OECD economist praises broadband plan

Broadband investment will lay foundation for economic growth 'for 50 years'

A bit unusual, but unusually good — that is how Organisation for Economic Co-operation and Development economist Taylor Reynolds labels the Government's $1.5 billion plan to wire up three-quarters of homes and businesses with fibre-optic cable.

Paris-based Reynolds is in Wellington to speak at a conference today, organised by the Telecommunications Users Association.

It comes at a pivotal time for the always turbulent industry, as the Government prepares to decide on its partners to build the ultrafast broadband network.

Reynolds said the New Zealand and Australian governments were pretty much alone in the OECD in proposing national fibre networks, but were being very forward-looking.

"In New Zealand, it is going to be a foundation for economic growth in the country for 50 years."

Some individual European cities such as Amsterdam had similar ambitions. But most countries were promoting broadband through a "patchwork" of different technologies that could cause long-term difficulties for regulators, he said.

Mike Quigley, the head of the government-backed company that is spearheading Australia's proposed A$43 billion (NZ$56b) fibre network, yesterday warned that the federal government might not make a financial return on its investment for up to 30 years.

But Reynolds said such networks would pay for themselves within 10 years if they managed to cut costs in health and education and in the transport and electricity industries by between 0.5 per cent and 1.5 per cent, a goal he suggested was achievable.

Unusually, Telecom chief executive Paul Reynolds and Vodafone boss Russell Stanners will not speak at the annual conference.

That will leave the spotlight to fall chiefly on Communications Minister Steven Joyce, who is understood to be upbeat following Telecom's revelation, last week, that it is now prepared to consider splitting into two companies in order to better position itself to take part in the ultrafast broadband initiative.

Taylor Reynolds said Telecom would be "essentially the first" structurally -separated telecommunications company if that happened.

"There are costs and there are benefits. With a national fibre network, you would want the participation of the national incumbent, because you would risk having to duplicate so many things if you didn't have their buy-in."

Splitting Telecom would provide a "clean way to go forward", but the drawback was the network business might then have little incentive to innovate or provide good service.

"The two big questions: How do you push them to upgrade the network and how to ensure that when the line goes down, that they go to fix it right away, when they don't have to answer to any competition?"

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