Telecom's latest Op Sep variation approved

With Variation 5 request approved the Rural Broadband Initiative can proceed; photos of proposed cell towers

ICT Minister Steven Joyce has approved Telecom's latest request for relief from its Operational Separation undertakings.

Telecom sought the request - known as Variation 5 - because it claimed that under the Rural Broadband Initiative it would be required to sell similar wholesale services at the same price whether or not they were government subsidised. In other words, Telecom didn't want to be bound by RBI pricing for the same services where RBI funding wasn't provided.

In a letter to Telecom on May 9, Joyce wrote that while he was comfortable with the intent of the proposal, he was not happy with the way it was worded: "My concerns relate to a potential lack of clarity over which Telecom unit is responsible for providing which Priority Rural Telecommunications Service; making clear that existing obligations will continue to apply for RBI and non-RBI services, just not between them; as well as the framing of the examples listed," the letter reads.

Along with the letter Joyce attached an amended wording of the Variation 5 request that sets out which services are part of the RBI roll out and which aren't. It includes examples of when access seekers can expect RBI-pricing, and when they can't. Telecom agreed to Joyce's "counter proposal".

Six submissions requesting clarity

Submissions to Variation 5 closed on April 5 and the MED received six - FX Networks, InternetNZ, Jonathan Brewer, CallPlus/Kordia, Vodafone, Federated Farmers. All submissions requested greater clarity around which services the Variation 5 request would apply to.

InternetNZ CEO Vikram Kumar - who's submission was especially critical of the lack of explanation provided by the MED - welcomes the revised Variation 5 request. He says in the original proposal it appeared that Telecom was asking for a "blanket exemption", but that the amended proposal clarifies which services are RBI- subsidised and which are not. "A very good outcome for everyone," he says.

Line the pockets of Chorus2?

But another critic of the original Variation 5 request, Jonathan Brewer, is concerned that the RBI proposal could be used to "line the pockets of Chorus2 (the fixed line-infrastructure company created after the structural separation of Telecom)".

"That the government may be a part owner of Chorus2 does not lessen the risk," he says.

Brewer emailed Computerworld a section from the original RBI proposal which refers to the benefits of extending high speed broadband connectivity to local communities - beyond just schools and health institutions.

But Brewer says that in Joyce's letter to Telecom it excludes rural businesses from access to new services at the same rate as priority users such as schools.

"The example of a school and a cheese factory in Okato is given in the Minister's letter. This example cites a "fibre bitstream" service, as opposed to a dark fibre service, but makes it clear that Telecom (Chorus2) would not be in breach of undertakings if it charged a higher price for the factory than it did for the school," Brewer says.

"If the infrastructure is grant-funded, and the ongoing price to the school one that is sufficient to earn a commercial rate of return, why should a factory in the same community pay more than a commercial rate of return?" he asks.

Brewer believes any new fibre paid for with an RBI grant should be available at Layer 1 (dark fibre) at the same price for any use in a rural community.

"These rural areas are not economic to serve. Market failure was identified, and in response the government granted (not loaned) money for new, open-access infrastructure to be installed," Brewer says.

Which cell tower is coming to your town?

With the request for relief granted Telecom, and its partner in RBI, Vodafone, can proceed with the rollout. "This variation will help ensure the success of the RBI and will benefit rural users," says Joyce in a statement announcing that the Variation 5 request has been approved.

Vodafone and Telecom representatives have been on a roadshow visiting 15 regional centres to promote the $285 million RBI rollout.

Computerworld saw the presentation in Auckland recently before an audience of mainly community board and council members. The initiative extends Telecom’s fibre to the node build from 84 percent to 92 percent of lines. Information handed out to attendees claims that by the end of the six-year build, 1000 cabinets will either be installed or upgraded.

This will mean seven percent of rural lines will be capable of broadband speeds of over 5Mbps, 50 percent over 10 Mbps, and 34 percent over 20 Mbps.

Vodafone, for its part, will build 154 new cell sites, with an average height of 25 metres, in either the lattice or monopole design.

The lattice tower is sturdy, but...

the monopole is aesthetically more acceptable.

The towers will enable fixed wireless connectivity with minimum peak speeds of 5Mbps to “remote communities and households”, it was stated in the presentation. In Auckland this includes communities such as Huia, Kumeu township and Port Waikato.

Vodafone general manager wholesale and business development Steve Rieger says the company will invest a further $100 million as part of the RBI rollout. This will pay for the equipment for the new towers, an upgrade of an additional 387 towers in rural areas and for fibre connectivity to the sites.

Rieger says there is room on the RBI-built towers for the three competing mobile networks, but that due to frequency interference Telecom’s infrastructure must be located about a metre apart vertically from Vodafone and 2degrees equipment.

InternetNZ and Jonathan Brewer made their submissions public on their websites, but the MED didn't publish any submissions on its website until negotiations over the Variation 5 proposal between the government and Telecom were complete. MED refused an Official Information Request by Computerworld to view the submissions, on the grounds they would be released "soon". Computerworld complained to the Ombudsman claiming that there was no timetable for the release of the information and had confirmation yesterday that its request was being considered. We have since advised the office of the Ombudsman that the submissions are now available on the MED website.

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Tags Operational SeparationSteven Joycevariation 5telecom

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