Telecom and Vodafone seem to have the inside running in building the $285 million rural broadband network under the Government's initiative.
Communications and Information Technology Minister Steven Joyce confirmed negotiations had started with the two companies.
Their proposal was based on proven technology and provided the Government with confidence it could be deployed.
"The Government specifically asked for parties to consider collaborating on joint bids to reduce construction cost, and this bid does just that," he said.
Craigs Investment Partners broker Chris Timms said the announcement came as no surprise, as the market had been anticipating it since last week.
Telecom's share price fell to $2.25 yesterday, after reaching $2.33 last week, but that had more to do with what was happening overseas than in New Zealand.
"What this announcement does is give another tick in the box for Telecom, an acknowledgement that the big boys are the most appropriate companies to deliver rural broadband to the wider community," he said.
Federated Farmers president Don Nicolson wanted the changes to rural broadband to be introduced as quickly as possible, as efficiently as possible and as cheaply as possible.
"We're not just talking download speeds, but upload speeds too.
"While download speeds are important, farmers want the ability to upload content to the web.
Ultrafast upload speeds give us the opportunity to play a full part of the digital economy as well as having a gateway to true internet telephony."
For about 800,000 rural New Zealanders, Federated Farmers wanted monthly wholesale prices of around $35 and retail of about $60 for speeds of at least 10 megabits per second (Mbps), he said.
"While there is talk of 5Mbps by 2016, the first urban broadband deals are for speeds 20 times greater.
Are we going forward or treading water?"Government needs to make sure it is as ambitious as Federated Farmers is in negotiating the next stage," Mr Nicolson said.
Mr Joyce said at present, 20% of customers in rural New Zealand could access speeds of at least 5Mbps.
That would rise to 86% of rural households and businesses, with 95% of rural schools receiving ultrafast connections.
The extension of the fibre backbone into rural areas meant more customers living on the fibre routes might be able to get fibre-to-the-door.
"... This will be light years ahead of where they are today and will ensure they participate in the promise of a digital economy," he said.
Telecom and Vodafone said in a joint statement their proposal was based on using their "significant" existing infrastructure, capability and experience.
A fast start would come from building out from the investment both parties had already made in fibre, mobile and fixed-line networks.
An open-access approach was at the heart of the joint bid, allowing other operators to access the infrastructure on equal terms.
That would provide strong retail competition from different technologies and service providers, and a choice of solutions and providers for rural New Zealanders, the statement said.
International Data Corporation senior analyst Rosie Spragg said the concerns expressed in the industry about fair accessto the government-subsidised networks was valid and underscored the need for a robust open-access policy regime.
Historically, telecommunications carriers have faced significant challenges in the rural sector.
To some degree, that reflected the difficulty of the investment business case in rural New Zealand.
Scale, and with it the ability to cross-subsidise between more and less profitable customers, were crucial, she said.
"It is this challenging business case that the Government has sought to support through the rural broadband initiative."
The key challenge for the Government was to ensure wholesale pricing and open-access terms and conditions that encouraged the development of a competitive rural retail market, Ms Spragg said.
There was limited information on what the open-access provisions were going to look like, or whether there would be opportunity for input from competitive carriers before contracts were finalised, she said.
