Joyce holds firm on $1.5b broadband cap

Capital costs of ultrafast broadband plan uncertain

Communications Minister Steven Joyce has dismissed as speculation suggestions that the government may need to increase the $1.5 billion cap on the amount of money it will invest in its Ultrafast Broadband scheme.

Electricity lines companies and fibre companies operating under the umbrella of the Regional Fibre Group have upped the tempo, proposing aggressive timelines for deploying fibre to homes and businesses in more than 33 cities, if the government picks them as its partner in the roll-out.

Joyce says there is a lot of water to flow under the bridge. "I don't think you can make any assertions at this stage about what [capital] you would need and when.

"I have seen nothing to suggest that what we have talked about is insufficient, or that there will be timing issues, but I would stress that it is very early days."

The Regional Fibre Group — a loose grouping of electricity lines and fibre companies - faces competition from Telecom and an international bidder, which may be Canadian company Axia NetMedia, to win the hand of government investment vehicle Crown Fibre Holdings and build the networks, at an expected total cost of more than $5b.

While the private sector partners will foot the bill to set up fibre companies and connect customers, the government has agreed to advance the capital required to lay fibre as far as city streets.

That capital could be recycled and reinvested as private sector partners in the broadband initiative connected customers to the networks and gradually bought out the government's stake in Crown Fibre, as they would be obliged to do.

But Joyce acknowledges they would need to know from the outset that the government would front with all the capital required to finish the communal networks.

Sources said a strong response from members of the Regional Fibre Group — many of which have solicited letters of support from councils and community groups — could put the government on the spot.

Counties Power and NorthPower have proposed building home fibre networks within three years, well ahead of the government's 10-year target.

Vector, CityLink, Wel Networks and others are proposing to complete huge networks covering hundreds of thousands of homes and businesses within six or seven years, if they win the bidding.

Sources suggested a shortage of skilled people to do the work could act as a natural check on the speed at which fibre could be laid, and hence on the local fibre companies' capital requirements.

Crown Fibre chief executive Graham Mitchell says some responses to Crown Fibre's invitation for partners comprised "reams of paper" but others were slimmer, suggesting some members of the Regional Fibre Group might be better prepared than others to participate.

Under the terms of the broadband scheme, private sector partners would have to meet the cost of any construction over-runs.

Not all members of the group appear keen to shoulder that liability themselves, with some suggesting that risk should be "ring-fenced" within local fibre companies, rather than falling on their shareholders.

Enable, a fibre company owned by Christchurch City Council, and Blenheim lines company Network Tasman both want to hold further discussions with Crown Fibre on the issue.

Network Tasman chief executive Wayne Mackey says it wants to minimise the risk to the company, which would let it "give the best deal to Crown Fibre".

Dunedin's Flute Network also says the nature of the guarantees would need to be subject to negotiation.

Mitchell says the question of who might provide the construction guarantees was one that needed to be worked through. Crown Fibre would be fair and reasonable, but "will be expecting, if people say they are going to deliver, they will stand behind that".

Joyce would not comment on the government's intent.

Counties Power chief executive Neil Simmonds says it recognises any cost over-runs would be its problem.

"We understand Crown Fibre wants to see that we are really going to build the network and not just 'cherry pick'. That's fine with us."

John Yeoman, chief executive of Kapiti lines company Electra, says while it would prefer liability to reside with local fibre companies, "my view is the Crown is going to put it back on us".

Mitchell says Crown Fibre would also need to consider the merits of connection fees, which some lines companies intend to charge customers.

"We don't want to put a barrier up there such as that just because someone has got too carried away with concrete on their drive they are not going to be able to connect to the network."

Crown Fibre expects to provide a timetable for talks next week. Mr Mitchell says construction would probably start in the second half of the year. "There is a lot of pressure for this to happen sooner, rather than later."

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