As first Crown Fibre laid, NorthPower talks costs – and partnerships

MAN-MADE FIBRE: Communications Minister Steven Joyce and a NorthPower engineer sit astride a directional digger.

Yesterday, with fanfare, the first Crown Fibre was laid - by Whangarei contract winner NorthPower – fulfilling Communications Minister Steven Joyce’s pledge to break ground on the $1.35 billion project by Christmas.

In truth, once NorthPower was selected as one of the first two partners in the ultrafast broadband (UFB initiative), it was never going to be hard for Mr Joyce to keep that promise.

The go-ahead NorthPower already has 104km of fibre in the ground, the lines company’s Darren Mason told NBR.

The roll-out includes a $500,000 project earlier this year to connect fibre to 850 homes in the suburbs of  Kensington and Regent.

Yesterday’s cable action on Murdoch Street – connecting Manaia View School – was simply the latest extension of that existing fibre, which already passes hundreds of homes and businesses.

The key difference now, of course is that Crown Fibre Holdings has now committed its first $200 million (between NorthPower and WEL, which won six regions).

Crown Fibre Holdings will want its investment back, the better to “recycle” the money to other regions as the 10-year UFB project progresses (NorthPower’s build will take around three years, Mr Mason said; it will cover 52,000 people and 20 schools).

So: how to make money?

CrownFibre will pick up the tab for communal infrastructure – or “in-the-street-stuff” as Mr Mason put it.

But who’ll pay for connecting from the curb to a home – which can cost anywhere from $1500 to around $2500 – but which Mr Joyce has already indicated will be free for home owners?

NorthPower.

Mr Mason would not be drawn on any specific costs, but agreed $1500 could be in the ballpark for an aerial installation (that is, hanging fibre cable from overhead lines), and that it would cost more for an underground install.

Crown Fibre Holdings and the MED are coordinating research and trials into new techniques such as shallow trenching (which the legislation introduced last week will also help facilitate), for the benefit of all UFB partners. Mr Mason said that should help bring down costs as the project progressed.

Around 60% of NorthPower’s rollout will involve stringing fibre along its existing power cables (a much sleeker process these days than when New Zealand’s first cable was strung up around Wellington); the balance will involve directional drilling.

Once NorthPower has connected a home – “free” - it must deliver a wholesale broadband fibre feed to a retailer (that is, any ISP) from $40 a month, or $60 with the 100Mbit/s speed that most associate with fibre.

The retail ISP will then add a margin on top.

The wholesale pricing does not include a voice line, and data caps are unknown.

Once a voice line is bundled, and the retail margin added, Mr Mason saw most people paying in the region of $80 to $100 a month (while wholesale pricing is under government watch, what residents actually pay will be set by retailers).

To help minimise the investment risk for NorthPower (or any UFB partner), Crown Fibre Holdings doesn’t have to be repaid until the first custs are connected.
Still, given its stumping for that $1500 to $2000 “free” home connection, NorthPower presumably wants to see its retailers sign people up to long term contracts?

Mr Mason didn’t speak directly to that point, but did answer by saying that the move from copper broadband to fibre would be the same as the move from dial-up to DSL.

Once people had a taste, they wouldn’t want to go back.

He hoped retailer would provide value-added services such as pay TV over broadband that would help keep people loyal (and see them upgrading to more expensive plans, I’d add).

A tight focus on efficiency would see NorthPower in the black on the wholesale side.

Partnerships
What of NorthPower’s fibre partnership with TelstraClear - which has been much touted over the past year (at least by TelstraClear; separately, TelstraClear chief executive Alan Freeth has also stressed the difficulty of maintaining complex services over fibre)?

Mr Mason totally played it down.

TelstraClear could provide fibre from Whangarei to Auckland. But then again so could Telecom.

The fibre in yesterday’s ceremony was laid by NorthPower’s field force. The field force was large, and could handle most of the roll-out (NorthPower has around 900 staff in total around the North Island).

Contractors were being used, but local drilling contractors.

While not explicitly ruling out some kind of sub-contracting role for Telecom – which has repeatedly emphasised it’s open to partnerships to reach areas beyond the 25 where it has been named the priority bidder – Mr Mason also made it perfectly clear that NorthPower was managing things just fine, and had plenty of options.

NorthPower is using technology from US companies Enablence and Cisco for the electronics on its network.

What off the big four telecommunications infrastructure and fibre companies: Alcatel-Lucent, Ericsson, Nokia-Siemens and the recently controversial Huawei?

Whose kit was going in?

The situation was under review, Mr Mason said.