tender, said Telecom and Vodafone’s bid “is based on proven existing technology, and provides the government with confidence that it can be deployed”.

And that pretty much says it all. Lacking confidence in the ability of new fixed wireless technology to deliver, the Government took the safe option and went with providers relying on mature technology to provide what might be a slower broadband service than is possible via the alternative but is in the eyes of an understandably risk-averse government, is more likely to deliver on the promises the Government has made of delivering network speeds of at least 5Mbps (megabits per second) to 86 per cent of rural homes and businesses – in excess of 250,000 sites.

The battle for government money to provide broadband to the rural sector really embodies the larger tussle still under way worldwide between technology companies looking to employ a new generation of fixed wireless systems to deliver broadband to hard to reach places and those who see existing mobile network infrastructure as the best platform to extend high-speed internet coverage beyond the reach of wired networks.

Kordia and Woosh, who have for years been in the business of delivering wireless broadband to customers both in urban centres and in rural areas via Kordia’s Extend network, constitute the first group. Telecom and Vodafone, who have nationwide networks of mobile phone towers and offer widespread access to mobile broadband via those towers, are firmly in the second group.

Fixed wireless deja vu

In December, I attended a briefing in Wellington held by the Woosh-Kordia-FX Networks consortium that made a compelling case that fixed wireless technology is the best way to deliver decent broadband speeds to rural dwellers. Geoff Hunt and Woosh CEO Rod Inglis said the consortium would use TD-LTE (long term evolution) fixed wireless technology to deliver “city type services at city prices for rural New Zealanders”. Latency would be lower than with existing mobile broadband services and the consortium dubbed OpenGate would actually be able to deliver 20Mbps to 68 per cent of the rural sector using wireless services delivered from high sites throughout the country Kordia and Woosh have already secured.

A host of technology vendors at the meeting gave technical updates on the status of fixed wireless LTE, but its here that I began to feel I’d heard the whole story once before. In fact I had, when both Woosh and Kordia (then BCL) embarked years ago on separate ventures to roll out fixed wireless services to deliver broadband to the rural service. The companies selected proprietary fixed wireless technologies that were heavily marketed at the time, to build their networks, subsequently finding that they had selected technology that had no long term upgrade path. Woosh in particular has suffered the consequences, racking up large losses as it struggled on providing services via a dead-end technology. Rod Inglis admitted as much at the briefing:

“We have had quite a string of losses which we’ve just reversed recently,” he said.

“The [IP Wireless] technology we chose didn’t really scale. We didn’t want to make the same mistake twice.”

Kordia didn’t do much better with its technology path and now both companies were looking to TD-LTE technology to get themselves back on track with a technology that has a decent future. The problem however is that the technology is just a bit too new. The slides the technology vendors put up in Wellington showed equipment only just deployed, network roll-out case studies that really constitute pilot projects and consumer equipment that’s scheduled for a 2012 launch. That’s not the type of maturity in a technology a government is willing to bet hundreds of millions of dollars on.

What killed the Kordia-Woosh-FX Networks bid is the poor track record of fixed wireless technologies such as those originally backed by Woosh and Kordia and the over-hyped under-performing WiMax technology that has given fixed wireless services in general a bad name. Woosh’s repeated losses over numerous years can’t have given the government confidence either.

Mobile mature enough

The upshot of all this is that the Government has foregone an opportunity to stir up the broadband market by throwing a lifeline to some marginalised players in favour of going with the tried and tested duopolists and their reliable technology. It means that rural customers will get their 5Mbps broadband access via a compact little modem that connects to a local cell tower. The rival consortium was offering a plan that would have delivered higher speeds sooner via an antenna receiver, but couldn’t convince the government that the equipment would be available in sufficient quantities at the right price and that the network would deliver the required speeds reliably.

It is disappointing that fixed wireless technology has to date been unable to deliver sufficiently to give investors – private or public, the confidence to back a true alternative to the mobile network operators. The rural broadband tender win by Vodafone and Telecom effectively kills development of fixed wireless services in New Zealand for the foreseeable future. Vodafone and Telecom are on standardised upgrade paths, so rural customers can expect improved connection speeds -  eventually, and there is merit in Joyce’s claims that the Telecom/Vodafone plan will allow for the expansion of mobile voice coverage in rural areas.

But competition drives the push to roll out better quality services and with Telecom and Vodafone sewing up the rural broadband space, don’t expect these two companies to be falling over themselves to exceed the Government’s targets for broadband access speeds ahead of schedule.