Vodafone, TelstraClear, farmers, choose sides in fibre war

Among 2500 pages of Crown fibre submissions, Vodafone shares Telecom’s dislike of local fibre companies; TelstraClear sees backhaul investment potential; power line companies back Steven Joyce; and farmers line up with Telecom. Welcome to the frontlines of the new fibre war.

Communications and IT Minister Steven Joyce –or at least, MED officials on his behalf – are now racing to summarise 52 submissions on the government’s Crown fibre investment discussion document, which called for responses to its vision of a Crown fibre investment company, which in turn would appoint private partners for, and co-invest in, 25 local fibre companies.

Midday yesterday, Telecom rejected the local fibre company proposal, putting forward alternatives centering on its Chorus division taking charge of a single national build.

Later in the day, a wider variety of views emerged:

TelstraClear: connecting the 25 islands
The 100% Telstra-owned subsidiary’s submission says TelstraClear sees a lot of potential for investing in backhaul on the back of the local fibre company (LFC) concept.

This could be crucial.

Visiting Auckland last week, managers from Sweden telco infrastructure maker Ericsson warned Mr Joyce against the LFC set-up creating “25 hobby networks” or “25 fibre islands” with strangled links between them.

As a retail telco, TelstraClear is prohibited from a majority stake in an LFC.
But if it invests in backhaul fibre to connect the “25 fibre islands,” that will play a major role in moving things along.

Using generally guarded language, TelstraClear says it sees itself as both a competitor to and a customer LFCs, depending on the situation.

Bottom line: TelstraClear is on board and, through its cash-rich Aussie parent, has deep pockets.

A crucial win for Mr Joyce.

Vodafone: Crown fibre good; local fibre companies bad; a jab at the TSO
Like TelstraClear, Vodafone is a retail telco and thus barred from a majority stake in an LFC.

The carrier gives its thumbs up for the creation of a Crown Fibre Investment Company (“The CFIC construct looks to be an appropriate governance model for managing government participation”.)

But it goes on to share Telecom’s concern about the creation of up to 25 local fibre companies.

Vodafone says the LFC concept undermines potential investment with its lack of scale (proponents say its regional focus will bring in non-traditional telco investors).

Like others, Vodafone says the “fragmented” LFC model could also lead to technical challenges if LFCs follow different technology strategies.

However, unlike Telecom, Vodafone does not propose that Mr Joyce bin his regional vision, or his equally central concept that one operator should not control both wholesale and retail fibre operations.

It does say that the rules on who can invest in a local fibre company should be revised, and that a lot more information is needed on how wholesale and retail roles will be delivered.

There’s a lot of language, both veiled and unveiled, suggesting that the government keep Telecom on a leash; e.g. “This initiative requires clarity around the participation of existing infrastructure owners, with particular reference to Telecom.”

Intriguingly, Vodafone also raises (wired and wireless) backhaul as an issue but in the context of the 25% of rural customers who would not be covered by Mr Joyce’s plan to connect 75% of the population within 10 years.

Vodafone, which hates writing a $15-20 million cheque to Telecom each year under the TSO (formerly the Kiwishare) underwriting Telecom’s service to “commercially nonviable” rural customers, has long maintained it could do the job better, and cheaper itself, if allowed by the government.

Its submission’s focus on extending backhaul to rural areas (as Mr Joyce is already considering for a separate $48 million initiative) would make the TSO redundant.

Federated Farmers: Telecom wins a key political ally
Federated Farmers has released a statement strongly backing Telecom’s submission, which blithely dispenses with Mr Joyce’s vision of 25 local fibre companies in favour of two options, both involving Chorus building and managing a national network.

The reason: both Telecom Chorus options involve fibre being piped to all 2600 schools in the country within two and a half years.

That includes rural schools.

Federated Farmers says it does not expect the government, or any telco, to run “fibre to every woolshed.”

But nor does it think Mr Joyce’s proposed $48 million public fund to subsidise wired and wireless rural backhaul will give farmers enough of a boost.

But if Chorus is runs fibre to every school, “This achieves vital geographic coverage for rural New Zealand to leverage off. These high speed nodes will enable community-scale solutions to emerge. This could be broadband delivered to farms and homes by way of point to point fibre, fibre to wireless radio or fibre to 3G networks.”

Telecom chief executive Paul Reynolds has one an important political ally here.

Power line companies: LFCs can deliver consistent service
Wary that Telecom (and Vodafone and others) are attacking the 25 local fibre company model as technologically fragmentary, nine power line companies and fibre-specialist companies (with the notable exception of Citylink) have ganged together to form a new lobby called the Regional Fibre Group.

In its group submission, the new body says its members have both telco and fibre-laying experience (Vector, which instigated the group, counts Vodafone among its wholesale customers), and that will ensure cooperation and common technical standards between LFCs (more here).