Telecom makes left-field bid for $1.5b govt broadband

The timing is (cough) not ideal, but Telecom has confirmed today that it will bid to participate in the government’s $1.5 billion fibre-to-the-home project, placing both compliant and non-compliant proposals before the minister.

Bids close for the project today (see other contenders below).

The state-owned Crown Fibre Holdings will now sift through an unknown number of proposals from potential investment partners in up to 33 public-private Local Fibre Companies.

The government has set no time-frame for picking winners.

Restraints on Telecom
The terms of the ultrafast broadband project forbid a telco with both wholesale and retail operations (that is, Telecom, Vodafone or TelstraClear) from holding a majority stake in a Local Fibre Company.

It is thus unclear how Telecom could bid without a concomitant proposal to spin off its Chorus division - something chief executive Paul Reynolds has repeatedly opposed.

And, until Crown Fibre Holdings and its minister, Steven Joyce, has mulled Telecom’s confidential bids, it seems we’re unlikely to find out.

In a brief statement offering few hard details, Telecom says its alternative bid will contain a proposal to build on Chorus division’s roadside fibre cabinet rollout, which is already underway (bringing fibre to neighbourhoods and many streets, if not to the curb or door).

Telecom’s statement (in full, below) also indicates sees a roll for itself in interconnecting the up to 33 local fibre companies around New Zealand. The skills and accomplishments of Chorus are highlighted - as they were when the company made its previous twin alternative proposal to Mr Joyce - both of which involved Chorus taking charge of a single national network.

It indicates Telecom is ready to work with other wholesale and retail players, but does not specify whether the company itself has bid to invest in one or more of the 33 proposed local fibre company areas.

Other contenders
Lines company Vector has already confirmed it will bid for Auckland, and TeamTalk (owner of the capital's CityLink fibre loop) that it will pitch for the Wellington Local Fibre Company.

And while Vector may well go it alone (the company was also mulling a shared bid for Wellington last time NBR touched base), a number of other lines and power companies in the Regional Fibre Group are expected to bid for regions as consortia.

As predicted in the December 4 issue of NBR, Waikato’s WEL Networks has teamed with Hamilton fibre optic network provider Velocity.

The pair are joined by Waipa Networks and Hamilton Fibre Network in a bid for the Waikato Local Fibre Company.

Telecom (NZX: TEL) shares were down two cents to $2.38 in mid-morning trading.

RAW DATA: Telecom's statement:
Telecom will today submit its response to the Invitation to Participate in providing Ultra-Fast Broadband (UFB) for New Zealand. Telecom will provide a fully compliant Preferred Commercial Model proposal, and an Alternative Commercial Model proposal. The alternative proposal focuses on delivering a national network using Telecom’s fibre-to-the-node (FTTN) programme as the logical springboard for the Government’s vision of fibre-to-the-home (FTTH).

“Telecom will submit a powerful proposition that will ensure the fast delivery of a national fibre network with none of the Government’s money being wasted through duplicating what is already built,” said Paul Reynolds, CEO, Telecom. “It makes the maximum use of the fibre already in the ground, assures high quality and guaranteed delivery, and the absolute minimum of waste. 

“Also, a national approach ensures individual regions benefit from a consistently engineered and interconnected network. Quality and flexibility are at the core of the network we propose to build. The network will last well into the future and be flexible enough to adapt – at minimal cost - to customer demand and new technologies as they emerge.

“Telecom’s access network business, Chorus, has many years of experience and a superior engineering skill and knowledge base. The Chorus-led FTTN project is an ongoing example of our decades of experience in building and operating national infrastructure. This project already extends the fibre footprint beyond the business districts of every city to include the majority of small businesses and within two kilometres of most residential homes. Building the FTTN network is a public and legally binding commitment which we have honoured by meeting all milestones. 

“We have designed our proposal from the ground up to meet the needs of all access seekers. This is because we understand that it will not just be Telecom, but also other wholesalers and retailers, who will drive the demand for fibre to the home. Make no mistake; this will be a future-proofed, built to international standards, ‘open to all comers’ network,” he said.

“In addition to the two proposals Telecom is submitting, Telecom is open to discussing other alternative proposals which achieve the Government’s objective, avoid unnecessary waste and align the incentives and investment plans of both the Government and Telecom,” said Paul Reynolds.