Play ball, or we will overbuild networks, says government

Focus will be on new infrastructure replacing legacy

The final version of government’s $1.5bn “ultra-fast” broadband proposal has delivered a none-too-subtle warning to incumbent telcos that excessive charging or other non-competitive practices regarding access to their networks will not be tolerated.

While there is preference for using existing telco assets as part of the buildout — particularly in central city areas already equipped with fibre — if access cannot be gained on reasonable terms, "then overbuilding will be considered”, says the proposal, drawn up by the Ministry of Economic Development (MED) and signed off by ICT Minister Steven Joyce.

This policy will apply both to the main network links and backhaul capacity within population centres.

One of six key principles outlined in the proposal is: “focusing on building new infrastructure, and not unduly preserving the legacy assets of the past”.

MED and Joyce go on to cast Telecom’s copper, at least in the longer term, into this legacy basket, DSL technologies notwithstanding. TelstraClear’s coaxial cable network is clearly not highly regarded either.

“In the case of residential access networks, such as Telecom’s copper and TelstraClear’s cable networks, it is clear that they do not have the capability to compete with the performance of fibre-to-the-premise (FttP) networks in the medium to long term,” the proposal says. “As a result, it is likely that these networks will eventually be overbuilt. In the short to medium term, consideration will be given to the speed, capacity, terms of access, and price of services on existing networks when investment proposals are considered.”

As previously signalled, a government-owned company, Crown Fibre Holdings (CFH), will oversee the government’s role in the project, including the appointment of private-sector “and other” partners to run local fibre companies (LFCs).

This phraseology admits local authorities as direct LFC participants and proposals from them will be entertained on the same basis as private partners, Joyce’s office confirms.

Reference to local authorities in the proposal, however, is almost entirely to co-ordinating role such as “facilitating partnerships with LFC investors” and “streamlining and coordinating regulatory processes and local authority interfaces”.

CFH will be a wholly-owned Crown company, probably constituted under Schedule 4 of the Public Finance Act, and not a State-owned enterprise because it also has non-commercial objectives.

Beyond recruiting and overseeing partners, CFH’s objectives will include approving technical and operational standards to achieve national consistency.

A formal invitation to participate (ITP) will be issued in the next month to encourage partners to put forward proposals. Proposals involving nationwide coverage or more than one region will be entertained.

Further ITP rounds may be conducted if initial proposals do not meet the government’s objective.

Private sector investment will be expected to at least match government’s contribution, says Joyce.

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