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Government finalises $1.5b fibre-to-the-home proposal

Communications Minister Steven Joyce released details of the government’s $1.5 billion fibre-to-the-home proposal today.

Telecom's (NZX: TEL) alternative proposal for a single national network has been rebuffed, as has Vodafone's for a co-operative FibreCo with the government and three largest telcos holding quarter shares.

However, the minister has confirmed his previous hints that multiple regions (which have now been expanded from 25 to 33) could be won by a single player.

Telecom's offer to wire every hospital and school for fibre within two years - as a kind of bonus provision if its Chorus division was given the task of building a single national network - was "not sufficiently attractive to justify moving away from a contestable regionally-based process," said Mr Joyce.

The highlights of the government's revised proposal to bring broadband to 75% of the population within 10 years include:

· An open, transparent partner selection process, which will be initiated in the next month.

· Government investment directed to an open access, wholesale-only, passive fibre network infrastructure.

· A new Crown-owned investment company (“Crown Fibre Holdings”), which will be operational by October, to carry out the government’s partner selection process and manage the government’s investment in fibre networks.

· Crown Fibre Holdings and each partner establishing a commercial vehicle, a “Local Fibre Company” (LFC), to deploy fibre network infrastructure and provide access to dark fibre products and, optionally, certain active wholesale Layer 2 services.

· Provision for national and regionally-focused proposals, as well as consortium and proposals aggregating any combination of LFC regions.

· Independence, equivalence and transparency requirements for LFCs.

· Expansion to 33 candidate coverage areas based on the largest urban areas (by population in 2021).

New focus on international bottleneck
In the proposal document released today, the minister also flags that "The capacity and reliability of New Zealand’s international data connectivity will become increasingly important as LFCs’ [local fibre companies'] networks are deployed over the course of the UFB Initiative."

The Commerce Commission recently identified slow international data as a roadblock to better domestic broadband performance, with testings showing that overseas pages take twice as long to load as those hosted locally - even with our current copper-dominated networks.

However, it doesn't seem as if our sole connection to the outside world, the 50% Telecom-owned Southern Cross Cable, is in any immediate danger of regulation, or competion from a crown-backed competitor. The document continues:

"The government has been closely monitoring market-led developments for additional international data connectivity, and has been holding discussions with a
number of relevant market participants.

"The government is encouraged by the developments in this space and does not
consider that additional measures are desirable or necessary at this time."

Major recent developments have included Southern Cross announcing plans for a possible second cable, and Spin Networks - backed, ironically, by the French government - claiming it is finalising plans to lay transtasman fibre. And SOE Kordia is also continuing its campaign to mount a business case that would allow it to ally with Australia's Pipe Networks.

Backhaul - not a problem
A consultation paper on backhaul between the 33 regions is still pending. However, today's document says that "after investigation" the MED has that backhaul, serviced nationwide by four different networks, is not a "material problem" in most areas. Whangerei, New Plymouth, Gisborne, Nelson, Greymouth, Timaru, Queenstown, Oamaru, Dunedin and Invercargill are flagged for futher investigation, however.

Opponents of the regional approach had flagged backhaul as a potential problem, including the issue of technically coordinating disparate networks that could be built to different standards. The Regional Fibre Group - a coalition of power companies, lines companies and other non-traditional broadband players, drafted in Ericsson and Cisco to help advise it on common standards.

As they did it across the ditch
Sydney-based market analyst Paul Budde told NBR: "It looks very much like the Australian model, which has been applauded around the world."

Mr Budde liked the new emphasis on "dark fibre"; that is, wholesale connections (if you don't know your lit fibre from your unlit, school up here).

"I think it is a great way of addressing this development as you clearly create the right environment to move a way from a telco-centric infrastructure approach. This structure allows for a trans-sector approach - other sectors, health, education, media, energy can all buy separately from the wholesale company and built their own products independent from each other, with no gateway keeper). In order to make this work the government will now have to make firm commitment that sectors such as health care and applications such as smart grids will use this infrastructure. That is essential to make the business plan work. This is not just about high-speed internet."

Biggest change since Telecom was privatised
“This ushers in the biggest and most fundamental change to telecommunications in New Zealand since the privatisation of Telecom 20 years ago,” said Telecommunications Users Association chief executive Ernie Newman in a statement broadly supporting the government's announcement.

Mr Newman also drew positive parallels with Australia:

“There will be important lessons to be learned from Australia, both in the infrastructure deployment and the usage. It is interesting that New Zealand and Australia are on parallel tracks and are ahead of many western countries, a fact that reflects the added value of connectivity to countries that suffer inherently from geographic isolation."

The final proposal struck a good balance between the need of investors for predictable regulation and the desire of customers for real market choice, said the Tuanz boss.

“Tuanz is especially pleased with the approach to balancing the need of investors for a predictable regulatory regime, with the desire of users for a competitive market with real choice and value. By dealing up front with competition issues related to fibre investment, and incorporating them in the design of the commercial structures, it should be possible to minimize the regulatory intervention that has been an unfortunate but necessary feature of the copper and mobile markets.

However, Tuanz is still hoping that the government will reveal further plans to boost online content and services, which would in turn ensure quick uptake of the new, superfast network.

"The real benefits of this investment will come through in health, education, business productivity, telework, government services, security, environmental management and a host of other components of people’s economic and social well-being. We need to get all these sectors working together so that the maximum benefit is derived as quickly as possible after the connectivity comes on stream," said Mr Newman.

More by Chris Keall and Kelly Gregor

Comments and questions
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Fantastic so we can all pirate music and surf adult content faster from home soon. Wouldn't the astronomically large amounts of money about to be invested in fibre builds be better spent on health, education and crime?

Faster data wont make us any wealthier, it'll just allow us to consume information faster (potentially speeding up offshore speding). What we need before we become a third world failed state is increased emphasis on science and tech in the education sector, R&D funding/favourable taxation and a cultural shift to putting a positive light on sci-tech.

Selling bits of dead animals and trees to the world isnt a sound strategy for growth. Uneducated people cost more from a welfare perspective and our current trajectory puts NZ on a downward spiral. Burning vast piles of cash on pointless fibre builds to score political points simply isnt going to change this.

agreed

Broadband is the future, almost everything we will use, and i mean everything, will be reliant on the internet in the future.

Look how far we have come in the last 5 years... It is so naive to think that this isnt a worthwhile spend, and that it wont make a difference to each of our lives.

@MB I am actually probably younger than you are but have done a serious amount of research into this situation.

I am not saying broadband isnt important and NZ already has one of the higest rates of broadband penetration per head of population in the world.

The Internet may play an important role in our future but saying that everything will be reliant on the internet is groslly over simplifying things.

The future is driven by ideas and will increasingly be about the power of intellectual capital. Unfortunately NZ is abysmally placed to play a role in intellectual property with most scientists,engineers and other skileld knowledge workers having to work overseas simply because there is no work in NZ for them.

NZ will never out manufacture the big Asian economies, but we can out design them and generate wealth through the ownership of concepts and ideas. This ties in with our clean green image and compliments our existing economy which is dominated by primary industries.

Broadband may help us communicate ideas but a lack of investment in science, engineering now wont see us doing much beyond being a nation of consumers reliant on wool, dairy and wood commodity prices in the future.

You can't talk about more R&D funding and sci-tech without talking about broaband. Our countries isolation requires immediatea and quality access to the outside world.

Quality international comms lays the platform for quality research. With this plan, it's not a case of either R&D or Fibre, but most hopefully, both! (one is pointless without the other). Buy you have to start on something.. I say more money for both to make real gains.

@build it - whilst I can see where you are coming from, your argument is somewhat flawed. I am a heavy broadband user and there's nothing I'm already doing that I need fibre for. Faster fibre to the home may be nice to have but certainly isnt a "must have" when viewed against the need to build a robust knowledge economy.

Having faster broadband to the home will most likely lead to higher media consumption/piracy etc, but how it will drive the economy is at best questionable.

The main centres where most knowledge workers work is already heading towards a broadband oversupply situation so more broadband there doesnt stand to benefit anyone at all.

The OECD and network equipment manufacturers have created a global contest that is causing NZ politicians to take their eyes off the real prize. We need to stop breeding a nation of ignoramouses and focus on developing a country with more smarts. Fibre to the home wont do this and I'd be willing to wager that it'll rank right up there with think big in 20 years time

Agreed - lets build a knowledge economy based on SciTechEdu investment. But we're to export that knowledge though right? But um we can't export (most) SciTech on ships and stuff can we? Oh yeah, we need fast internet to do that. Just ask all of the tech companies here struggling to compete globally because of our shoddy internet infrastructure (I'm one of them). If the side effect of fibre to home is more warez and pron I don't care - it'll allow me to run my (non ware/pron) business at a globally competitive level.

Luddite indeed.

@ Bob - You seem to be assuming we dont have the means to communicate ideas digitally now yet we have extensive broadband penetration already and multiple internatonal links via satellite and cable in place or about to be built.

Surely you would stand to benefit from a more favourable R&D taxation situation and acess to better venture capital funding? Then there's the not too small matter of quality graduates too. Fast broadband is incredibly useful but is useless when the current situation limits tech companies ability to grow and survive.

If we had decent internet, we maybe able to make efficiencies in all the government organisations, by processing data online, and getting rid of paper shufflers. Have you ever gone to hospital and seen how many times the same information is written down? The big cost of statistics and the IRD already has most of the answers? etc etc
How do you like having to keep your computer safe and up to date- with good internet you will only need access to your browser- everything else can be done on the web

@K1 - Greater efficiencies in government organisations will not be driven by fibre to the home - All government agencies have access to business grade data pipes if they need them already.

I think you've confused Using IT to "get rid of paper shufflers" with fibre to the home which will do little to nothing to reduce governmental red tape.

For supplying information to the government via web based forms, existing groadband is plenty fast. Perhaps some of the vast pile of cash being burnt building fibre to the home could instead be used to deliver better government IT systems?

Congruent symbiosis of human kind requires adjacent proximity to collective will. This proposal is acceptable. Resistance is futile!

Selling bits of dead animals and trees to the world isnt a sound strategy.

Yeah food is just a fad.

@ Anonymous - now thats just being obtuse. No one said bits of dead animal or trees shoudl stop but the implication was more that NZ has virtually all of its eggs in the primary goods basket leaving it heavily exposed from an economic standpoint.

where is the economic benefit ? will new plymouth become the call centre of the south pacific ( no) will india with a very fast connection to NZ take more IT apps off our servers ( yes) will a cow be milked by fibre optics ? ( no) will a surgeon undertake delicate neurosurgery over the net in Greymouth from his Wellington Public Hosipital Rooms and will the DHB be charged less than if the surgeon was there in person ( no - his standard of living must remain unaltered) will NZ catch Australias GDP with these innovations ( no - because mineral wealth doesnt rely on fibre ) will farmers be able to subscribe to farmers weakly and get it a nanosecond later - no they are too miserable to buy bifocals and put it in the spam folder. leave it to the private sector otherwise nationalise telecom and be done with it.

how many ordinary houses will this expensive f/o cable pass to get to your place?50 or so?and are a large percentage of these 50gonna take up this massive bandwidth flowing imperiously past their letter box?remembering the companies are gonna want to claw back their expenses rapidly to keep their shareholders,govt or otherwise smiling.be satisfied with the bandwidth in the office .it has to be massively more"carbon friendly".our rapidly aging population cant afford it!

Who is going to install all this new fibre, cabinets, DWDM's and all the other equipment needed for this to happen. At the moment telecoms techs all across the country are in the fight of their lives for decent pay conditions. If this fight is lost then a mahority of these techs wont be there to install it. Sure they arent the only ones capable of this work but they make up a majority of it and a majority of the experience to train new comers into the industry. Lose these guys and there will be a 1.5 billion dollar mess.!!!

Agree with Stevo. Many Techs have had their lives turned upside down with Telecom NZ endorsing Visionstreams business model. A great deal are now leaving the industry and taking their experience with them. The government will be well advised to keep TNZ as far away from this project as possible.

Agreed, the majority of experienced engineers have had their notice and handed their vans back and are now on WINZ books. Telecoms contractors Downer and Transfield have given notice to their engineers
. Transfield are laying off over 150 nationwide as the flow of work from Telecom cant be guaranteed and the rates Telecom pay these contractors have decreased. Labour costs have been driven down once more. Visionstream the newly invited Australian contractor which are really only labour brokers and are not a skilled base company are here on Telecoms request causing major disruptions to the network.
The skills shortage for this fibre roll-out is immense. Unless the engineers are given a fair deal I can see major problems undertaking the roll-out.
Unless of course Steven Joyce might like to put on a pair of over-alls and have a go.

1.5 billion for fibre to the home. They are joking right?
What new sub-division are they planning to do this at? The costs of implementing this would I suggest cost 10 times this amount. Telecom NZ certainly could not manage it at the moment. They are locked in a crippling dispute with their workforce and have shown no regard for maintenance of their existing copper or fibre networks for many years. The way highly experienced people are exiting the telecommunications industry at present would also mean the new fibres would truly be dark as the engineers are not installing or commissioning the equipment on the end.
Best keep Telecom NZ out of the picture until they sort out their own mess.

Ten years ago, there were just over four million broadband subscribers world wide. In 2009, more than 400 million people are connected to high-speed internet.

see for yourself

http://news.bbc.co.uk/2/hi/technology/8255695.stm

New Zealand is already ten years behind.

Korea has already built and a Gigabit Fibre network (10x as fast as what is proposed for New Zealand) and we are going to be waiting ten years before we see 100meg.

WHAT A JOKE

This 100meg network should have been built ten years ago.

The new network should be Gigabit and built NOW.

@postman Pat - Did you actually look at the penetration figures in the BBC story? NZ was right up there with most of the world.

Korea has a massive science, engineering, design and biotech based economy with huge R&D resources - they are probably going to see a solid return on invesment on fibre to the home.

In New Zealand where the R&D economy is all but dying and ignored by the government giving households faster broadband to pirtate more music isnt going to deliver any sort of real return at all.

@ Anonymous
Current top countries by download speed

# 1. Republic of Korea @ 21.35 Mb/s
# 2. Japan @ 15.86 Mb/s
# 3. Aland Islands @ 15.26 Mb/s
# 4. Lithuania @ 13.27 Mb/s
# 5. Sweden @ 13.14 Mb/s
# 6. Latvia @ 13.07 Mb/s
# 7. Romania @ 12.62 Mb/s
# 8. Netherlands @ 12.01 Mb/s
# 9. Bulgaria @ 11.86 Mb/s
# 10.Republic of Moldova, @ 9.80 Mb/s

And well down the list is New Zealand at number 48, with a average download speed of just 4.11 Mb/s. if your lucky.

So why does New Zealand need this network you ask. Simple it gives every household access to the worlds largest library and educational resource allowing NZ to build a knowledge based economy ( think of it as the foundation).

Back @postman pat - You're confusing speed with utility. Aside from downloading bootleg movies and music most educational stuff can be done using todays broadband speeds.

Having spent some time in Korea I can say that yes Korean broadband is blindingly fast, but most Koreans barely use a fracrtion of its speed. We need more money invested in schools not giving kiwis the ability to access adult content in HD.

I Lol'd - here is a govt rolling out a BBand Dark Firbre GPON advising the largest carrioers that they will have to divest their reatil operations to utilise the network.

The realioty is that these are the only companie who will justify or truly leverage the network by proviidng services to customers.

The naivety of the govt and their adviseors is starting to show...

" build it and they will come" yeah right...

Telecom, Voda, TClear all have actual customers and networks - established with what is known as "captive customers"

To exclude companies from participating make no sense - the reality is this is a utility service - the people of NZ want their investment used - to get an ROI - utilisation is key - set the price make it available commercially and get out of the road.

Anyone who wnats to buy what is known as accessm can then buy it.

This is why governments should not play in this space - in reality all they can offer up is the public purse and a set of rules for controlling that investment ot get a great ROI for the taxpaye.

These decisions wiil not allow that to happen - however given that we have non commercial people involved such as lawyers running the CFIC what did we expect......

All we are setting up is a company that offers wholesale services - without the scle of the big telcos and their customers the 2nd and 3rd tier players will have to compete against these giants - they will not get and do not have the cpaital investment required to provide a meaningful service.

(disclosure - I am not affiliated to any telco and am not employed by any telco or govt department)

Well, we have seen everything from this National led government. Holland-style union bashing, Holyoake -style inclusion and moderation, Richardson/Shipley -style beneficiary bashing, Bolger-style racial conciliation, and now, Muldoon-style statism, tarted up for the 21st century (it might have lipstick, but its still a pig(gy).) Not even those protrayed as the spiritual heirs of Stalin and Lenin themselves, Clark and Cullen, would have pulled something like this off (and National would be screaming blue bloody murder if they did).

Hear that people? Its the sound of Rob himself, chuckling in his grave.

(this is actually good idea, BTW)

up in whangarei northpower are stringing fibre on the power line network.most every place has the power on and it doesnt take very long to run fibre down the power lines.1oombs.go check out there website and then tell us what you want.once the fibre is run to the premise it should have the potential to be very cheap if we run it as a trust.we get credits for our power about twice a year because its a trust.it doesnt cost a lot to send data down a fibre apart from the initial set up and the standard faults /maintenance of the infrastructure.its only light .high speed fibre offers a lot of options and if we are going to do this high speed broadband isn't it better that we future proof it by setting very high standards first off.i watched a northpower line crew come and do a street before lunch time.100mbs fibre ready to run into every building.it was right outside the main telecom exchange in whangarei,and they are are in with telstra clear,so there is an independently owned network plus a telco selling retail products.and i thought goodbye telecom.

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