Joyce: Crown company should control broadband network

In what looks like a victory for Vector (NZX: VCT) and others seeking a regional solution, Communications and IT minister Steven Joyce is proposing that a new, state-owned company should drive government spending on its proposed fibre-to-the-premises network, co-investing with a series of local players.

The proposed Crown Fibre Investment Co, or CFIC, would select a range of private investment partners to match the $1.5 billion chipped in by the government. The total cost of a fibre-to-the-premises network is estimated at $5 billion [UPDATE: Govt to hold stake in regional fibre companies].

The regional investors will in turn build and provide access to each leg of the national fibre network - under open access provisions dictated by the government.

The network will be broken into chunks covering 25 towns and cities (see list below), an arrangement that suits Vector, Kordia, TelstraClear and others who have lobbied for a regional-based solution - although, in theory, one provider could still win every single one of the 25 centres, Mr Joyce says.

Mr Joyce has rejected the only other viable option: a single network controlled by a single commerical player – which would almost certainly have had to have been Telecom (NZX: TEL).

Instead, there will only be one big fish: the CFIC.

The government will ensure that telcos, and other broadband providers, will have open access to the finished network.

Mr Joyce says the CFIC will operate an open, transparent and contestable process to select local partners with selection based on:

• The amount of additional fibre coverage being proposed

• The proposed capital structure

• Commercial viability of the proposal

• Consistency with government objectives

• Track-record of the partner

Mr Joyce says the open infrastructure model will ensure all telecommunications companies have the option of using the fibre.

“This model aims to provide government investment on favourable terms, while minimising government involvement in commercial operations which we believe the private sector is better positioned to direct.”

Interested parties have until April 27 to make submissions.

Broadband was a key plank in National’s election manifesto – in fact, one of its few specific promises – with the party promising $1.5 billion for a fibre optic network that would deliver superfast broadband to 75% of the country.

Mr Joyce has previously said that ground will be broken on the national broadband network this year.

But beyond the initial hustle, people will have to be patient. The time-frame to deliver fibre to schools, hospitals, businesses and “the first tranche of homes” is six years, with other homes to follow within 10 years.

Mr Joyce's announcement is a blow to Telecom, which after blowing cool on fibre with the Castalia report, expressed enthusiasm to "play a major role" in bringing fibre to every doorstep, even on a "no dollar profit" basis.

Conversely, it is a victory for lines company Vector, which has been an unequivocal proponent of laying fibre optic cable for broadband and pushed hard for a chunk of the government's funds.

The Telecommunications Users Association of NZ, representing 500 corporate telco customers, was quick to praise Mr Joyce's announcement:

“The Minister’s paper is at the top end of our expectations,” Tuanz chief Executive Ernie Newman said.

“It sets out a clear structure for the proposed partnerships, and will give potential partners in the private sector all the information they need to come up with regionally-based proposals. Excellent progress is being made.

“It also appears to be sector-neutral – opening the way for the widest range of potential co-investors including telecommunications companies, power lines companies, or regional consortia. This is important as a greater diversity of investors are showing their hands and broadening the range of innovative, cost-effective solutions."

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11 Comments & Questions

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Is there a list of the 25 towns/cities that will benefit from this investment?

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Yes the list is in the full document located at http://www.med.govt.nz/upload/Final broadband initiative consultation document - 31 March 2009.pdf on page 23.

The list is: Auckland, Christchurch, Wellington, Hamilton Zone, Napier and Hastings, Dunedin, Tauranga, Palmerston North and Fielding, New Plymouth and Hawera, Kapiti and Levin, Nelson, Rotorua, Whangarei, Invercargill, Wanganui (note the H is missing in the document :) ), Gisborne, Cambridge and TA, Blenheim, Timaru, Taupo, Masterton, Whakatane, Ashburton, Tokorua and Oamaru.

Listed in decending order of population based on the 2006 Census.

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The sooner we get this initiative going the better!

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the bottleneck is not the last mile it's the first mile - the international connection. Where's the alternative to the Telecom owned/dominated Southern Cross Cable? One good earthquake in Auckland and we're cut off completely. Spend the money where it's needed.

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Pointless having a fast NZ fibre network if Telecom is still has a monopoly on international traffic. I guess we can now share holiday photos with people in Invercargil at lighting speeds!

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The govt is not proposing an SOE, but a COE, there's a big difference in terms of commercial goals.

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Don't worry about the international connection just yet - a better national infrastructure will create demand for more international bandwidth.
Also, remember that Kordia is laying a new fibre to New Zealand (Google Kordia PIPE).

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It's my understanding that Kordia is still looking for funding

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When will kordia actually have the 200 million dollars to lay the fibre to Australia? The Government has been quiet on this matter. Will we get uncapped data when kordia get their fibre in or will we be using up our international data cap in 10 minutes with this new fibre network?

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Just read on the Herald that the 25 regions I thought the country was being split up into, is in fact, 25 cities/towns.
The stupid thing is that the cities are already well underway in rolling out fibre, there is a business case for it there.
The towns however, where there is less business case, need government assistance, and anywhere smaller than Omaru won't get it.
We need legislation that encourages/requires councils to put in fibre whenever they are digging up roads.

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A table has been added to the bottom of the story.

Note Mr Joyce says that, in theory, one provider could win all 25 centres.

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