"The Government has ignored Telecom's proposals on how to spend the $1.5 billion of government money - which is not surprising given Telecom ignored the Government's own proposal - and has stuck with its initial framework for investment."
That framework involved establishing Crown Fibre Holdings to invest alongside the private sector in a group of regional local fibre companies, he said.
The market seemed as confused as everyone else about Telecom's position, Mr Timms said.
Although a lot of shares were traded yesterday, the price stayed flat at around $2.60 a share.
The Government explicitly noted it was open to proposals that involved aggregating any and all of the 33 regions (previously 26) although that was implicit in the the original proposal, he said.
That left the door open to regional or national proposals by Telecom.
A lot hinged on the terms of the ITB (invitation to participate).
Within the next month, the Government, through Crown Fibre Holdings, was expected to release its initial ITB.
That would provide important guidelines on commercial issues and financing options to enable participants to sub-tender.
Assuming there was more than one tender, a shortlist would be drawn up before the final bonding offers were released in June 2010 - which appeared to be an ambitious target, Mr Timms said.
"The Government appears keen to get the ITB out quickly, to determine who is serious and ready to invest. There are lots of players talking the talk but it is less clear who will walk the walk.
"Telecom's original proposal focused on redirecting spend but the Government remained adamant it wants incremental investment on a dollar for dollar basis, albeit it will accept a less than commercial return for a period."
Mr Timms said there was room for the Government and Telecom to negotiate but a carve-up of the regions between the various players seemed the only politically acceptable outcome if Telecom was to participate.
The proposal was tighter and more explicit than the original but it still left gaping holes to enable Telecom to engage and negotiate with the Government.
Speculation had been around of Telecom selling its retail division or ceding control of its investment if it joined the Government in building the broadband network.
However, Telecom chief executive Paul Reynolds said selling the retail or network divisions was firmly off the table.
While the company was committed to its network investment plays, Dr Reynolds said that if the Government proceeded with a plan that excluded meaningful participation by Telecom, it would look to alter some other aspects of its separation agreement.
The agreement, which came into effect in March last year, forced Telecom to split into operational divisions and offer competitors access to its network on the same terms as its own divisions.
"It's kind of hard for Telecom to be fully involved in the way it's currently structured. Obviously, that's going to significantly restructure the industry in New Zealand and would put the existing commitments and undertakings back on the table," he said.
