Communications and Information Technology Minister Steven Joyce yesterday unveiled plans for a new Crown-owned company which will drive the Government's plan to boost broadband speeds to 100 megabits per second - more than 50 times faster than speeds available today - by laying fibre-optic cables to homes and businesses.
The money will be allocated through private companies on a regional basis.
The technology used will be open-access "dark fibre" technology, meaning companies are given equal access to the network, which does not line the pockets of existing broadband network providers.
The Crown-owned investment company will be called the Crown Fibre Investment Co, or CFIC.
It will, along with private sector investors, put money into regional fibre companies that will install fibre-optic networks in 25 New Zealand towns and cities.
Once finished, the investment model would deliver on the Government's commitment of ultrafast broadband to 75% of New Zealanders where they lived, worked and studied over the next 10 years.
Telecommunications Users Association chief executive Ernie Newman said Mr Joyce's paper was at the top end of his expectations.
"It sets out a clear structure for the proposed partnerships and will give potential partners in the private sector all the information they need to come up with regionally based proposals. Excellent progress is being made."
However, Mr Newman was not so supportive of the timetable outlined by Mr Joyce.
"Much as we support the target of covering 75% of New Zealanders within 10 years, as time moves on this is starting to look too soft."
The association hoped that in the medium-term, the target could be revisited to increase the percentage of people with access and shortening the time line.
That would be of particularly benefit to people in rural areas who were the group with the most to gain from the services the technology would unlock, he said.
Telecom, New Zealand's largest listed company, was generally supportive of the Government's proposal with chief executive Paul Reynolds saying the company would review the opportunities the announcement presented to work with the new company.
"We will do this against the backdrop of Telecom's existing $1.3 billion this year alone in improving the country's telecommunications infrastructure which we believe is proportionately the highest rate of investment being made by any national telecommunications company in the world."
ABN Amro Craigs broker Peter McIntyre said the response by Dr Reynolds was "extremely diplomatic" given Telecom had been pushed from pillar to post by Commerce Commission rulings and ordered to separate its operations into three companies.
Telecom's share price staged a small recovery yesterday on the back of the news and response.
Mr Joyce said CFIC would operate "an open, transparent and contestable process" to select local partners:
Partners would be selected on these criteria:
- The amount of additional fibre coverage being proposed.
- The proposed capital structure.
- Commercial viability of the proposal.
-Consistency with government objectives.
- Track-record of the partner.
Mr McIntyre said that the Auckland-based energy network company, Vector, was likely to be a prime candidate to join the new investment company in introducing fibre optic cables to homes and businesses.
Vector had 500km of fibre optic network laid in Auckland's business districts and was expanding that network by an extra 300km as part of an agreement with Vodafone.
PowerCo was another company which was likely to get involved in the process.
In the South, Mr McIntyre urged the Dunedin City Council and other local authorities to get involved in introducing fibre to more New Zealand businesses and homes.
Dunedin and Oamaru were among the centres identified for the new fibre network and the Government wanted to support and work with local councils, he said.
"This is extremely positive for Dunedin. The high-speed link to the university and businesses will attract companies to do business here. We have a lower cost structure advantage over North Island cities and we have a well-educated workforce. This is a good opportunity for local authorities."
High-speed broadband was more important for Dunedin than many other cities because of its education base and the hospital - the two main areas where its employment opportunities were based, Mr McIntyre said.
A report commissioned by industry heavyweights Telecom, Vodafone and TelstraClear said their own investment plans would deliver broadband speeds adequate for the needs of everyday internet users without the need for a boost from the Government.
Consulting firm Castalia challenged the belief that high broadband speeds for households - up to 50 times faster than that presently available - would deliver significant economic benefits.
Mr Joyce said an open infrastructure model would ensure all telecommunications companies had the option of using the fibre.
"This model aims to provide government investment on favourable terms, while minimising government involvement in commercial operations which we believe the private sector is better positioned to direct.
"This is a big investment both in terms of the money committed and the returns it will bring. It's essential that we get it right the first time."
The deadline for submissions on the plan is April 27.
