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InternetNZ gives thumbs up as Nats promise $100m more for rural broadband

InternetNZ has welcomed a move by ICT Minister Amy Adams to top up the six-year, $300 million Rural Broadband Initiative (RBI) with $100 million more in contestable funding if National is re-elected.

Ms Adams has also promised $50 million to boost mobile phone coverage in remote areas.

The policy would be funded by extending the Telecommunications Development Levy, currently due to expire in 2016, for another three years.

The Levy (successor to the old Kiwi Share Levy that used to go straight into Telecom's pocket) extracts $50 million a year from telecommunications companies, proportionate to their revenue (see Commerce Commission table right).

As the law stands, the levy will reduce to $10 million a year after 2016.

Funds from the levy go toward the RBI build, which is being carried out by contract winners Vodafone (building new cell towers fixed wireless broadband leg) and Chorus (fibre). Unlike the $1.35 billion the Crown is investing in various companies involved in the urban Ultrafast Broadband (UFB) rollout, the $300 million for the RBI (which includes both money from the levy and $48 million direct from the taxpayer) does not have to be paid back, and Chorus and Vodafone get to operate RBI infrastructure on a commercial basis (with the proviso they give all retailers equal access). 

The fact the new funding is contestable is a blow for Chorus, which had been feeding off rumours that National will put more money toward public-private broadband. 

And it's definitely a knock for Spark, which as our largest telco has been levied close to $20 million a year. If the industry tax is extended another three years, that's an extra $60 million or so it will have to pay the Crown.

It was not immediately clear if the $50 million for extending mobile services was contestable [UPDATE: it is], but Ms Adams did have specific ideas about where it should be spent.

“State Highway 6, which runs along a significant proportion of the West Coast, would be a top candidate for this fund. So would State Highway 73, the main route between Christchurch and the West Coast. Both are major tourist routes and improvements to mobile coverage would be welcome," the ICT Minister said in a statement.

Thumbs up from InternetNZ
InternetNZ CEO Jordan Carter said anything that helps our incredibly important rural sector get better connectivity will go some way towards building a better New Zealand through a better Internet.

"The RBI has seen some real gains in getting better Internet to rural New Zealand. It's very pleasing to see the growing focus by a wide range of political parties as they realise the potential and need for proposals that address the gap in connectivity. It shows that parties are treating ICT policies with the seriousness they deserve."

"Already we have seen Labour release a comprehensive ICT policy and now National is proposing some ambitious ideas.

"The idea of a contestable fund is great. It will allow communities to develop plans that really match their needs, rather than Wellington making all the decisions. Improving Internet accessibility is a core tenet of InternetNZ's and so anything that goes towards making New Zealand a 100% connected country receives our support," Mr Carter said.

Good, but not enough
The InternetNZ boss cautioned, "While $100 million would be a substantial investment, it would not likely be sufficient to provide all of rural New Zealand with high quality, high speed connectivity.

"We hope this proposal spurs additional plans for private sector investment, and that whatever government takes office after the election keeps a watching brief on the state of rural connectivity. It's important to the country that we ensure that there is not a significant digital divide between rural and urban New Zealand."

Labour on backfoot
Today's policy announcement has also put Labour on the backfoot. 

National has already comprehensively out-spent the previous Labour government on broadband; Labour's ICT policy promised new spending in the region of $21 million.

Again, David Cunliffe and Clare Curran find themselves out-Laboured by Steven Joyce and Amy Adams.

This afternoon, Ms Curran said, "Amy Adams must guarantee that the new fund announced today will be truly contestable and not just a slush fund for large telcos or a continuation of the existing failed Rural Broadband Initiative."

“Today’s new fund is an admission that the RBI has failed and under-shot the ambitions of New Zealanders.

“Broadband connections in rural New Zealand are poor by world standards. New Zealand needs the best rural broadband possible because of the importance of primary production."

It appears that the National may have woken up to the importance of community solutions – a solution that Labour has already embraced, Ms Curran said.

“This fund must be genuinely contestable and not a repeat of previous mistakes such as ultra-fast broadband where their conventional thinking resulted in relying on a big incumbent to deliver the best solutions for its bottom lines rather than for communities."

More by Chris Keall

Comments and questions

Hold on - am I missing something

The UFB rollout has been a disaster since day one and has never delivered on what was originally promised - all it has done is fund Chorus and Vodafone to put in infrastructure - for their commercial benefit

So having cell phone coverage on the West Coast of the Sth Island and on SH73 from Chch to Greymouth is nationally important - more important than a new international cable or more important than health education and crime prevention

I don't think so and nor will most normal Kiwi families

- West Coast-Tasman is a New Zealand parliamentary electorate. It is the largest general electorate by land area. As of 2011 it is held by Damien O'Connor MP.
- Selwyn is a current electorate in the House of Representatives of New Zealand, based around towns on the outskirts of Christchurch city. ... It was last re-established for the 2008 election and has since been held by Amy Adams
- why shouldn't these electorates have cell-phone coverage? how many other regions don't have it? there must be others. Ms Adams' remarks come from local knowledge, no doubt.

The towns and surrounding areas on the West Coast do have cell phone coverage already - so does the majority of the Selwyn electorate

What is the value or urgent necessity to have cell phone coverage for tourists when they are in Arthurs Pass or along the highway on the West Coast - aren't they there to view the extreme beauty of these areas - not to chat on the cell phone

You are suggesting the Government is providing election bribes - to woo votes

I thought the National Government was being fiscally prudent.

I think you must be confused as the UFB rollout has not been a "disaster" in fact quite the reverse especially in regional NZ where both residential and businesses are benefiting from finally having services better than what the major cities have. You only need to look at the results and case studies from Ultrafast Fibre, Enable and Chorus to see that it is making a difference to ordinary NZers.

RBI is a different ball game and whilst it may not be ideal I do know a few end users whom are using the service and love the fact that they are no longer enduring the pain of dial up speeds

There's more to it:

National will also create a $50 million fund to extend mobile coverage in the more remote parts of New Zealand, and fill black spots on main highways and in key tourist areas. “State Highway 6, which runs along a significant proportion of the West Coast, would be a top candidate for this fund. So would State Highway 73, the main route between Christchurch and the West Coast,” Adams adds. “Both are major tourist routes and improvements to mobile coverage would be welcome. “Mobile phone coverage is an essential form of connectivity, and can be even more important in our rural and remote towns, where it has benefits from a public safety perspective. “Boosting mobile phone coverage also has the ability to help grow productivity in our regions. “This is part of National’s programme to deliver world-class connectivity to drive innovation, create jobs and grow New Zealand’s economy.”

You can also see the benefits accruing to Wanganui from prioritising connectivity at Stuff/Wanganui Chronicle.

This Levy is not extracted from telecommunications companies. It is like a value-added tax in that it is collected and then passed on by companies but ultimately paid by end customers.

So thanks National - a tax hike for all telecommunications users to pay for some of Amy Adams' pet projects.

RBI is a joke. Does anyone actually know of a single business connected to Vodafone's mythical fixed wireless broadband solution?

Call it what it is. Corporate welfare to extend mobile phone coverage for one of the worlds biggest telcos. It has and never did have anything to resolving the broadband issues in rural NZ

The Rural Broadband Initiative and the Telecommunications Development Levy (both introduced in 2011) are a step up from the old Kiwishare Levy -- which also saw around $50 million a year extracted from the industry, only it went straight into Telecom's pocket to maintain voice and dial-up speed internet to so-called commercially non-viable customers in rural areas.

Having said that, the RBI has drawn flack from TrueNet (backed by Telecommunications Users Association analysis) for not improving rural broadband - or at least not fast enough, or in the right fashion (see Bad news for rural broadband). NBR also fields a steady stream of reader complaints about the cost of rural broadband.

My business will be next week

RBI in our experience as the ISP has been very good, never had a customer complain about speeds, Ive even had customers streaming netflix and hulu over it.

Consume or business customer? There is a massive difference between a consumer device being used to browse and stream and a business with several connections running hosted services and voice

Consumer running netflix and business running a VPN device behind the RBI modem to establish a VPN to corp office and running terminal services over it. No complaints when your in the middle of no where and you either have sat or RBI its kind of a no brainer.

Further, Vodafone just sent this reply on connection numbers:

"We can’t give you our retail numbers as they’re commercially sensitive; however, uptake of wireless broadband has been strong – with 6,064 connections at the end of Year 3 of the programme.

"We’re starting to see connections rapidly increase, with increased awareness – roughly twice as many – compared to three months ago.

"Additionally, a major benefit of the RBI programme is the expansion of mobile coverage to rural New Zealand.

"The 89 New RBI Towers in service (at end of Year 3) were used by more than 675,000 unique Vodafone users between 7 July 2014 and 7 August 2014 – that’s nearly a third of Vodafone’s mobile customer base utilising the service."

With 65% of New RBI towers also providing competing broadband service from other operators, the total rural user base relying on these new towers will be substantially higher.

I note that the Prime Minister commented that consumers were already paying for TDL. This is completely disingenuous. TDL is paid by 22 of the 150+ participants in the telco industry.

Wholesale liable parties have been unable to pass on the ~1% tax as their pricing is set either by the Commerce Commission or by Crown Fibre Holdings. Even those who aren't governed by "regulated pricing" have to meet the market so they do not explicitly recover TDL.

Retail liable parties have the same issue. If they pass this tax on they effectively price themselves above the other 130 market participants who don't have to pay the tax.

In other words the Prime Minister should have said that the shareholders of telecommunications companies who are liable parties are already paying for TDL so consumers don't have to worry.