Fibre's impressive return on investment in Aotearoa

New Zealand's big bet on fibre has paid off in spades, according to a new report by Deloitte that found the $5.5 billion that government and private companies invested into the super fast internet infrastructure has delivered $31b in value due to productivity gains.

Two economists from Deloitte Access Economics, Liza Van Der Merwe and Mayuresh Prasad, walk us through the findings from that report, and what the future may hold for fibre in NZ.

Plus, the first part of a new segment where Garth Bray upgrades from an iPhone 8 to an iPhone 16 and lets us know what he thinks of the latest in smartphone tech.

The Business of Tech is sponsored by 2degrees for Business.

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Episode Transcript

Speaker 1 (00:00):
We've heard so much in the past couple of years
about the woeful state of the nation's infrastructure, from dilapidated
roads to broken pipes.

Speaker 2 (00:08):
We can't even seem to get our act together to
secure new ferries for the Cook Straight crossing.

Speaker 1 (00:12):
But there is one particular infrastructure bright spot, ultra fast broadband.

Speaker 2 (00:18):
This week on the Business of Tech Powered by two Degrees,
Deloitte's economists walk us through their new analysis which suggests
we've already received a thirty one billion dollar boost from
having access to high speed internet available to eighty seven
percent of the country, and how we get add a
further one hundred and sixty three billion dollars to the

(00:38):
economy over the next decade, all thanks to that fiber
in the ground.

Speaker 1 (00:43):
He has some big numbers there, but the digital divide,
a gap between fiber availability and uptake, and the slow
adoption of digital technologies among our small businesses could see
us leave billions in economic gains on the table.

Speaker 2 (00:56):
I'm Peter Griffin and I'm Ben Moore and soon you're
here from Lisa Vandermev and Mayo ash Prasad on the
UFB dividend.

Speaker 1 (01:04):
But first being you and our Business Desk colleague Garth Bray,
a familiar face too many from his time as a
reporter on tvented fair Go program, have been looking at
the latest iPhone sixteen devices from Apple. Given this is
a really big update for Apple, I think a lot
of listeners will be keen to hear what the two
of you make about it. So what you had two

(01:25):
different models you split between the two of.

Speaker 2 (01:27):
You, That's right. I've been using the iPhone sixteen Pro Max,
the big one at the big old Boy, and Garth's
been using the sixteen base model, and he is upgrading
from an iPhone eight as you will hear, so a
bit of a big step. I previously was using a
review unit of the fifteen Pro, so not that much

(01:48):
of a difference for me. Also, obviously, I'm a bit
of a I'm not a I wouldn't call myself power user,
but I do heavily use my phone and lots of
it's different features, whereas Garth is more of a gentle
kind of user of the iPhone ecosystem, so you know,
things like having to talk them into using face IDs.
This is definitely an interesting conversation that we get to have.

(02:10):
We called it comparing apples and you can have a
listen to that.

Speaker 3 (02:13):
Now, this is very exciting, Garth, you've agreed to join us.

Speaker 2 (02:30):
Obviously you're Garth Bray. I'm Ben Moore. I'm the host
of the Business of Tech podcast and a tech editor
at Business Desk.

Speaker 4 (02:37):
And I'm a roving investigative reporter and a little bit
of a new when it comes to new apples. And
so when being you said you could get your hands
on a new iPhone sixteen for me to have a
try with, I was like, this is.

Speaker 2 (02:50):
My chance, this is my chance step into the twenty twenties. Yeah, welcome,
because you were coming up from an iPhone eight? Is
that right?

Speaker 4 (02:57):
Yeah? And I would have to say, straight off the mark,
where's the button? Where's the button gone? The thing about
that button that I loved on my iPhone hate was
it's just so convenient you click on that. It does
so much and it's got the touch ID, which is
something I would really want to break into with you
in this if you like, like definite where is that gone?

Speaker 3 (03:17):
Yeah?

Speaker 2 (03:18):
Yeah, And that's actually quite an interesting one. And that's
something that you probably here to people talk about a
fair amount because there are ways of doing touch ID
without that button, but Apple has decided no face ID
or passcode. That's your kind of lot. So that's kind
of what we're going to be doing, is basically talking
about what it's like to use the new Apple sixteen.
I've been using the sixteen Pro Max, which is kind

(03:42):
of the big boy does everything, has everything. You've been
using the sixteen base model, and I don't think there's
a huge amount of difference in general, but you've also
only been using it for a few days at this point.
First of all, when you first unboxed it, how did
it feel compared to your eight?

Speaker 4 (04:01):
Well, I mean it's bigger obviously for a start, even
the base model is larger, and just the way it
immediately kind of booted up, ran through the languages, it
all felt very intuitive. And I've got to say I
spent probably most of Saturday morning just sitting there tooling
across from one to the other. But the whole process
of shifting from one to another, I'd forgotten how seamless

(04:23):
these guys make this. Compared to my son who got
the donation of the old iPhone eight, he spent probably
a few few hours trying to put stuff across from
an Android phone. And maybe it's something that people who
regularly change phones wouldn't necessarily notice because it's a bit
more incremental. But when you've got like years with the
stuff there, it all just went straight across. Yeah, with

(04:45):
a few exceptions.

Speaker 2 (04:46):
Yes, yeah, there are a few exceptions. And as somebody
who does regularly change my phone and also regularly changes
so I also run an Android for work purposes, I
do actually much much prefer their changeover of your iPhone
your Apple phones, partially because Android has so many different manufacturers.
But yeah, iPhone definitely does the best thing. The biggest

(05:09):
frustration for me was getting a new iPhone is having
to reconnect all of my cards.

Speaker 4 (05:14):
Ah, but so frustrating. This is a plus minus for me. Okay,
so yep, it was a hassle. But the whole thing
of putting those cards over, I think it's like a detox.
It's like a choice. So you sit there and go,
hang on, this is the credit card that I'm being
asked to add to this wallet and approve, And this
is the credit card that I've taken out of my

(05:35):
physical wallet because I'm gen X and still actually have
a wallet, and I I've wrapped it up in a
series of post it notes, and each one of them
says do you really need this? Do you really really
need this? And now being asked to put it on
my phone, I'll go, huh, actually no, no I won't.
So I see it as a plus.

Speaker 2 (05:52):
You're right, it does have that. That is good. But
if you're like me and you have like more debit cards,
then you probably should and you kind of use having
different debit cards for budgeting because they're so easy to
spin up these days. And then if you're using a
watch I'm also reviewing the series ten watch, you also
need to do it all again pretty much.

Speaker 4 (06:12):
To be fair, I mean, it's it's people's money we're
talking about there, right, so you want a pretty high
standard there. But I'm just a little bit horrified to
you how many debit cards you've got. You know, the fees,
the fees alone are going to be keeping you broke.

Speaker 2 (06:24):
Well no, we Yeah, it's probably stupid, but I tend
to go, I tend to have really good ideas and
then go, this will help with organization, and then end
up with like a million email addresses and debit cards.
Face ID, I haven't done face ID. Do I need
to do face idace ID Well, I mean that depends
how much do you like putting passwords into your phone?

Speaker 4 (06:44):
Well, this is the thing. Every time, every single thing
now going you know, jumping into what's it, remember the corde,
jumping into your banking app, remembering that pin code, every
transaction that just used to be put your your thumb
on the bottom, and now it's like it's not there.
And you mentioned there are ways to do it, because
I know talking to friends that there are some Android
phones like Samsung one that will just pick it up

(07:06):
through some almost spectral process right on the screen.

Speaker 2 (07:09):
Right, Yeah, you put a ghost inside the phone and
then you can No, they do have underscreen fingerprint readers,
so you can put your thumb on the screen and
it can read it through there. You also can some
of them have the fingerprint reader on the side button.
But Apple, I think one of the things is they
don't want to put the physical technology in the phone.

(07:31):
They want to cut down on space, They want to
cut down on complexity on the actual board itself, and
so they would rather use face IDs. There's less burden
of actual physical stuff they need. That's just my hunch.

Speaker 4 (07:42):
I think they just want us looking at the phone more.

Speaker 2 (07:44):
I think they probably want us looking at the phone
more as well. Definitely, yeah right.

Speaker 4 (07:48):
And that's just like queuing there then.

Speaker 2 (07:50):
But it's it's pretty great Apple ladies. Apple's face idea
is really easy to use, very intuitive, works ninety nine
percent of the time, as long as you're okay with
you know, having their your biometric data stored on your phone,
and that's okay.

Speaker 4 (08:06):
I think after years on the Telly, it's probably already
out there anywhere. Look, Okay, for next time, I will
try face ID and I will give you some updates
on how that works for me. But I'm still not
sure about Siri. Do I need Suri in my life?

Speaker 2 (08:19):
So this is where we start getting into Apple Intelligence.
So at the moment, what we've got with Siri is
still a bit clunky, not as good as some of
the competition out there in terms of picking stuff up
or reacting to what you're saying. But in the eighteen
point one update iOS eighteen point one, we should be
getting Apple Intelligence, and part of that will be powering

(08:41):
Siri with a lot more contextual understanding and ability to
respond to you, as well as some other features which
are pretty cool at the moment, I am okay with Siri.
She's she and I or he and I in my
phone the Irish man that I have answering.

Speaker 4 (08:57):
To me follow I'm deliciously.

Speaker 2 (08:59):
Exactly here, and I get on pretty well. My wife
and Siri do not get on.

Speaker 1 (09:05):
Well at all.

Speaker 2 (09:06):
She really struggles to get Siri to respond to her.
I don't know whether that's a training thing or if
it's an accent thing, because my accent's a bit less
kary than hers. Probably, So I would be very interested
for you to give Siri a go as it is
now and see how useful it is.

Speaker 4 (09:20):
We can check some of that stuff out.

Speaker 2 (09:21):
Yeah, you're gonna go see what you think.

Speaker 4 (09:22):
So the other thing I think is that continuing that
theme of like choices that you're asked to make, like
will I give my face to this or will I
sign up that card? Little stuff like you're going through
an emergency call organ donation. Yeah, I'm now being asked
to consider whether or not I'm an organ donor, and
I'm thinking this might be set up later for me.

(09:45):
It's kind of like, Okay, that's an interesting choice. So
I'm I'm very keen on that idea of any time
you step from one platform to another or even a
new little piece, it's a good chance to look at
how it affects all the parts of your life and
whether you could be doing it be and maybe whether
there's some underlying choices that you need to reflect on.
So that's for me. It was a transformational experience in

(10:08):
many ways.

Speaker 2 (10:08):
Yeah, yeah, I can imagine, and like I think, you know,
as somebody who does it so frequently, I just do
it on autopilot now tic tic yes, yes, yes, have
my heart. I don't care to be honest, like, yeah,
maybe I should stop and actually take some time to
think about to do a little digital cleanse and actually
go through and look at everything. But it's just so
unwieldly at this point. It is so thoroughly integrated with

(10:31):
my life. I've got apps on there from a million
years ago I never use and.

Speaker 4 (10:34):
Yeah, and I guess, look, okay, it's it's not the
same as moving the entire contents of your house with
you when you go and not sort of downtizing or whatever.
I think I had about sixty point one eight gig
of stuff that pourted from one to the other, which
I'm just thinking back once upon a time would have
taken forever and literally was like I think I went
away and made a cup of coffee and.

Speaker 5 (10:52):
It was just about that.

Speaker 2 (10:52):
It's incredible, isn't it.

Speaker 4 (10:54):
And just the way it sort of happens in such proximity.
It's kind of increasingly the way that I don't know,
I would imagine technology should work. It's just finally it's
happening without the need to plug stuff in and connect
it and all that kind of thing.

Speaker 2 (11:07):
I think that's pretty What makes Apple kind of special
is the lack of friction, you know, that is really
what they're all about, that user intuitiveness, user interface.

Speaker 4 (11:14):
So yeah, I found it really interesting that transferring your
phone number is like almost about the fifth or sixth
It's so down the list. This is a phone, you know,
originally its purpose was to ring people, and there's some
way down the list we get to, Oh, by the way,
if you've got a phone number, you might want to
chuck it in. Now, at what point are we just
not going to have phone numbers anymore?

Speaker 2 (11:36):
Yeah, it's a really interesting question. I think that a
phone number has become more of a unique identifier than
anything else, because people if you have like FaceTime, people
can ring you using your email address. Realistically, we don't
ring people. We don't talk in the same way anymore.
We don't talk using resonance. That's kind of sent down
copper wires. It's digital. Things get turned into a digital

(11:59):
format and sense to you digitally. So the idea of
a phone number where it's trying to figure out which
exchange to go through is kind of obsolete, But as
a number that is a unique identifier for you still
very useful and will probably be used as we move
forward into the digital identity world as well, which is
where things like having your organ donation status on your phone.

(12:20):
You know that could be now when we get to
digital identity that can be linked to your driver's license,
can be linked to other forms of IDA, and it
will all be kind of integrated into this digital morass
that defines you. I guess it's a billing point right
for most bats. This is who we're seeing the bill to,
so they want to kind of maintain that connection to
some extent.

Speaker 4 (12:40):
But surely there must, like you say, to your point
where you just don't really need it anymore. You can
get by without it. There's a lot to consider here,
and so I don't want to try and cram it
all into our first chat, but it feels like we've
got we've got some solid chances to try and help
me understand technology. I feel you know the stuff backwards.
And this is why I'm very, very glad to have
your expertise at my disposal here, because I would say, like,

(13:04):
not knowing what goes on inside a phone doesn't necessarily
hold people back, but it might hold them back from going, Oh,
do I really want to spend like another fifteen hundred
bucks or something or a whole lot extra on this,
But I guess I'm interested to explore all the things
that I didn't realize the phone could do and in
ways that it might sort of help sort of make

(13:24):
life a bit more simple.

Speaker 2 (13:26):
Yeah, I'm really interested to hear what you think, in
particular of some of the sixteen specific features like having
a camera button at your disposal, or how often do
you use the camera button as you start to use
the phone more, what other kind of bits and pieces
in the sixteen compared to the eight you're finding quite
useful and interesting?

Speaker 4 (13:47):
And it sent me all these things like, hey, you
can get three months Apple TV so you can see
how constantly they're using ways to flick you some insurance,
flick you some extra plans, and it's really just a
gateway drug to all the things that they offer.

Speaker 2 (13:59):
There's a reason that Apple really have a decent services
revenue as well as their product revenue. So you can
definitely see how they.

Speaker 4 (14:07):
Want to keep that going on. More on that in
the next one, maybe, maybe.

Speaker 2 (14:12):
Yeah, thank you so much for taking the time to
chat with us, Garth, and thank you guys for joining us.

Speaker 1 (14:29):
Interesting Ben. You know, we usually because we're upgrading our
phones a bit more often are going from you know,
an iPhone fifteen to sixteen, or an S twenty three
Samsung Galaxy to a twenty four. Garth has skipped quite
a few generations and quite confronting for him not to
have a physical button on a phone. It's just something

(14:50):
we take for granted now, but actually for a long
time that was a really cool feature off the iPhone.

Speaker 2 (14:55):
Yeah, and the thing that he pointed out about touch
id and his love for touch ID, which I actually
remember missing when I first upgraded. But I've become very
used to face ID. But one very exciting thing is
that I'm not one of those people who dives into
beta operating systems. I tend to wait for the full release.
And today I woke up this morning and my phone

(15:17):
said eighteen point one is ready for download. That's going
to be Apple Intelligence. So I haven't had time to
do that the OS upgrade yet, but hopefully after this
conversation today, I will upgrade it to Apple Intelligence, And
so next time Garth and I have a chat, I'll
have a lot more to say.

Speaker 1 (15:35):
Yeah. For me, that's the one thing I really want
to see. I know they have great hardware, a great
operating system, but the one thing that might get me
across from Android into the Apple camp is all of
these built in free features that come as part of
Apple Intelligence. And we're talking about things like tools to

(15:58):
allow you to edit and so rise your emails, text
editing tools across the iPhone, the ability to automatically transcribe
and record conversations on the phone. That's really valuable. But
it'll be interesting to see what Garth makes if the
AI powered Siri when that comes along. He's obviously been

(16:18):
using it to some effect, but that's potentially going to
be quite a big change in the iPhone as well.
When they have generative AI underpinning Siri that's able to
cross a number of apps on your phone and give
you a lot more value in terms of it being
able to find information on your device and control menus

(16:39):
and the like. That's what Apple is talking about with
Apple Intelligence, but haven't seen it in the wild yet.

Speaker 6 (16:44):
Yeah.

Speaker 2 (16:45):
So we'll probably have part two of my series with
Garth and the New Year, so stay tuned for that,
And in the meantime, let's head over to our featured guests.
As I said before, we've got Lisa van der merv
andsh Prasad from consulting firm Deloitte. Lisa is a lead
partner at Deloitte Access Economics and former Commerce Commission economist,

(17:08):
and Mayo Rash as an Associate director and senior economist
at Deloitt Access Economics, and he also did a length
at the ComCom.

Speaker 6 (17:16):
Yeah.

Speaker 1 (17:16):
Then you report Unleashing the Power of Digital Fiber Infrastructure
in New Zealand is probably the first in depth look
at what our five point five billion dollar investment in
ultrafast broadband has returned to the country and what the
spin offs might be in the next decade. As we
enter the AI era.

Speaker 2 (17:35):
There's a lot to unpack with this, I mean, considered
one of the most successful projects in New Zealand's history
in terms of what it has actually been able to
deliver to its citizenry. So here's that interview. Peter speaking
to Lisa and Mayor Rash from Deloitte.

Speaker 1 (17:53):
Lisa and Mayor Esh, Welcome to the Business of Tech.
Thanks so much for coming on.

Speaker 6 (17:57):
Well, thank you for the opportunity to be she some
insights from our recent report.

Speaker 5 (18:03):
Yeah, I likewise thank you for having us on.

Speaker 1 (18:05):
Yeah, so you've just done this really interesting report, a
retrospective report in some sense, looking back at what we've
achieved with the ultra fast broadband network. Now that was
sort of designed and thought off and the politicians really
got behind that way back in two thousand and nine.
Construction started in twenty ten. This was back in the

(18:27):
Key government. We're now in twenty twenty four. So let's
just break down. First, break down the numbers for us
in terms of looking back to I think twenty twelve
the research covers to twenty twenty three. What did it achieve?

Speaker 6 (18:40):
Firstly, maybe just stepping back a little bit, so I've
been Peter, like you I've been part of the Fiber
journey since they won while I was working at the
COMMAS Commission, I mean, even thinking about regulation, what does
the design look like? At the start there was quite
a key focus just on a fly and from his
supply side perspective. We then conducted in twenty twelve at

(19:03):
demand site studying because demand at that point in time
was still so uncertain. Just reflecting back on that is,
if I look at the fiber roll out today, it's
probably one of the most successful examples of a large
scale public private partnership that we have in New Zealand.
So in that context, we took it upon ourselves to

(19:25):
do this report and as you say, first consider what
are the benefits today, what are the benefits in the future,
and what actions do we need to take to achieve
that benefit.

Speaker 5 (19:37):
The way we looked at it was, you know, measure
how fiber has better enabled us to combine now know
how our our labor are capital to better produce goods
and services. So what we've what we found is that
between twenty twelve and twenty twenty three, the productivity uplift
I mean GDP terms is thirty one billion, so quite
a significant amount, and you know, in twenty twenty three,

(19:59):
just in particular, the productivity uplift was eight point eight billion,
so recently significant amounts of productivity uplift to date as
a result of the fiber network.

Speaker 1 (20:09):
Yeah, and that really interested me. In twenty twenty three
eight billion odd and economic uplift there it seems to
be is this an acceleration. What explains that just in
one year we've got almost a quarter of that economic
uplift is that just because uptake is accelerating.

Speaker 6 (20:24):
It is around uptake, it is around access, and it
is around speed, but it's also coupled with the development
of new applications and innovations, and that is driving the
productivity benefits. That is a result that we see in
twenty twenty.

Speaker 5 (20:40):
Three when the network's being rolled out, obviously, you know,
we're necessarily going to see the benefits. But once uptake
increased and applications started getting developed on that connection, that's
when we started seeing the productivity uplift. And that's why
you see more of the impact and the latter period
because that's really when people started connecting and using and
developing applications. And I think productivity as a result of

(21:01):
the fiber network.

Speaker 1 (21:02):
Yeah, and you pointed out in there. I think there's
been about a five point five billion dollar investment in
the UFB network between Orus and the other fiber providers
have obviously invested a lot of money. We've had at
least one point five billion taxpayer dollars in the form
of loans and investment went into that as well. So
I guess an economic terms, pretty darn good return on

(21:24):
investment so far.

Speaker 6 (21:26):
Yeah, that's absolutely right, Peter.

Speaker 1 (21:28):
Having said that, you know, you point out in the
report that we haven't really captured the productivity potential off
this network. We have a New Zealand a reputation for
not being great on the productivity front compared to other
advanced nations. We lag behind them. We've been hearing from
the New Zealand Institute at Economic Research many others that

(21:51):
one of the keys to boosting productivity is embracing advanced technologies.
A lot of them are digital technologies underpinned by high
speed into So mayrish, to what extent have we actually
got a productivity boost to date from UFB. We've obviously
had an economic impact. What about the productivity story?

Speaker 5 (22:10):
It has a lifted productivity to date, despite the weak
productivity overall, what I would say is that our productivity
performance would have been a lot worse had it not
been for the fiber network. But as our report emphasizes,
there's still a long way to go. There's still a
massive dividend to capture if we continue, well, if we
take a few key six steps that we've outlined in

(22:31):
our report to really capture that substantial dividend to come.

Speaker 6 (22:35):
I mean, if we all imagine a world without fiber
productivity in New zeal And, what would our productivity look like?
It uplifted our productivity. And what we also showing the
report is that our productivity payoff to come is just
really getting started, and we have a potential to add
another one hundred and sixty three billion dollars in MPV
terms over the next decade.

Speaker 1 (22:55):
You explain that in MPV, so you've got one hundred
and sixty three billion dollars by twenty thirty three. What
does the MPV mean?

Speaker 6 (23:04):
MPV is just net present value terms. What is the
value to dry over the next ten years.

Speaker 1 (23:10):
So that's obviously significant. And to achieve that, we know
we'll get onto the six things that you sort of
have outlined you need to achieve. One of them is
just actually using this sort of gold plated network that
we've built. So I think it's been rolled out to
eighty five percent of the country now, but not everyone's
using it, right, That.

Speaker 6 (23:30):
Is absolutely right. I mean in our report, what we
indicate is that yes, eighty percent of our population do
have coverage in fiber, but uptake of fiber is currently
sitting at seventy five percent. And if we break it
down on a regional basis, for example, if we look
at Wellington, there's a gap between access and uptake of

(23:51):
twenty two percent. That is the first component that we
need to focus on. Is really decreasing the gap between
access and updake.

Speaker 1 (23:58):
Yeah, drill into that a little bit more more yoursh
you've identified the seventeen billion dollar figure that would be
left on the table. Is that simply down to the
fact that if we don't extend this out, less people
can access this, less people get those productivity gains.

Speaker 5 (24:13):
Yeah, yeah, I think better. That's that's exactly exactly right.
By increasing coverage and also I think importantly increasing uptake,
you get consumers, businesses and the like accessing this high
speed internet infrastructure increasingly as we outline in our or,
there'll be a lot more applications, technologies and the like
that are reliant on the high speed nature of the connectivity,

(24:34):
but also the bandwidth and latent to see characteristics of
the technology, they'll be crucial in enabling that. So the
more connection coverage you get of the fiber network, the
more use of these new technologies you get, and the
more better we get at producing goods and services I
eat productivity, and the better the benefits overall. So that

(24:56):
that's how Yeah, characterizing I agreeing with you, but just
unpacking up packing your question a bit more.

Speaker 1 (25:00):
Okay, looking forward, let's look at these sort of six
key things that you've identified that a sort of key
to really maximizing the benefit of this leads them. Could
you take us through those?

Speaker 6 (25:10):
Yeah, So in terms of the first actions, we just
discussed that already, So that is readdressing digital equity by
boosting fiber access and also the uptake in households. The
next dimension that we identified or action is in New Zealand,
we have to make room to innovate with II. So
as part of this is we identified to actions. So

(25:34):
the first action is first on policy makers, so policy
makers really need to ensure that we promote increased II
usage but also in a responsible way. And then it's
another action is perhaps on business associations where they would
need to work with their members to guide them through

(25:54):
the adoption of new technology is but also sharing success stories.
Another dimension that we've identified is about seizing the opportunity
to grow exports. So we know the government would like
to double the value of exports and one way that
we can diversify our exports is in fact through weightless exports.

(26:15):
So New Zealand do have a comparative advantage in this
and even if we think, say for example, about our
gaming sector. Just last week it was announced that for
the first time we are a net exporter from a
New Zealand perspective, and our fiber network is so critical
to enable this. So what we can do, and this
is both on businesses but also the government, is to

(26:37):
promote New Zealand, to promote the capabilities of a fiber
network and to promote the success of our infrastructure that
we have here in New Zealand and that can facilit
out of growth in our exports. The last three actions
that we identified, one that I will focus on now
is around our small businesses. So our small businesses in
New Zealand as really a backbone of our economy is

(27:01):
lagging in a take a I mean pt you will
probably be aware of this to Asia Pacific surveys, as
only a third of our small businesses use social media,
only three four percent generate more than ten percent of
the revenue online. The average on an Asia Pacific level
is seventy percent, So we are really lagging behind. This

(27:23):
is impacting our growth, also impacting our productivity and performance
of our economy. So yeah, we can get small businesses
under government really to collaborate in order to get businesses
connected and lifting online presence. The government and a small
businesses again can work together in terms of providing the

(27:46):
right incentives, providing support programs, also ensuring that we are
attracting but also retaining the right talent in New Zealand.
And then if we think about larger businesses, they can
in fact support these small business customers through processes of
digital adoption and facilitating knowledge sharing. Then if we only

(28:08):
focus on the government full moment, the government can really
be an early adopter. So what do we mean by that?
For example, the Commerce Commission in their recent market study
on personal banking. One of the recommendations there was for
the government to be an early adopted in open banking,
so we refer to it as open customer data because

(28:29):
banking is the first sectem being insurance, energy and so forth,
so the government could really be an early adopt to
day but also ensuring that we are moving more towards
a matured digital public infrastructure. And then the last component
is around regulation or is it deregulation that we need

(28:52):
because we need to make sure that our regulations in
New Zealand is really fit for purpose. So it is
conducive to invite an investment going forward. And I mean
regulized could refer to copper, could refer to fiber, could
refer to IO. So that is in a natural our
recommendations and key actions that we think is required to

(29:13):
ensure that we don't miss out on this opportunity. Maurge,
do you mind, We just want to flag the example
in Europe.

Speaker 5 (29:20):
Yeah, yeah, sure, think so, Peter. We note in our
report Europe's Digital Decade, it's a policy program with kind
of concrete targets to make the whole of you a
bit more, I guess, transform EU economy and make it
more digital. Some of our recommendations draw upon some of
the initiatives from the digital decade. For example, the increase

(29:42):
in coverage and uptake is a key key tenet of
Europe's digital decade. The other thing I guess I would
emphasize is Europe's doing a really really great job in
terms of measuring how they are tracking against those targets.
So they've got set concrete targets by twenty thirty. Every
couple years or so, they measure how each country is

(30:03):
tracking in relation to the targets, and if they are
tracking properly, they then go back to the drawing board
and essentially troubleshoot how they are going to reach those targets.
Underpinning those digital targets are quite a range of metrics
and data depending how each country is tracking towards the target.
They are tracking, how many invoices each of those large

(30:25):
to medium to small enterprises are providing as part of
their business operations. So really concrete targets backed up by
really concrete measurement and recalibration.

Speaker 1 (30:35):
Yes, so tracking what you're doing is really important so
you can measure progress. We have had sort of initiatives
in New Zealand, like Digital Boost aimed at at small
and medium sized businesses. During the COVID pandemic, there was
a big focus on going digital really for necessity because
businesses had to pivot online. You think we've sort of

(30:55):
taken a foot off the gas on those efforts. Do
we really need to do a lot more. I'm thinking
of countries like Singapore which have given all the hawker
stalls in the country basically access to i F post
technology trying to get everyone transacting digitally. Do we really
need to do a bigger push with small business to
get them capable enough to take advantage of this great network?

Speaker 6 (31:18):
We have totally agree, Viz, that's really required. I mean,
even if we think about our small businesses and the
fact that they are lagging in a tech game, that
is really important. We also understand, I'm in full small business,
the cost around technology and adoption is a big barrier
foot them. In order of our small business really to

(31:40):
lift their tech game, we might need to consider about
how can we support them to do that?

Speaker 1 (31:46):
Yeah, and that's for pretty basic stuff really, like as
you say, accessing social media, having an e commerce platform
might be Shopify or something getting that enabled for your business.
But I think we're really starting to see with a
lot of businesses moving to the cloud, and then with AI,
we'll start to see that accelerate, which is what you've
identified in the report. May resh what sort of applications

(32:09):
when it comes to AI are we starting to see
being used and what do you expect over the next decade.
Give us a flavor of some of the more sort
of bandwidth intensive applications of AI that our businesses may
be using and consumers as well.

Speaker 5 (32:23):
So at the moment, you know, as you'll be where
AI needs to be largely text dominated, so we're seeing
a lot of that being rolled out currently, but looking forward,
there might be generative AI models that take user prompts
and outputs such as videos, and you know, work off
that to simulate scenarios or IS solutions or answers. Another

(32:43):
example is a shift from X to two dimensional inputs
so that those tools can extrap plate and generate data
representing three D objects or creating virtual renderings or AIA
assisted prototypes or designs in a virtual virtual space. So
really kind of shift how we use AI currently from
a largely text based application to something a lot more interactive,

(33:06):
bred and dynamic. The bandwidth and the latency provided by
the fiber network will be really really key to enabling that.
It will be a very i guess data hungry application
and the fiber network will be critical to that. So yeah,
that's that's I guess a view on how things might
evolve going into the future. And what is clear as

(33:27):
in any scenario, the fiber network will be really important
to the adoption and use of those kinds of developments.

Speaker 1 (33:33):
Yeah, and we've got really no idea what you know,
what is coming in the next five to seven years.
You know, Mark Zuckerberg is working on the metaverse. If
something like that took off, you know, real time virtual
reality and in a multi sort of player environment, could
could be very bannedwidth intensive as well. I guess the
benefit of fiber is that ability to increase the speeds

(33:57):
by changing the equipment at either ends of that fiber
optic cable and some of the stuff you've quoted in
there from Coorus. It's really quite staggering where we've come
from sort of in the last decade, from sort of
accessing the Internet at five megabits per second too. I
think the average was over four hundred megabits per second now.

Speaker 5 (34:14):
Exactly right, And I just wanted to emphasize that, I
guess our estimates of the future dividend in a way
are conservative. They relate primarily to the I guess the
historical relationship between connectivity speed and penetration and productivity uplift.
But if AI technologies start really evolving and taking off,

(34:35):
and they still will be reliant on other fiber network
then that relationship might increase, and so the potential dividend
going forward might be larger. So in many respects, the
future potential impact that we've estimated might be a conservative
one if things move in a positive direction going forward.

Speaker 1 (34:51):
And Lisa, in the report, you've talked about Europe what
they're doing, which is quite regressive. You quote in there
is some some research from other countries about the sort
of the productivity and economic boost that other countries have
experienced as well. How do we compare in terms of
how we've done compared to some of those other countries
that invested in high speed internet.

Speaker 6 (35:13):
The first example is probably the example closest to us,
and that's Australium. So what we know is Australia mandated
a copy to fiber migration, where as an inner Zealand
we ben it was quite different. It was very focused
on targets, the provision of fiber products that set prices

(35:34):
and initially through contracts with the Crown Infrastructure Partners. I mean,
what we see today is that every compare to Australia,
and this is all based on public reports. It is
not necessarily my own personal opinion. But we know we
have faster internet compared to Australia. We also know that

(35:54):
NBN is performing relatively well. There are quite a lot
of lessons that I can learn from New Zealand from
a fiber perspective. What we also know, for example, is
that New Zealand is currently ranks under the top ten
ninth out of thirty eight OCD countries, whereas Australia is

(36:15):
in a distant thirty of place. From a respective on
an international ladder, we are huge New Zealand's fiber network
is a huge success. Also, further, if we think about
downloaded speeds, for example, we are currently the thirteen fartist
in IRCd and that is ahead of Australia, United Kingdom,

(36:37):
Ireland and Germany. So yes, we are still lagging behind
countries such as Singapore, Korea, Iceland, Spain and Japan. But
that is also why it's so critical for us to
increase our coverage from eighty seven percent to ninety five percent.

Speaker 1 (36:54):
Yeah, I believe there are plans to do that. There
is a scope for further investment in the network. The
government seems amenable to doing that, so we may actually
get to ninety five percent. In terms of, you know,
the weightless economy, which everyone tells us we need to
move to, even from a sustainability point of view, what

(37:14):
are you sort of thinking in terms of the types
of applications and products and services that our businesses will
increasingly be selling overseas. I'm thinking of the likes of
you know, wetter here, which makes very elaborate movies and
is shipping them around the world. You mentioned our gaming industry.
Those are obvious ones. What sort of other applications do

(37:35):
you think our businesses will increasingly be using high speed
internet to ship to the world.

Speaker 6 (37:40):
Another couple of examples, say, is around any accounting systems
we can explore at Then if we think about meat
TECHSA medical technology, I mean we already have quite a
significant comparative advantage in that we can grow AD and
again that is with the underlying the fiber needwork and

(38:02):
enable to add And I infurther to that is that
we just talked about AI as well and all the
future II applications, so that in itself can also enable
the growth of our weightless X words.

Speaker 1 (38:14):
Murray Rish, what do you think this says about so
called public private partnerships which really underpinn the ultra fast
broadband network. We've got I think a problem in New
Zealand at the moment with infrastructure investment. There was a
lack of investment in the eighties and nineties and then
two thousands there was a bit more investment in roads
and infrastructure like UFB, but there seems to be a

(38:36):
model that worked very well for digital infrastructure. Do you
think there are parallels here with roading and water infrastructure
and other types of things that we could apply these
lessons to other things.

Speaker 5 (38:48):
What I would say to that is, and this is
what LESA had emphasized, there were set targets with the
UFB rollout, and it was done in a particular way.
I mean, I guess the key takeaways for me would
be that given those targets, given that clarity, it can
be a successful way in which to roll out infrastructure
and investment. And it has been successful. You know, the

(39:11):
devil will be in the detail right in terms of
how it might be applied to other infrastructure or other
types of investments. But I guess what this report is
focused on is a successful rollout of it, and it
highlights some of the key features being those performance targets
and the like pet.

Speaker 6 (39:28):
I think also just adding to that is that, I
mean we have quite a lot of experts in our
Delutte infrastructure team and that will remind me every time
that a PPP construct for writing project is very different
to the public private partnership that we are talking about. Yeah,
but I still think that having that full sight is

(39:49):
really important. You know, doing it right on budget and
on time is really important. I do think this public
private partnership, even though it's digital, can also be considered
for our digital public infrastructure going forward. The other key
thing is, like any infrastructure investment, is you will only

(40:10):
really read benefits over the long term. So keeping that
in mind, keeping in mind at any decisions that we
make today for infrastructure investments will take a long time
to play off. But as we see, we've already reaped
sixteen percent of the productivity benefits, but the basin is
yet to come. So I four percent of the productivity

(40:31):
benefits we could realize that over the next ten years.

Speaker 1 (40:34):
None of it appears to be really difficult. It's just
it's a lot of small things, like getting small businesses,
for instance, confident enough using digital tools, building their own websites,
and then maybe looking ein voicing if they're working with
overseas partners. You know, we've done some work with an
Asia Pacific to enable that to happen. So it seems
like it's it's not one massive thing, although AI collectively

(40:59):
will POTENTI have a transformative effect on the economy. But
there's lots of things we can do now that other
countries are maybe a little bit ahead and to allow
us to read more of those productivity gains.

Speaker 5 (41:09):
Exactly right, And I think the government also has a
crucial role in doing that, being an early adopter almost
to setting an example in terms of leveraging the network
and increasingly digitizing, which will also enable the private sector
to do so as well. So yeah, government has a
role to play.

Speaker 1 (41:27):
Yeah, that's interesting. The government one, we've got Judith Collins
as the Minister for digitizing Government, so she's really passionate
about that. People will probably think of when they talk
about the government, Oh, you know, filing my tax return,
stuff like that, maybe telling medicine in the health sect there.
But I guess there's lots of other things as well,
you know, for instance, education and even research, you know,

(41:51):
and doing e research. We've got a lot of Crown
research institutes and universities as well. Is that of those
six things that you're recommending, is that actually really crucial
wonder government is one of the biggest customers in the
country and one of the potentially one of the biggest
users of ultra fast broadband as well.

Speaker 5 (42:08):
One of the six recommendations is that the government be
an early adopter here, so really harness that digital infrastructure
and be a bit of a bit of a leader
because they all add different kind of words out in
similar behavior from the private sector. So yeah, quite consistent
with what we've said in terms of how we realize
that future dividend.

Speaker 6 (42:29):
Adding to that is that our views was that if
the government is an early adopted could actually potentially inspire
industry to follow.

Speaker 1 (42:37):
Finally, the digital equity piece is really important. You know,
when I write about broadband and how great UFB is,
I just get a lot of people responding going, well,
I haven't got access to it, and I have to
rely on expensive alternatives like style ink, which is which
is great, but you know it's it's one hundred and
fifty dollars a month for the full speed version. So

(42:59):
a lot of people sort of like, well, what about
us here in rural areas? And then we have issues
in even in urban areas where households just can't afford
to access it. How crucial is it that we we
crack that digital equity issue? And as you look around
the world, are there any initiatives or any leaders where
it's obvious we can learn from to try and do that.

Speaker 6 (43:22):
The first step could also just be educating consumers, educating
households and educating businesses as well. The reason why I
think educating consumers around fiber and its benefit and households
is so important is just based on how regulation works

(43:42):
in New Zealand is the current wholesale providers of fiber
can only operate in a wholesale level off the market,
so I can't operate on retail as well. As a
result of that, there's a potential gap between the wholesale
level and the in consumer. So by educating the end

(44:02):
consumer around the benefits of fiber, the technologies that's coming
or is it the evolution and a train in the mind,
can really support that decline and a gap between access
and updike.

Speaker 1 (44:15):
Yeah, that's a really good point. When I talk to
the telcos, they're basically saying for us to be able
to continue to invest in this network, whether it be
fiber or even mobile like five G going to six
G technology, they're saying, consumers are going to need to
realize the benefits of this technology. They sort of just
see these increases in capacity and speed as just a

(44:39):
thing that will always be there and always be relied on.
But it's really expensive to do that. So unless consumers
recognize that there's a premium premium service should require premium pricing,
Unless we get our heads around that as a nation,
it's going to be really difficult to justify big, multi
billion dollar investments to make even more of these networks.

Speaker 6 (44:59):
In our report mentioned that as well. So for example,
if you think about a household today on the average,
you have about twenty two connected devices. So it's a
move from I am connecting individuals or households, but it's
also connecting to things. I mean, in the next by
twenty thirty, the average will move from twenty two connected

(45:23):
devices to forty four connected devices by twenty thirty. So
that movement and the development of technologies and consumer preferences,
that is just re emphasizing the importance of our fiber network.
I mean always just take it for for granted.

Speaker 1 (45:40):
In a background, just said one other question I've for
gotten to ask you about, which maybe mayor issue you
might have an answer to this to what extent are
these really significant gains we see from UFB into the
future reliant on cloud infrastructure. We've got the hyperscalers, Google,
Microsoft and AWS are building infrastructure in New Zealand. Sure,

(46:04):
at the moment our businesses are sending their data to
hyperscale facilities offshore. But that flurry of investment in the cloud,
including from the Data com and Spark, is that really
going to enable us to get a lot more out
of UFB as well.

Speaker 5 (46:21):
I might answer this in two parts and see how
it falls. Our report focuses on the fiber network in particular,
so how the increase in uptake and speed will result
in us doing things better, so a productivity uplift and
therefore a bit of a benefit going forward. In relation
to those hyperscalers and data centers, absolutely, they're crucial, crucial

(46:44):
to this, and I guess what I would say is
that the fiber network is again a pretty critical piece
of infrastructure. They will enable us to utilize that delatency.
The speed of the Internet connection will mean we can
leverage those data centers and make better use of use
of those without the fiber connectivity. Without the fiber network,
the benefits you might get from those hyperscalars might be

(47:06):
curtailed or were limited.

Speaker 1 (47:14):
Yeah, so I'm really glad that Deloitte did this study.
It didn't appear to have any agenda in doing it either.
Two economists who have a background at the Commerce Commission
so have been analyzing this from a competition point of
view at one point the economics of competition are now
at a consulting firm that is very interested in how

(47:37):
we're using technology. So I think that the two big
takeaways from this are concerned about small business, especially with
digital boost seems to be winding down or has wound down.
The funding isn't there anymore. So we had an initiative
to really encourage small businesses to take up cloud computing,

(48:00):
e commerce. Do we actually have a government drive anymore
to do that? It doesn't look like it. And you know,
if they're not taking up simple things like social media
and e commerce platforms and those sorts of tools, what
are they going to do with AI? So are we
going to lag in AI as well? And the other
thing is, you know, a lot of this is predicated

(48:20):
on we're going to fill the pipes, these bigger pipes
more capacity with AI related applications. What's that actually going
to look like? And I guess we were asking that
same question. I remember I was when we were on
five megabit per second connections and being told we were
moving to hundreds of megabits per second. Other than you know,

(48:41):
live streaming and gaming and that sort of stuff, what
were we going to use it for? But we've used
a lot of that capacity. We are using it and really,
you know, not just richer sources of media, but more devices.
They said there's something like twenty four devices per household
going to forty five in the next decade. So the
IoT revolution, having smart fridge is having smite everything in

(49:04):
our homes. We will actually be using the best part
of a gigabit connection within a decade.

Speaker 6 (49:12):
Yeah.

Speaker 2 (49:12):
I think it's one of those things where and you
kind of saw this in the move from dial up
to faster broadband in the beginning, which was that you know,
we started with these really bare bones HTML websites literally
just text and a couple of small, low res images,
and then the more the faster we got, the higher
resolution everything got. We fill the capacity as it arrives.

(49:35):
I don't think we're going to reach a point where
we run out of ways to use up data. The
more we have, the more we'll use. Yeah, I think
I wonder about the diminishing returns of value on the
faster speed, whether we're actually just filling it with junk
or whether we're actually going to get value out of it,
and AI seems to be one of the areas where
that could potentially help to boost that value.

Speaker 1 (49:56):
So and it turned out to be a great return
on investment, know in terms of the money we've invested
versus the value. That's mirrored by other studies overseas. For
every dollar you put into fiber, you get a really
healthy return. That issue they identified though eighty seven percent coverage,
seventy five percent uptake. And I wonder if a large

(50:20):
component of that is that the internet providers have been
diverting people away from fiber to their own wireless broadband
products because they get a better margin on that. They
don't have to pay Corus and the other UFB providers
a big wholesale fee. And that's where Liza was talking about.

(50:42):
Regulation is one of those six things in future. So
does the government need to do something to change the
settings here to make it more attractive for ISPs to
actually use this goal plated network rather than trying to
go around it with their own products.

Speaker 2 (50:57):
Maybe I actually think that event market forces might sort
it out, because fiber is better. Have you ever had
one of these calls from your ISP saying, hey, you
should really be on fixed wireless.

Speaker 1 (51:10):
I haven't, but my father did and he went on
to it.

Speaker 2 (51:13):
Oh no, see, I got one, and I'm like, you
are a horrid percent barking up the wrong tree because
I know what my data usage is, Like, I know
that I stream in four K regularly at high peak
area at high peak times. I need consistency because I
do a lot of work online. They do podcasting. I
need all these things. Why on earth are you calling me?
And I wrote a story recently we're talking about a

(51:37):
forsythe Bar report where one of the analysts said that
he sees fixed wireless as a legacy technology now, which
I think is quite strong words, and that connections to
it are going to start to decline from about twenty
twenty seven because people are going to see that fiber
is better. Chorus is still releasing these really good low

(52:01):
cost plans for consumers, and then you're getting a lot
of done with pressure on costs of fiber as well
from virtual network operators like some SkyTV and that kind
of thing, who are saying we'll use broadband as a
lost leader because the margins are relatively low anyway, So
people are going to want to get on fiber eventually,
especially as fixed wireless limitations start to become more obvious.

(52:23):
And then in the rural area, starlink still offers a
much better option in terms of speed, so and I
don't think we're going to see it continue to take
up market share of fiber.

Speaker 1 (52:34):
I guess the real takeaway for other infrastructure projects is
you've got to have really firm targets and be monitoring
that all the way. That's what the Digital Europe thing
is doing. That's what they did with the Yeah, I
remember all the announcements and pressure releases where we're getting
every six months, this is how many households we've reached,

(52:55):
this is how many accounts have been turned on. It
was sort of like really easy to track progress on
that it hasn't been on some of the other infrastructure projects.
And I think that accountability really drives a project forward.

Speaker 2 (53:10):
Yeah, And I think we have to remember that just
because broadband was hugely successful as a PPP as a
public private partnership doesn't automatically mean they all are. They're
still going to need to have all of these checks
and balances and things in place to make sure that
to make sure that the outcomes that we are looking
for are matt because it doesn't automatically mean success just

(53:32):
because it has before.

Speaker 1 (53:33):
Absolutely so. Thanks so much to Lisa vandermerv and Majoorish
Prasad from Deloitte Access Economics for their insights on their report.
We've a link to it in the show notes find
them in the podcast section at Businessdesk dot co dot nz.

Speaker 2 (53:50):
And that's where you can stream this podcast in full
every week, and it's also available on iHeartRadio or your
podcast platform of choice and get in touch with your feed.
We'd love to hear your suggestions for upcoming guests as well.
Email me on Bend at Businessdesk dot co dot z
and you.

Speaker 1 (54:08):
Can find both of us on x and LinkedIn, where
you can follow the Business of Tech page for all
of our updates.

Speaker 2 (54:13):
That's it for another week.

Speaker 1 (54:15):
Catch you for the next episode, same place next Thursday.