The Internet continued to create tectonic shifts in the technological and social fabric in the few short months since this manuscript was handed over for the pre-publication process in early 2008. A number of significant milestones were reached, for example broadband users had exceeded dial-up for the first time in the six months to September 2007.

According to Statistics New Zealand there were 829,300 people on broadband compared to 675,800 on dial-up. Half the new broadband subscribers had switched from dial-up and the rest were new. Dial-up was no longer adequate for accessing some of the most useful content and services and even many broadband offerings were still not up to scratch. “New Zealand has a long way to go to claim real broadband,” lamented InternetNZ executive director Keith Davidson.

Stepping back it was clear broadband uptake rate had actually slowed with the 14.4 percent increase representing only half the growth of the previous year (28.6 percent) and New Zealand still ranked 20th in the OECD for broadband penetration.

Meanwhile Statistics New Zealand noted a 47 percent increase in the number of ISPs claiming the high cost of international bandwidth had been a barrier to growth over the previous two years. That was one of the reasons State-owned Kordia Group joined with PIPE International (Australia) in April to collaborate on a new private fibre optic cable linking the two countries to increase international capacity and competition in the New Zealand marketplace. “Much like Australia, New Zealand suffers from a severe lack of competition when it comes to international bandwidth and the price of bandwidth reflects that,” said PIPE Networks managing director Bevan Slattery.

From April 2008, as a result of local loop unbundling (LLU), Orcon and a couple of others were able to deliver “up to” 24Mbit/sec over ADSL2+ from a dozen or so exchanges but the earlier promises of $10 broadband accounts were still vapourware. It was clear the broadband adventure had only just begun.

The drive toward mobility was also relentless. The Commerce Commission in its ‘2007 Telecommunications Market Monitoring Report’ revealed mobile penetration had risen by 12 percent to 4.25 million in the 2006-2007 financial year and was at 104 percent. It appeared Kiwis would rather be customers on both mobile networks with two mobile numbers, than port between networks. Number portability had peaked at just 11,000 in June 2007.

New Zealand youth were the world’s heaviest users of mobile phones, sending 29 million texts a day. A Telecom survey rating the importance of the cellphone, asked how much it would have to pay users to never pick up their cellphone again. The staggering answer was 55 percent of respondents said at least a million dollars. Of course no-one actually fronted up with the money to test their resolve.

Network socialites According to a February 2008 survey by Nielson Online nearly half of all Kiwis and Australians had created an online profile and the majority were spending one to four hours a week networking. More than six in 10 online New Zealanders (62 percent) had browsed other people’s online profiles in the previous 12 months, and 49 percent had actively updated their own online profile.

The most in-depth local analysis of social networking yet, revealed one third of Australians and a quarter of New Zealanders had only begun their social networking at the end of 2007. Based on the viral nature of social networking adoption, Neilson expected significant increases with as many as half of current non-users indicating they would sign up during the next 12 months. While males were the early adopters two years ago females were leading the latest surge of interest. In New Zealand the main driver appeared to be a desire to reconnect with people from the past including former colleagues and schoolmates.

“We are seeing a revolution in the way in which consumers in the Pacific and around the world are interacting, communicating, creating and nurturing personal and professional relationships, expressing and publishing their opinions and thoughts, creating and distributing content for and to one another, and entertaining themselves,” said Melanie Ingrey, Nielsen Online’s Asia Pacific market research director. “This has largely come about through the tools that are now readily accessible for everyday online consumers from the luxury of their home, office, or any other location in which the Internet is available.”

While millions were still discovering the wonders of social networking, many early adopters, overcommitted in their efforts to service multiple sites were reeling from virtual friend fatigue. Those frustrated with the constant churn in search of the next best thing, the invasion of advertising or just disappointed in their bid to find quality interaction and intelligent life on-line, were leaving ghost profiles in their wake as they consolidated on a single site or went looking for something more satisfying or relevant.

Growth and governance Regardless the growth curve of Internet uptake continued with 1.15 billion of 17.5 percent of the world’s population now considered to be regular Internet users and eMarketer predicting that by 2012 more than 1.7 billion people or 24.5 percent of the global population would be using the Internet at least once a month. It was expected that in 2008 China would overtake the US for the number of Internet users and the Asia-Pacific region, where 50 percent of the world will reside, would top 500 million users.

According to research company Point Topic, there were 349.98 million broadband subscribers worldwide by the end of 2007. However growth in the fourth quarter of 2007 was slower (4.8 percent) than it had been since the second quarter 2006. A total of 69 million people signed up for broadband services during the year bringing global broadband penetration to 6.1 percent.

Governance of the Internet remained a particularly sticky issue with the move to decentralise management away from the US remaining one of the top concerns. ICANN’s chairman, New Zealander Peter Dengate Thrush, believed it was time the organisation adopted a full private sector model. Following a meeting in New Delhi in February a full review of the US government Joint Project Agreement with ICANN was underway.

The US Federal Communications Commission announced it was prepared to correct unreasonable practices, including telecommunications and cable companies blocking or hindering content such as multimedia file sharing and messaging to ease traffic flow on their networks. The ‘Internet Freedom Preservation Bill’, was introduced by lawmakers to enforce net neutrality.

Locally InternetNZ was in the process of changing its official name from The Internet Society of New Zealand to InternetNZ which it had been trading under for several years. The intent was to remove any an hint that it might be an official chapter of the world body the Internet Society (ISOC). The new official name was expected to be Internet New Zealand Inc.

Telecom dramas Telecom was never far from the news with backlashes, bright points and ironies evident early in 2008.

The Commerce Commission decided to prosecute Telecom and its subsidiary Xtra, alleging they misled broadband customers in 2006 through the promotion of the Go Large plan, which promised “unlimited” and “maximum speed” but actually gave many customers less bandwidth for their buck. Charges were based on the Fair Trading Act alleging Telecom had “misled the public” and “made false or misleading representations”. If found guilty Telecom could be fined up to $200,000.

Then, after trying to sneak around the edges of the mandated operational separation requirements, Telecom was pulled back into line by the government. In March Communications Minister David Cunliffe rejected a plan which would have allowed executive incentives across Telecom’s wholesale, retail and network businesses. It stuck to its guns; separation means just that. Critics were concerned the head of the wholesale division for example could be financially motivated if Telecom retail won business from other wholesale customers putting non-Telecom companies at a disadvantage. Telecom was forced to revise its plan and delivered a last minister reworking just in time for Separation Day on 31 March when the split into wholesale, retail and network divisions became legally enforceable.

And the Yahoo Bubble debacle kept coming back to haunt Telecom customers. After shutting down email access for an unforgivably long period at launch, further shifts in how email was handled continued to perplex Xtra users, many found essential business correspondence trashed by spam filters. Others, particularly if they used Xtra for their email accounts and hosted their site with another provider and had multiple address variations, discovered they had to register all those variations or the mail might not get through. Trying to deal with the helpdesk personnel in the Philippines who rattled off rote textbook answers regardless of the questions was equally as frustrating, and often resulted in wrong settings being advised. Telecom Xtra, finally admitted it had little control over its own email, which now went through Sydney, and would launch a new business specific service to try and deal with the issues. Meanwhile newspaper Computerworld was inundated with complaints and stories of defections to other providers.

Complicating convergence In the rush to establish high definition standards Toshiba eventually dropped out of the rival HD-DVD) camp it was leading and joined the BlueRay alliance, leaving early adopters of its approach in the lurch but giving the movie and TV industry and hardware developers a clear road into the future.

Locally the debacle between Sky and TVNZ refusing to carry each others programmes as digital TV shifted into high definitions mode was causing ongoing frustrations. NZ Herald commentator Chris Barton believed “must carry” rules for Sky to offer Freeview’s TV6 and TV7 and Freeview to carry the Sky-owned free-to-air channel Prime would quickly deliver immediate benefits to the Government and a fairer deal to consumers.

As well as “cutting through the nonsense” it would also deliver around 50 percent coverage of free-to-air digital TV close to the threshold required for analogue TV switch-off. Barton said there was a need for open standards as consumers were currently faced with having to have two set top boxes to get all channels, when one would do. There was also ongoing anticompetitive activity through the use of electronic programming guides and lock-out mechanisms in some accredited set top boxes preventing them tuning into other free-to-air channels.

Perhaps it was that kind of behaviour that had spurred serious discussions on a single regulator for converged media, including telecommunications and broadcasting. A discussion paper canvassing the options warned that failure to reform regulation could adversely impact the growth of broadband infrastructure. Among the proposals was to extend the role of Telecommunications Commissioner to redefine the boundaries of the various media markets and ‘help limit market concentration in one company’s hands or maintain market plurality’.

While convergence was blurring the distinction between broadcast programmes and “broadcasting-like” digital content, traditionally delivered through the Internet, they were subject to different regulatory regimes, which could distort the market. Possible scenarios included a single authority, comparable with the Australian Communications and Media Authority (ACMA) administering the Telecommunications Act, separate media market legislation and regulations or a unified Act and a new regulatory body governing all digital media.

A last minute addition to the Copyright (New Technologies) Amendment Bill required ISPs to more tightly monitor and police the content being delivered over their networks. The new copyright law, which had was stalled late in 2007, eventually passed with requirements for ISPs to have processes in place to cut service to persistent copyright infringers.

Ministry of Economic Development (MED) spokeswoman Bronwyn Turley said ISPs would have to not only to adopt but “reasonably implement” account discontinuation or be forced to do so by the courts. That requirement was removed from the Bill at Select Committee stage absolving ISPs from liability if they took appropriate action against obvious copyright breaches. It was back in again, in a ‘slightly watered down form when it was finally passed into law.

What was implemented was a “notice and take down” regime, rather than InternetNZ’s proposal which was for a “notice and notice” policy with the ISP advising its client twice before it was left to the lawbreaker and the copyright owner to sort out.

Focus on fibre While the Australian government’s ambitious plan to roll out an A$8 billion national broadband network was moving apace, the New Zealand government was still deliberating whether it should be involved at all in any supercharged broadband roll out.

A number of ISPs were frustrated that Telecom’s streamlined cabinetisation plans threw their unbundled local loop access plans out of whack by taking fibre closer to the curb and shortening the copper tails. Others believed those plans didn’t go far enough. Would Telecom’s kerbside cabinets be sufficient to meet growing demand for high-resolution video, especially when three or four people in one household might want to watch different programmes simultaneously?

“A speed of 24Mbit/s is needed to implement high-definition television online, said consultant Ian Mitchell. To achieve this, the length of the copper connection would have to be a maximum of 800 metres, which suggests cabinets spaced on a 1km grid — requiring more than 200 cabinets to cover central Auckland.

The proposal for a fibre fund so quickly rejected by the Ministry of Economic Development in 2006 was back on the table. InternetNZ president Pete Macaulay dusted off his plan to stimulate public-private partnership and investment in infrastructure at a March public meeting to discuss investment models.

At the Auckland Broadband Investment Forum (BIF) meeting, 25 senior representatives from major telecommunications providers, utility operators, industry organisations, institutional investors, and central and local government, began looking at the options. Macaulay claimed there was strong pent up demand for broadband but Digital Strategy broadband funding had now dried up. “Fifteen organisations would have applied for a second tranche if it had been available.” Meetings would be held every two months to discuss the issues

Funding separation? Meanwhile the government was moving to the next stage of its Digital Strategy broadband map, aimed at more clearly evaluating supply and demand for broadband communications. The online map sought public comment and submissions, based on existing networks and estimated future demand and was being revamped with a five year projection for business and residential bandwidth requirements to help stimulate providers to fill the gaps.

New Zealand Institute chief executive David Skilling, believed it would take $4 to 5 billion to get fibre to the premises of 75 per cent of the population by 2018 and the majority of this would have to come from private investors. The Institute believed the country was becoming too dependent on Telecom for the answer and warned the goal for advanced fibre to the premises would not progress if government and industry stuck with the status quo. Solid investment in fibre was required urgently to capture economic value but under the current model there was little incentive to do so, said the Institute.

Then in its final broadband report, it proposed Telecom’s fixed-line network be rolled into a partially taxpayer funded investment business to build a $5 billion high-speed infrastructure. The fibre-based network requiring $1 billion of government money over 10 years was bound to be scoffed at by Telecom which only a couple of months previous affirmed it was definitively in the network business for the long haul.

The Institute insisted its proposal could generate economic benefits of up to $4.4 billion annually, giving the State an ownership stake in the theoretical ‘Fibre Co’, a price-regulated monopoly investor which would provide equal and open access to service providers at regulated prices. It believed this would shift the focus from competition between fibre networks to building a single fibre network, ensuring New Zealand remained competitive in a global environment.

Meanwhile the Wellington City Council dumped its plan to invest $40 milion in fibre optic infrastructure, citing the government’s failure to replicate its 2005 MUSH networks subsidies to stimulate regional broadband growth. The council’s “broadband vision” adopted in March 2007 was dead in the water just over a year later, with councilors voting unanimously to have minimum interference in the broadband market. It would help facilitate access to ducting or cable laying to bring fibre optic cable to more suburbs but that was it. Now that government subisidies were unlikely to be available, it no longer made sense for the council to invest in its own network. An earlier proposal to extend fibre optics into the suburbs through a stake in CityLink, was abandoned after a report from consultants NZIER concluded there was no strong case for the investment and that broadband had been over-hyped as a driver for economic growth.

Changing umbrellas At the end of March Communications Minister David Cunliffe announced the government would fund a new overarching digital sector forum which would ‘consider’ aspects of the NZ HiGrowth Project and the Digital Strategy Advisory Group which it had shut down. No mention was made of the ICT NZ group which had earlier been floated as an industry umbrella group then had the public funding plug pulled. The new forum, expected to be operational by mid-2008, would create partnerships between industry, community and voluntary groups and users to provide a coordinated voice to government on “digital issues of national importance”. This would coincide with the launch of the ‘refreshed’ Digital Strategy 2.0 strategic direction for New Zealand’s digital future.

The ICT sector which had hoped to receive some level of government funding, was now working on plans to establish a self-funded industry body to focus on commercial issues, which the government would be “happy to cooperate with”. The government’s reasoning behind having two groups was to ensure a “clearer separation between national good and industry good objectives”. In April Telecom announced details of how it planned to pull up from the gradual dive which was had been costing 6-10 percent on its bottom line. It would significantly reduce operational costs through new technical and operating systems, transition to the IP ‘Next Generation Network’ platform, move more local call centre and customer service operations offshore, create a leaner corporate centre and automate online sales and services.

While major investment was still required; $1.1 billion over the 2008-2009 year for separation, building out its new mobile W-CDMA network and accelerating its fibre to the node (FTTN) roll out, this was expected to reduce to about $750 million by 2013. In the interim CEO Paul Reynolds wanted to see a million broadband connections and 80 percent of those customers receiving 10-20Mbit/sec and Telecom providing 85 percent of total fixed lines to the market. Telecom’s goal was to boost its broadband penetration from 40 percent to 60 percent by targeting the high end of the market with new services. With the W-CDMA build under way, Reynolds hoped to have 80 per cent of customers on the new network over the next few years and a mobile market share greater than 50 percent with greater concentration on the post-paid market and an improved roaming proposition. Kiwi Share kyboshed?

Meanwhile major changes to the controversial Kiwi Share or Telecommunications Services Obligation (TSO) which had been under review since submission closed in August 2007 were on the cards. At stake the free-calling arrangement set in place when Telecom was first privatised, whether it extended to broadband, and what this might mean for provider subsidies, and emergency calls. Telecommunications Carriers’ Forum chief executive Ralph Chivers said the industry was unhappy with the current state of the TSO. The biggest problem was that had been defined in PSTN terms “… and needs to be redefined in a technologically neutral way.” While broadband and how to improve rural coverage were important Chivers said the TCF didn’t believe these should be included in the revised Telecom services obligation.

When the TCF report was finally tabled at the end of March, it recommended free local calling and inflation cap guarantees be removed in areas wherever there was sufficient competition. Communications Minister Cunliffe urged the industry to “take ownership of any solutions for reforming the TSO”. While the government denied consumer protections were about to be scrapped the TCF had recommended none of the old Kiwi Share obligations should apply in areas the Commerce Commission deemed competitive, thereby removing “residual obligations on anyone”. And just as you thought you understood the history of the Internet and all the possibilities of the near future, an experiment at the Cern particle physics laboratory in Switzerland was being touted by some futurists as the beginning of the end of the web as we know it.

Red Button Day will give the world the first insights into the power of the grid, as scientists at Cern switch on the Large Hadron Collider (LHC) particle accelerator built to probe the origin of the universe. The grid which has the kind of power necessary to transmit holographic images, enable instant online gaming with hundreds of thousands of players and offer high-definition video telephony for the price of a local call was to be activated to capture the data generated by the collider.

David Britton, professor of physics at Glasgow University a leading figure in the grid project, believes grid technologies could “revolutionise” society. “With this kind of computing power, future generations will have the ability to collaborate and communicate in ways older people like me cannot even imagine.” It’s said the breakthrough in lightning fast grid computing, capable of downloading entire feature films within seconds, could make the Internet obsolete.

For example at speeds about 10,000 times faster than a typical broadband connection, it could send the entire Rolling Stones back catalogue from Britain to Japan in less than two seconds. Cern, where Sir Tim Berners-Lee invented the web in 1989, started the grid computing project in 2001 ago when researchers realised the LHC would generate so much data so quickly that it would bring the Internet as we know it to its knees. By contrast, the grid built. The 55,000 servers already installed are expected to rise to 200,000 by 2010.

Professor Tony Doyle, technical director of the grid project, said the only answer was a new network powerful enough to send the data instantly to research centres in other countries. That network, in effect a parallel Internet, with dedicated fibre optic cables and modern routing centres, has no outdated components to slow the deluge of data and already under construction. Connecitons run from Cern to 11 centres in the US, Canada, the Far East, Europe and around the world. Other connections radiate out to a host of other research institutions using existing high-speed academic networks.

Britain alone has 8000 servers on the grid system so that any student or academic will theoretically be able to hook up to the grid rather than the Internet in 2008. Ian Bird, project leader for Cern’s high-speed computing project, said grid technology could make the Internet so fast people would stop using desktop computers. “It will lead to what’s known as cloud computing, where people keep all their information online and access it from anywhere.”

The first real goal of the grid, however, is to work with the LHC in tracking down nature’s most elusive particle, the Higgs boson. Predicted in theory but never yet found, the Higgs is supposed to be what gives matter mass.

Although the grid itself is unlikely to be directly available to domestic internet users, many telecoms providers and businesses are already introducing its pioneering technologies. One of the most potent is so-called dynamic switching, which creates a dedicated channel for Internet users trying to download large volumes of data such as films. In theory this would give a standard desktop computer the ability to download a movie in five seconds rather than the current three hours or so.