A Ministry of Economic Development draft discussion paper received by Computerworld suggests "facilities-based competition may be the most efficient (or perhaps the only) way to achieve competition" in the broadband market.
The draft paper will become part of the government's Digital Strategy but has yet to be signed off by Cabinet. The strategy is due to be released in mid June by Associate Minister of Communications David Cunliffe.
The report compares "intermodal competition", competition between networks, and what it terms "facilities-based competition".
"Facilities-based competition allows competitors to use the existing infrastructure owned by an incumbent," says the report.
"Local-loop unbundling and the sharing of radio transmission sites are two examples of facilities-based competition. Although it requires regulatory intervention, facilities based-competition may be the most efficient (or perhaps the only) way to achieve competition, given New Zealand’s small, thinly-dispersed population and rugged terrain."
Intermodal competition has worked well in places like South Korea, says the report, in part because of the higher population density.
The report makes it clear that New Zealand's current telecommunications infrastructure is world class, yet remains under-utilised.
"While internet-grade broadband is widely available in New Zealand, its uptake to date has been uncharacteristically low, with only 2.5 subscribers per 100 population, compared with the OECD average of 6".
The draft report, which will form the basis for the government's ICT strategy, brings together various threads including the Project Probe initiative, the Next Generation Internet forum and the Telecommunications Commissioner's role. It outlines the importance of the government's role in broadband development.
"In a small market with limited competition, government regulations are necessary to maintain optimal conditions (whereas in a truly competitive market, the regulatory environment is less significant)".
The report also outlines benchmarks for broadband that the MED would like to see in place by 2010. These include 50Mbit/s service for most homes in New Zealand with those remote customers, roughly 15% of the country's population, "only" able to receive 10Mbit/s.
Currently most of the residential customers are only able to receive Telecom's JetStream service at a maximum of 4Mbit/s. The report acknowledges the need for a complete revamp of New Zealand's infrastructure to meet these needs.
"To achieve the benchmark targets ... the industry will need to replace all copper lines to exchanges and cabinets with fibre, and provide major users in cities with fibre connections on demand."
For residential and SME customers in towns and provincial centres, it is expected that demand for 10 Mbps (extending to 100Mbps) can be met via the copper lines between their premises and the cabinet or by using wireless technologies.
Minister of Communications spokeswoman Phillippa Fox says the minister is aware of the report and its findings.