Taitokerau Network is about reach, not capacity

Randal Jackson looks at iwi investment in telecommunications

The Taitokerau Networks Ltd Partnership, which will operate as Taitokerau Networks, is thought to be the first limited partnership in New Zealand formed to achieve iwi ownership and operation of core telco infrastructure.

Taitokerau Networks’ plans to roll out broadband services across Northland are about reach, not capacity. The decision was made late in 2008 by Northland iwi to use telecommunications in its broadest context as a strategic tool and key enabler to achieve socioeconomic growth, sustainability and well-being for iwi in the region.

It has taken until February 2011 to bring the parties together under the sponsorship of Te Taitokerau Iwi CE Consortium. The consortium comprises Te Runanga o Whaingaroa, Te Runanga o Ngati Whatua and Te Runanga o Te Rarawa iwi. DataLight Ltd ( the operational arm of Opto Networks) will act as general partner to manage and operate the network.

Taitokerau’s vision

Taitokerau says its vision is to create commercially competitive and sustainable, iwi-owned open access, ultra-fast broadband fibre transmission network infrastructure throughout Taitokerau.

Parts of the network extending to isolated rural areas may not be profitable but, overall, the consortium expect there to be positive financial returns, notably from an Auckland to Whangarei network service which will be operative from July 1.

The consortium will enable all ISPs, IT and telecommunications-related companies within Northland, to equitably compete based on a low-cost, open access fibre infrastructure.

DataLight director Roger MacDonald says it has taken 18 months to complete due diligence and put in place the right ownership and governance arrangement that best suit the Taitokerau iwi’s long-term interests.

“We’re in the 21st century with telecommunications now being one of the critical national infrastructures that will form an important foundational content for the survival of Maori as a people. It is important for Maori to have a full and meaningful, inter-generational relationship in New Zealand’s infrastructure.

“The Taitokerau governance model has attracted attention from other Maori interests, which have the same regard for other national infrastructures such as electricity and water,” Donaldson says.

“When you own infrastructure, you are able to directly influence revenue flow and achieve desired outcomes.”

Business case

Putting the business model in place has not been easy sailing owing to the tension between social and revenue-focused investors with one iwi investing group pulling the plug on the eve of the announcement about the network, says McDonald.

DataLight has no equity share in the network. Rather, it will be paid a flat management fee to build and operate the network. The company is also providing a low-interest loan to the project. He says the company is committed to project and network management and operations, and intellectual property transfer and capacity training.

JB Contractors has been contracted to lay fibre. It will be a short-term, limited-partner investment and will provide local employment in Northland.

Axin will provide project management, design services, and materials and also act as a debt funder. Axin is currently in a joint venture with Counties Power. It is a subsidiary of China’s largest telco, China Communications Services, and was part of the Torotoro Waea bid for the Rural Broadband Initiative.

The Taitokerau Network will be built in seven phases, the first of which is the Auckland to Whangarei connection over 174km. It will begin at Orewa and will link back to Auckland (37km) through Vector dark fibre. The cost of the build is $9.1million and is specifically designed for rural pit breakout access.

MacDonald says the network will offer significant fibre count and an initial 100Gbit/s lit services into Whangarei. “The cost is so low, we can deliver 1Gbit/s and 10Gbit/s at a fraction of the current cost,” he claims.

DataLight has estimated the Northland telecommunications market at $120-140 million annually, with Auckland to Whangarei providing half that. It says Taitokerau Networks expects to achieve 15 percent market penetration by year five.

The company’s contract to run and operate the network is for five years, during which time it will help build sustainable skillsets for the unemployed in Northland.

“We’ll work closely with Taitokerau iwi, MSD, Winz and tertiary institutions to fulfil regional outcomes” he says.

National network owned by iwi

MacDonald believes that within 10 years there will be a national broadband network owned and operated by iwi that will focus on the achievement of social outcomes throughout the whole of New Zealand, particularly within the rural regions.

Taitokerau formed part of the Torotoro Waea broadband proposal, which was one of the unsuccessful bidders for the Rural Broadband Initiative with DataLight a partner in that bid.

“Torotoro Waea set out to achieve long-term aims for Maori outcomes, particularly outcomes for rural communities” MacDonald says. “It was all to do with collaboration and partnership.”

He claims Torotoro Waea was offering to put up more capital for the RBI than all the other parties collectively. “In fact, our modelling shows that we could have completed the RBI without any taxpayers money,” he claims.

That was largely based on its plans to do a western fibre build down the North Island, from Auckland to Wellington.

“The business case had been done, but the decision was put off pending the RBI decision. The build would have been collectively owned, traversing Auckland, Pukekohe, Hamilton, the King Country, New Plymouth, Whanganui, Bulls (with a loop to Palmerston North), and joining the current FX Network infrastructure on the Kapiti Coast.

It would have also involved several power companies. As well, there were also plans to provide fibre to the Hauraki Plains and around the East Cape.

Torotoro Waea is planning to proceed with a number of its builds.

MacDonald says Axin, the Chinese-owned company, through one of its parent companies, has experience of rolling out LTE (long-term evolution) to millions of customers.

“If Torotoro Waea had won the [RBI] bid, we would have collaborated with Kordia and FX Networks to form a very powerful capacity within the country, one focused on providing rural New Zealand exactly what it wanted – and within a two to three year period. A reciprocal arrangement was in place” he says.

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Tags Taitokerau NetworkDatalightRoger MacDonald

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