August 2015. The distant past. A time when no one really believed Trump would be president, and McCaw was still playing rugby (*sheds a tear, sings the national anthem quietly*). That is how long ago it was that Chorus announced their intention to provide tail extensions for UFB services.
For a brief recap on tail extensions, try this:
Tail extensions are an industry term used to describe the cost Chorus charges Retail service Providers (RSPs) for handing a tail circuit off to an RSP when that RSP doesn’t have a presence in the town/city where the end user is located. For example: A RSP has a client in Taupo, but has no infrastructure or handover in Taupo, and the nearest handover that RSP has with Chorus is in Auckland. Chorus will carry the circuit data 400km or so back to that Auckland handover and charge the RSP an additional cost on top of the standard circuit cost.
Copper services have had this model applied for a long time, enabling RSP’s to have a single handover nationally (or more if they like) with services brought back to it from various locations.
Pricing was released a year ago, but the service itself was initially meant to be available in August 2016, then that was pushed out to October 2016, then there was some issue with a portal of some sort and the date was pushed out again to February 2017.
Then, this week, it happened, we got an email saying extensions would become available this Friday.
Why is Chorus doing this?
Revenue. This isn’t about driving uptake of UFB, it will have zero impact on that. Chorus is not making much money from the few ISP’s connecting in each region at $100 p/month plus the few rack footprints purchased in the exchanges, but this move will allow them to make 4-5% more on each tail sold where the ISP doesn’t have a local handover.
Who wins?
From a Chorus perspective, it is the right move by them on behalf of their shareholders.
Small ISP’s currently purchasing services from the likes of Kordia, Voyager, Vibe and others will be able to reduce costs by purchasing direct from Chorus.
Who loses?
Several ISP’s in NZ have made the ill-fated move to position themselves as UFB wholesalers, often referred to (by me at least) as 3rd party aggregators. Chorus has seen this market evolve and realised it could service this segment more effectively, but in doing so is putting some of its clients, already running with very low margins, at significant risk.
Domestic backhaul providers will have less demand for their fibre services connecting smaller towns to major centres. If ISP’s aren’t setting up in regional exchanges, they won’t need to connect them back to their core points of presence (PoPs).
Quick question
How far off are HSNS tail extensions? (Not the current expensive kind, a new cost effective model)
