Strawman: How to save the New Zealand economy

Tuanz head Paul Brislen

GUEST OPINION

Put aside the idea that it’s Kim Dotcom who wants to build a new cable connecting New Zealand with the outside world for a moment and think about what we’re really talking about here.

Firstly, we’re talking about building a data centre. Nothing unusual in that – we have many dotted around New Zealand, some large enough to register on the international scale of such things. Between Orcon, Vocus Communications and Weta FX’s donation of the New Zealand Supercomputer Centre, we have several.

READ ALSO: Dotcom's cable - fact or fantasy? Kim makes his case

But this would be orders of magnitude larger – something that would either power Dotcom’s new Me.ga service or cope with the demands placed on Google, for example. It needs to be robust, it needs to be multiply redundant and it needs power. Lots of power. Green power. Fortunately we have that and even better, the Tiwai aluminium smelter is apparently going to be coming available soon and it requires 610MW to function. That’s 14% of the national output, which makes for a scary conversation with government whenever the smelter’s owners talk about packing up and leaving.

Google’s combined data centres use 260MW as best I can fathom which leaves us in a very good position to take over production of the whole lot and do it entirely by green means. That’s quite important to a company like Google, but don’t forget Facebook, Apple, Twitter (those tweets don’t weigh much but by golly there are a lot of them) and all the rest. In fact this piece in GigaOM nails it quite nicely  so have a look at why North Carolina is the place these guys base their mega centres. Hint: power’s cheap there – cheap but dirty (61% of their electricity is from coal, 31% from nuclear).

How cheap? They pay between 5c and 6c per kilowatt hour, which is a really good price.

According to Brian Fallow in the Herald  Tiwai smelter pays 5c per kilowatt hour also, but don’t forget that’s New Zealand money, not US money, so let’s call it 4c per kilowatt hour in American.

Clearly that’s a good price, plus it’s almost all green which means a big gold sticker for any data centre using New Zealand.

So we’ve got electricity covered, if Kim gets his submarine fibre built we tick off another huge problem. There’s not much we can do about the latency between here and the US, so let’s ignore that thorny issue for now. We’re conveniently located a long way from everyone so let’s move along.

There’s the issue of land which as we know is hideously expensive in New Zealand. Unless it’s somewhere like Tiwai Point in which case it’s not. I think we can tick that box off, particularly if you consider the US pricing as your benchmark.

That leaves us with two major stumbling blocks. Firstly, the staffing situation.

We need to produce enough graduates (or import enough graduates) to staff this kind of monstrous facility and at the moment we’re not doing that. We don’t have any push to get secondary school students into the industry and we don’t have any long term plan to stop this incessant churning out of management students and encourage kids into the world of ICT.

Without these kids coming through at all levels, we’re just not going to get a data haven off the ground.

Because that’s what we’re talking about here – turning New Zealand into a data haven where anyone can store data safe in the knowledge that we treat bits as bits and that’s that. Nobody is going to trust us to look after their data if we’re willing to send in the Armed Offenders Squad in a chopper-fuelled moment of madness on the say so of some foreign national. It’s just not viable.

The final problem then, is the legal situation.

We would need to become the neutral ground, the data Switzerland if we’re to gain their trust. Publicly adhered to rules regarding data collection and retention. Privacy built in, access only under the strictest conditions.

But think of the upside – the PM talked about New Zealand becoming a financial hub and while I get where he was coming from, that’s old school stuff. Let’s become the home to all things data related instead. It turns our long-time weaknesses (distance to market, isolation, relatively small size) into strengths. Plus we’re New Zealand! Nobody’s going to invade us, we’re too far away and too friendly.

Latency aside, what’s the downside of getting this done? If we build the capacity we can attract a first mover in and if we have one, we can attract more.

Customers from banks to insurance companies to individuals to governments to movie studios (yes, you luddites, you) could make use of our clean power, our isolation, our cheap land and our fantastic environment to secure their precious bits and we would get a steady, reliable source of revenue for the country that’s sustainable in all meanings of the word.

Have I missed anything? Why won’t this work? Is anyone thinking about this?

Paul Brislen is the chief executive of Tuanz (the Teleccomunications Users Association).

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34 Comments & Questions

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This is pretty exciting as a prospect but I dont think the PM actually knows what the interweb is ...does he?

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And if he does, he probably thinks it's full of perverts and hackers.

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Finally someone who knows what they are talking about, as a computer science graduate - I approve of this.

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That's twice Paul B has stated there's no activity to get school kids into ICT this week. In actuality, the industry through the Institute of IT Professionals have a major project underway in our school (and I believe hundreds of others) to do just that, with presentations from IT people and other material coming through.

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Hi anonymous, what I've said is there's little effort going into getting kids engaged in this industry, IITP does a great job, but there's no push to produce graduates of any particular type from either the MoE or the government it'self.

It's time we started picking winners. Long past time, in my view.

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Actually what you said was "We don’t have any push to get secondary school students into the industry and we don’t have any long term plan to stop this incessant churning out of management students and encourage kids into the world of ICT.".

While I agree with your general sentiment, it's not correct to make that statement when a big chunk of the industry is doing just that through this project.

I do agree with what you're saying. I just think credit where credit's due. The Connect project has been a real eye-opener for my students.

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What claptrap. New Zealand is, and always will be, a primary sector producer and it's high time we got over that fact.

We need to encourage the farmers of New Zealand to do more with what we already have. We need to dump extremist views like this, and focus on what actually makes money for New Zealand: dairy produce.

We need to get rid of the RMA, stop blathering on about our clean and green image and let the farmers got on with earning more money for the country.

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"There's no money in search!"

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claptrap indeed. Data centres tend to be very costly to build but incredibly lucrative once built and there is a huge shortage of them in NZ.

Being data neutral could be an interesting play but I suspect that the US and many other trading partners would be most displeased and that would affect our primary goods trade... Nice concept though

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These are not mutually exclusive, data centres don't have to take up farmland. We can be a primary producer AND a data haven.

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There are a huge number of services which are latency agnostic. Kim Dotcoms previous venture being one of them. Dropbox, box.net, etc being others.

A storage centric datacenter in southland to replace the smelter would not only access HUGE amounts of green power, but would have the southern ocean as an infinite and cheap cooling resource - a large chunk of the power consumption of any data center. Mass online storage (dropbox, google drive, apple, etc) are still a few orders of magnitude more expensive than consumer prices for hard disks, so there is plenty of room to move.

And if we really do focus on latency agnostic applications like near-line data storage, then we don't even need to build a cable across the pacific - Australia, Singapore, etc would be fine.

On top of all of this it could be a great place to host google, amazon (as announced today), etc locally for low latency access to apps for Australians and New Zealanders.

I've been waiting a long time to hear someone take this prospect seriously - bravo.

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WTF!? The day that the internet can send one of my 3 dimensional widgets that I manufacture (and which the world wants), then I'll invest.

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Actually it can already, it's called 3D printing.

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Not unless it can print a machine 3 x 2m (wght 2 tonne), made of steel.

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The worlds changed. Even you who spend your day hitting stuff with a hammer will need a slide rule or computer.
I love cnc.

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If it's not possible now, it's not far off...

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don't break the bank buying hdds at duopoly prices....

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Insightful, logical, forward thinking and encouraging article from someone who clearly has the nouse - great reading.

C'mon NZ - lets get to it!!

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Data haven? Yeah, right.

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The primary concern not mentioned here is our susceptibility to earthquakes. So the benefits would have to outlay the additional concerns this would create.

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Somehow earthquakes never stopped Silicon Valley from getting to where it is now.

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As someone who's Chch-based datacentre remained in full operation throughout the quakes (kudos to the guys at Unleash.co.nz), I would've thought our proven ability to deal with seismic instability would be a big selling point!

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Sorry to say Paul that the action against Dotcom has just about ruined any trust people have in storing their files online in New Zealand.
So many businesses lost important data when megaupload was shut down...
There would have to be some rules put in place that such a service as you propose is protected from total shutdown on the whim of a Warner Bros film studio exec with good connections.

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You were supposed to throw your strawmen on the bonfire at Guy Fawkes.
Storing data in New Zealand, powering it with eco-marketing, and education has absolutely nothing to do with Kim Schmitz and his piracy ring. Not even a small African nation is willing to devalue itself in such a way.

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Think Big all over again but this time the idea comes from a criminal conspiracy who expect the NZ taxpayer to underwrite their new venture by perverting PPP.

If Kim is serious then why doesn't he build his data business in China where he can satisfy the NZ government's requirement that all broadband infrastructure must be accessible to the Chinese government, and, where IP theft as a business doesn't get challenged by the USA. That way Kim can meet the needs of current stakeholders and avoid needing investors to fund the expense of building cable.

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No reality in what you are saying. So you have moved from being Pacific Fibres unofficial PR person to Kim Dot Coms? I expect a little better approach from you than just throwing wild ideas in the air

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With TUANZ is trouble , is Paul angling for a ministerial role in a future Steven Joyce or Grant Robertson government?
Either way, he will need to get on a party list first.

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Bring it on- clean green data from "The land of the long white cloud"

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Good thinking;but after the way we treated Kim Dotcom why would anyone be interested in tackling our FBI directed Govt?
liberte

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Another great NBR conversation-starter diluted by anonymous conspiricists, talk-back lovers and bumper sticker slogans. Dear NBR - How about sacrificing comment quantity for quality? I thought this was a focus for the new management? Leave the playground noise to Fairfax and own the high value stuff.

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Latency is the big issue that militates against this getting off the ground with regard to volatile data. This issue is canvassed in an ISCR paper I co-authored in 2010 (shortly to be published in the international peer-reviewed literature) http://www.iscr.org.nz/f609,17429/The_Tyrant_Lives_v3_Nov21.pdf .

The average return trip time for a request to a Data Centre in North Carolina from any North American request (over 360 million potential users) in the order of 60 to 80ms. If that data is stored in NZ, the RTT would be 220 to 280 ms. Aggregated up over trillions of individual transactions, that leads to a substantial time cost to North American data users compared to their existing supply that would not be tolerated unless the price of the New Zealand service was several orders of magnitude lower than that currently offered by US providers. Our electricity would therefore have to be just about free to offset that disadvantage compared to the North Carolina competitors.

That is the reason why NZ has never become an international electronic digital data centre, despite the presence of low-priced electricity and very large amounts if unlit capacity on the current international cable. It is also why Iceland, too, struggles to disrupt the European data centre market, even though it is closer to most of Europe than NZ is to even Australia and has cheap, green geothermal-powered electricity and a cooler ambient temperature so lower absolute costs aside from other factors. The reality is, time still matters, and moving data further away from the majority of its users increases waiting time costs (something NZ has to consider when it comes to deployment of locally-stored data onto international clouds).

Industries based on digital data are no different to any others when it comes to regional competitive advantage (as per Michael Porter). NZ's distance from its trading partners is a disadvantage that must be overcome by a competitive advantage that is based upon unique or costly-to replicate factors if the new industry is to become sustainable. The freezer ship (to which digital data transport is often compared) could not have transformed NZ's economy if we did not already have a compelling competitive advantage from a benign climate that enabled the world's lowest-cost pastoral farming (cheap grass, abundant land at the time and no need to keep animals in barns over winter). It is not at all clear that electricity costing the same (or if we consider our own environmental impacts – eg, the costs of the Manapouri dam that fuels aluminium production, even more) to produce as in another country will underpin a similar economic transformation.

If there is a case for NZ to become a digital data repository, it is more likely in the storage of static (or very rarely-accessed archival) digital data, not the volatile data that powers economies and markets. Indeed, one could argue that NZ's isolation has in the past allowed it to be such a repository for the "digital data" that is the DNA of flora and fauna species (LSE economist Danny Quah defines DNA as a form of digital data). However, this business case requires a very different skill set – physical defense of our borders and not data processing capability.

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Just one question; a datacenter is a giant 'shed' containing computers. Once it's built, connected to fibre and operational, what jobs is it going to provide other than a couple of security guards?

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You forget computers do break down, need servicing, so does the air con, the power supply, light bulbs. A Starbucks will need to go in too.

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Data centres need only 50-100 staff to manage them, from what I've read, but they do lead to the mushroom effect - more businesses sprout up (do mushrooms sprout?) to support them and to get closer to the data. This has happened in North Carolina in the US where many of the mega data centres are based. They're now seeing developers, data miners and the like setting up shop in the region.

Bronwyn, the point about latency is well understood but as I said, these days it's far less a problem than it was three years ago and if we're talking about non-time critical storage (file lockers are one such example that have recently come to light) then there's still more than enough content to set up shop in New Zealand.

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