There needs to be more guarantee that each of the 25 Local Fibre Companies (LFCs) announced today won’t exercise monopoly power over its home town.

Communications and IT minister Steven Joyce is moving at pace on broadband, which on balance is a very good thing.

Nevertheless, Keallhauled is never satisfied and has identified several gaps in Mr Joyce’s strategy.

Chiefly, there’s the concern that there will be one Local Fibre Company (part-owned by coming state-owned investment vehicle the Crown Fibre Investment Company, or CFIC), and part by a private investor chosen by the LFC) in each of the 25 towns and cities that will be covered by the fibre-to-the-premises network.

The government responds that although each LFC might have a monopoly on “dark” or “raw” (wholesale, in English) fibre in its town, there will be competition at the retail level.

There will also be competition provided by Telecom’s copper network and, in some of the 25 areas, LFCs will overlap.

Tuanz chief executive Ernie Newman notes that the government has not ruled out some degree of price fixing and "there will be some contraint from other people's fibre". That is, in some areas LFCs will compete with the likes of CityLink or Vector (which, with their overlapping networks, can't both win an area's LFC).

"At the day's end, power lines companies are in an identical position - they are in theory licensed to print [money]. But because they dont have the tantalising opportunity to trade in downstream services the way traditional telcos did, the incentive is less." LFCs will be barred from selling retail fibre.

"It's not a perfect solution, but there isn't one and I reckon this is as good as we are going to get."

Speaking to NBR, Mr Joyce echoed Mr Newman's comments about Telecom copper and overlapping fibre, adding that cellular is an emerging alternative in some circumstances, too. 

"It will be in LFCs interests to sign as many customers as possible in the short and medium term," the minister says, "but if at the end of the day there's a need for regulatory or price controls, that's something we'll look at."

A shares, B shares
Another grizzle: a lot of detail is missing on how LFCs will be structured.

We know there will be “A shares” in each LFC (held by the state’s CFIC) and “B shares” held by the local private partner that the CFIC choses to co-invest with in any of the 25 areas.

But although running to 42 pages, the draft proposal on the MED’s website doesn’t say how many shares the CFIC will hold. A majority? A minority? It seems to be anywhere in between with the number pulled out of the air by each prospective private partner as they make their pitch.

Mr Joyce tells NBR he wants the CFIC's board to have flexibility on this issue and created its own "template" for LFC deals. But, when pushed, he says a 50/50 joint venture set-up is likely (the A shares would revert to normal shares when the state exits after 10 years).

Fast internet, slow build
Another moan: at the recent Commerce Commission conference, Mr Joyce said ground would be broken on the national fibre network this year.

But under the time table released today, the CFIC won’t choose among the first proposals from LFC wannabees until January next year.

And as Mr Joyce did concede at the Commission’s broadband conference, the first stage - getting broadband to schools, hospitals, business and “the first tranche of homes” will take up to six years, and all homes up to 10.

Given that Mr Joyce has identified broadband as an area where New Zealand is already losing competitiveness, that’s a mighty long time to wait.

Another issue: in Australia, Telstra has been shut out of the national broadband network tender (whose winner, after more than a year of chaos, will be announced next week). Telstra is now demanding tens of billions in interconnect fees back to its main fibre network, which the winning company will have to pay, or the government will have to mow down.

Telecom, which as a retail telco is barred from owning a majority stake in any LFC, could pull the same stunt here, albeit not at Telstra's histrionic level.

In the country
Lastly, rural areas - and, in fact every town outside of the table below - will be waiting be waiting for Mr Joyce to announce how, and when, they will get fast broadband. The minister says a separate plan is coming for those areas.

Mr Joyces says a separate initiative is on the way for rural and semi-rural areas. Unlike urban areas, the focus will be on backhaul, Mr Joyce says.