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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."