FORUM: Questioning Chorus

Will the agreement over shared national backhaul between 'New Telecom' and 'New Chorus' ever be made public?

Albany, in north Auckland, was an interesting place for Chorus to launch its Ultra Fast Broadband network last week. Right in the heart of Vector country.

Telco watchers will know the two companies were fierce rivals for the UFB contract in the region, and if Chorus hadn’t succeeded in Auckland it might have scuttled Telecom’s involvement altogether.

But Chorus was triumphant, securing not only Auckland but 70 percent of the national UFB build. Its CEO Mark Ratcliffe (who fronted Telecom’s bid) managed to negotiate a deal whereby Chorus gets $929 million of the $1.35 billion taxpayer funding available. Of course the company will be expected to pay it back (interest-free) but over a much longer period than those UFB partners who have formed Local Fibre Companies (LFC), as per the original process led by Crown Fibre Holdings.

Ratcliffe was quite clear that Chorus is not an LFC, but he would not tell Computerworld what the governance relationship between CFH and Chorus will be. We have to wait until Telecom’s shareholders receive information about the proposed demerger of Chorus before we learn what those governance arrangements are. Apparently, the telco’s investors have a greater right to know how taxpayer money is to be spent than the New Zealand public.

This is in keeping with the entire CFH approach to the UFB build. Everything behind a veil of secrecy and that old chestnut “commercial sensitivity” trotted out every time a reporter asks a question they don’t want to answer.

So that is the deal, what about the deployment?

Clearly Chorus and CFH are confident that Telecom’s shareholders will give the proposed tick to the demerger, because it has released plans showing its UFB roll out will commence in 10 cities, including Auckland, by the end of the year.

Details about the fibre deployment were on display at a cafe near the roadside ceremony in Albany. Chorus will deploy smaller fibre-fed cabinets which will be manufactured by Eaton in Christchurch – the same company that made Telecom’s larger cabinets.

The gear on display sported a mix of logos, but I was interested to see Alcatel-Lucent and Ericsson badges. Both technology companies, along with Huawei, are in line for the uber-RFP that CFH is running for layer 2 services. CFH CEO Graham Mitchell is quick to point out that LFCs and Chorus are not obliged to take up any contract negotiated with the preferred supplier, but clearly there are advantages in ensuring homogenous technology at a level of the network that operates the OSS (Operating Support Systems) and BSS (Business Support Systems).

The UFB deployment comes as Chorus finishes off its Fibre to the Node or cabinetisation project. There are around 200 roadside cabinets left to install and this is in a deployment of more than 3000 nationwide.

The idea behind cabinetisation was to shorten the distance between the premise and the exchange by running fibre from an exchange to a roadside cabinet, which then fed the copper to about 300 or so surrounding houses.

It was a cornerstone requirement in Telecom’s operational separation and, while Telecom has requested – and received – five variations to these undertakings, it has never asked to be let off its cabinetisation schedule.

Under UFB, Chorus will have to provide layer one and layer two services to all comers at the same terms and conditions. There were no layer three providers or Retail Service Providers present at the Auckland UFB launch, or at least none that made themselves known. But I presume there are some ready to go to market with broadband plans (Orcon has made noises it will be among the first) when the fibre arrives at houses.

It’s expected Telecom Retail will become an RSP on the network (and with more than 50 percent of the broadband market, let’s hope so). It will be a separate company to Chorus – or at least that is what we have all been led to believe. Ratcliffe told Computerworld national fibre backhaul is to be shared between the two companies with commercial agreements to be put in place.

This doesn’t seem to me to be in keeping with structural separation, but its unlikely we will know for sure the exact arrangements between the two newly formed companies on this critical piece of broadband infrastructure. I would be surprised if the agreement was publicly disclosed, although apparently there will be Commerce Commission oversight. They will probably say it is commercially sensitive and, if Telecom Retail or 'New Telecom' becomes majority overseas owned (a real possibility now that Kiwishare obligations have been lifted), everything will become even more opaque.

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