Ultrafast broadband will be available in Wellington and Christchurch next year, allowing consumers to watch high-definition internet television and video-conference with friends and workmates.
TelstraClear chief executive Allan Freeth announced last night the company would upgrade its InHome cable networks to deliver download speeds of 100 megabits per second.
That is 20 times the speed enjoyed by the average New Zealand broadband user and 10 times the highest speed previously offered on the Wellington cable network which covers most of city, the Hutt Valley and the Kapiti Coast.
The upgrade will take about a year and cost $10 million. Freeth said TelstraClear would then offer 100Mbps plans as soon as there was a demand from customers.
TelstraClear plans to soon begin selling high-tech set-top boxes to the 80,000 households on its InHome networks that would let them view programmes downloaded over the internet on their TVs. Ultrafast broadband would also be of use to businesses, doctors' surgeries and telecommuters, Freeth said.
There was now no point in the Government rolling out fibre-optic cable to homes and businesses in Wellington and Christchurch through its ''yet to be confirmed'' $1.5 billion broadband investment initiative, he said.
The $400m earmarked for the two cities under the scheme would be better spent elsewhere.
''We strongly don't believe taxpayers' and ratepayers' money should be used to compete against us in areas where we have spent hundreds of millions of dollars.''
Communications Minister Steven Joyce could not say whether the investment would influence the Government's ultrafast broadband plan.
''Any private sector investment that brings broadband speeds up is really good and my personal preference would be that the private sector saw the need to do the whole thing, but I think that is unlikely.''
Details of the service that would follow the upgrade were not yet clear, there were parts of Wellington and Christchurch that TelstraClear's networks did not reach and 100Mbps might not be sufficient to meet the future needs of schools, he said.
Australian telecommunications analyst Paul Budde said Telstra had announced similar cable network upgrades, ''squarely aimed to undermine the Australian's government plan for a national broadband network''.
Any improvement was welcome, but TelstraClear's cable networks were a ''dead-end technology'', he said. There was a good chance they would need to be replaced with fibre within the next five to 10 years as fibre was ''more flexible and cheaper to maintain''.
Freeth rejected that. "We don't buy into much of Paul's stuff."
The Government's election commitment was to roll out fibre cable to schools, businesses and three-quarters of homes within 10 years. Unlike TelstraClear's cable, the fibre network would also let people upload information at 100Mbit/s.
Freeth was dismissive, suggesting few needed that. TelstraClear's cable networks would allow uploads at 10Mbit/s.
TelstraClear did not plan to let other telecommunications companies retail services over its cable network, but Dr Freeth would not rule that out. A key feature of the Government's proposed fibre network is that it would be open to all.
Harcourts Wellington managing director Marty Scott said houses that had access to good broadband could be easier to sell.
For some buyers, especially those that worked from home, ultrafast broadband might feature among the top three things they decided they could not do without.