Retail telcos will be barred from owning more than 50% of one of the government’s proposed 25 Local Fibre Companies (LFCs), the public-private companies that would bring fibre-to-the-premises under Steve Joyce’s $1.5 billion broadband plan.

“Retail telcos cannot be a majority partner in an LFC ,” says Forsyth Barr senior analyst Guy Hallwright, “so that is going to act as a significant constraint on Telecom’s plans”.

In theory, the restriction also applies to TelstraClear and Vodafone. But, unlike Telecom, neither telco has made a public tilt at building Mr Joyce’s proposed network.

At least one option is still available to Telecom. It could still bid as a minority partner in a consortium for one or all of the 25 towns and cities there LFCs will be established.

The draft proposal placed on the MED’s website today also has restrictions on an LFC shareholder being involved in retail broadband; a restriction meant to underline the government’s intention that LFCs revolve around the provision of “dark” or “raw fibre”, feeding wholesale fast internet connections to retailers.

Further, no private company will be able to own 100% of any LFC.

For at least the first 10 years of its life, each LFC must allocate an unspecified number of “A shares” to the proposed Crown Fibre Investment Company CFIC).

It will be up to each private partner, as they pitch for each region to propose how many "A shares" are held by the state.

After 10 years, the A shares will revert to normal shares (read more aobut LFC structure here).

The government does see a direct role for Telecom, though possibly not the one the telco envisioned for itself: helping to provide competition within each of the 25 fibre fiefdoms (overlap between the 25 areas is also supposed to spur competition).

Telecom released a brief, anodyne statement this afternoon, with chief executive Paul Reynolds saying, “We now look forward to working with government funding to complement the government’s plans to take fast broadband even further, including to those areas that currently are not commercially viable."

Spokesman Mark Watts said Telecom is still digesting the full draft proposal, and will be making a submission to the goverment.

Submissions are due April 27, with the government due to make its first decisions on RFPs in January next year.