Coalition of small ISPs confirm bids for $150m Rural Broadband Initiative 2
A coalition small rural ISPs called WISPA has confirmed its members have (acting as individuals) put in regional bids for the government’s $150 million Rural Broadband Initiative 2 tender — $100 million of which will go to improving the internet and $50 million to fixing cellphone blackspots in remote areas.
The 30 members of WISPA (the Wireless Internet Service Providers Association) are seeking up to $2 million each.
The $300 million RBI 1 was won by a joint bid by Vodafone and the company formerly known as Telecom. Vodafone handled new and upgraded rural cell towers, while the spun-off Chorus took care of landline upgrades and new fibre.
The big boys are expected to confirm bids for RBI 2, as well, joined by Spark which will be elbowing for a slice of the action
Is the government serious about smaller providers?
For the second round of the urban Ultrafast Broadband (UFB) rollout, the government also talked up alternative providers, but ultimately awarded nearly all the top-up funding to Chorus.
Will RBI 2 also be a letdown?
WISPA head Chris O’Connell argues the WISPA minnows do stand a chance against the heavy-duty competition.
He notes that (then) communications minister Amy Adams specifically invited small ISPs to take part when a request-for-proposals was put out last year.
And it wasn’t just talk. The RFP included several provisions to encourage small ISPs.
It made them exempt from the open access rules that govern bids from the larger Chorus, Spark and Vodafone (that is, they must provide wholesale access to other network providers for any infrastructure they build with RBI money). Small ISPs will also be subject to lighter reporting requirements, should they win a slice of RBI 2 funding.
Mr O’Connell maintains it makes commercial sense to pick small wireless internet providers, who today have about 40,000 customers between them.
“These guys are able to be economic at a scale the large operators simply can’t match,” he says.
“So they can deploy quite often small sites; a tower that might be serving 10 or 15 customers for $5000. Under the RBI 1 initiative, the average cost of Vodafone’s cell towers was $500,000.”
It’s worth noting here that Vodafone NZ chief executive Russell Stanners has said his company is open to building smaller towers or even deploying tiny femtocells or working with smaller providers who do.
Mr O’Connell says WISPA members’ second major advantage is that “they are hyper local.”
“They really understand their region and their community well; in fact, their networks have grown by being in touch with their communities; they’ve managed to build sites where their communities need them. They are the ones who’ve been responsive for local broadband when it hasn’t fit in with the plans of the major operators,” he says.
If you have a problem with your broadband, “You’re not dealing with call centres in far away places,” the WISPA head says.
“For example, one of the more established wireless ISPs who covers North Canterbury is actually based in Culverden. So if you want to meet with your telco and sort out your broadband issues, you can meet the guy who provides you with those services.”
Mr O’Connell has previously noted that community-based ISPs often know how to grease the wheels. One strategically dispensed meat pack can help speed a council consent.
A law change is due to hit Parliament this week that puts rural consents on a more formal footing. If passed, it will mean broadband providers will be able to piggyback on lines company poles and other infrastructure already on private rural land without having to seek permission.
Several WISPA members have partnered with local lines companies on their RBI 2 bids.
Mr O’Connell says the law change isn’t essential, but it will help – and if it is passed, it will make wireless ISP-lines company alliances much more cost-competitive than Chorus (it should be noted that in some areas, Chorus has used already used power line piggy-backing as an alternative to trenching fibre).
Where the money's coming from
The government is funding RBI 2 by extending the $50 million a year Telecommunications Development Levy for three extra years (it initially planned to scale it back to $10 million from 2016).
If Chorus, Spark and Vodafone (who together pay most of the levy) win major chunks of RBI 2, it essentially becomes a money-go-round, with their levy contributions returning to their pockets as government grants. But if WISPA members do manage to score some of the funding, they won’t be so happy.
Winners of the RBI 2 tender will be named by Crown Fibre Holdings later this year.