Government finalises broadband investment proposal

Telecom alternative 'not sufficiently attractive', dark fibre access features

ICT minister Steven Joyce has finally released details of the government’s planned $1.5 billion broadband investment initiative, which broadly follows the outline of the government's original regional investment structure.

Joyce says the investment, in partnership with the private sector, will deliver gains for "productivity, innovation and global reach".

The government says it has no preferred private sector partner in mind for the network builds.

“Submissions, alternate approaches and a range of regulatory issues have been carefully considered, and I believe this proposal will give best effect to the government’s goal,” he said in today's announcement.

The proposal includes an "open, transparent partner selection process", to be initiated in the next month.

Telecom has failed to impress with its alternative investment proposal. The announcement says Telecom's proposal has been assessed by The Ministry of Economic Development and is "not sufficiently attractive" to justify moving away from a contestable regionally-based process.

"Relative to indications from potential partners, Telecom’s proposal covered fewer homes and businesses, only provided ducts and not the fibre itself, and did not clearly result in significant additional private sector expenditure above 'business and usual' levels," a Q&A attached to today's announcement says.

The government reiterated that it will only invest in fibre companies that are not controlled by shareholders who also operate retail telecommunication businesses.

"The government is also clear that potential partners who already own fibre assets can table options that involve those fibre assets being vended into any new fibre companies," the announcement says.

Government investment will be directed to an open access, wholesale-only, passive fibre network infrastructure, the minister says. As expected, this will be conducted through a new Crown-owned investment company, “Crown Fibre Holdings” (CFH), which will be operational by October, he says.

Crown Fibre Holdings and each partner will establish a commercial vehicle, a “Local Fibre Company”, to deploy fibre infrastructure and provide access to dark fibre products and, optionally, wholesale Layer 2 services.

Access to dark fibre is currently not provided by the major telcos and not covered by Telecom's separation undertakings.


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However, the plan released today is explicit that the government is getting involved "in order to encourage the provision of widespread open access dark fibre services", which it says will facilitate the best possible competition outcomes in emerging markets and encourage innovation in wholesale and retail services.

Joyce says government investment at that level will facilitate the competitive commercial provision of ultra-fast broadband services over fibre with the minimum regulatory intervention.

"In very simple terms, this is the most 'raw' access to the underlying infrastructure, and provides the best competition outcomes because the wholesale customer has full control and flexibility and has the ability to innovate in downstream services," the Q&A says.

There will also be provision for national and regionally-focused proposals, consortia and aggregation.

Any entity or consortium of entities, including local or regional government, iwi, trusts or equity funds will be eligible to submit proposals to partenr in broadband investment, the Q&A says.

One change from the original proposal is that the list of investment regions has been expanded to 33.

"CFH will have the flexibility to negotiate the boundaries of proposed coverage areas with prospective partners, with an overriding mandate of achieving the government’s 75 percent coverage target," the Q&A says.

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