Chorus extends NZ$28m fund for connecting UFB premises

Chorus has extended its deal with government-owned company Crown Fibre Holdings (CFH) to provide its NZ$28 million fund to finance free non-standard residential connections to the New Zealand Ultra-Fast Broadband (UFB) network out to the end of 2019.

Under the fund, Chorus provides free fibre installations for premises that are beyond the standard 15-metre distance automatically connected, covering single-dwelling residential units and multi-dwelling residential units with three or fewer stories that are up to 200 metres from the network.

The fund was first established in 2012, with Chorus at the time providing NZ$20 million to complete free residential non-standard installations, and increasing the fund to NZ$28 million in 2014. In February this year, Chorus extended the funding out to the end of 2016 after reaching an agreement with CFH.

Chorus said it worked closely with CFH to come up with a "value-neutral way" to continue providing free non-standard residential fibre connections until the network build is completed in 2019.

According to Chorus CFO Andrew Carroll, the regulatory model proposed under the New Zealand government's current telecommunications review would provide a sustainable, long-term solution for funding Chorus' costs.

"We've therefore taken the pragmatic approach that a 'building block' model is likely to include the cost of residential non-standard installations in a regulated asset base, thereby allowing a regulated return on this investment," Carroll said.

"In the event that this hasn't occurred by 31 December 2020, or not all of Chorus' actual UFB non-standard installation costs are included in the asset base, the dates on which Chorus must redeem or provide dividends on the CFH debt and equity securities will be postponed.

"The CFH security postponement dates would effectively range from a few months in the event that 80 percent of non-standard installation costs are included in an asset base, through to about two years in the event that no costs are included."

Postponing Chorus' repayment of the CFH debt and equity securities would contribute a maximum of NZ$60 million towards non-standard installation costs incurred between 2017 and 2019.

In April last year, it was revealed during a parliamentary review of CFH that only NZ$100,000 of the NZ$28 million fund had been used.

Last week, a report on telecommunications complaints by the Telecommunications Forum (TCF), made up of telco operators across New Zealand, revealed that consumer complaints about delays in connecting premises to UFB fibre have skyrocketed.

According to the Telecommunication Dispute Resolution Annual Report [PDF], the number of complaints about delays in connected fibre broadband services "accelerated in January 2016, and has been steady ever since".

"The typical complaint is that the scheme member signs the customer up to the fibre service with an indicative commencement date. This date passes with no service being connected," the report said.

"It appears that the scheme members, in notifying the installation date, rely on information provided by the fibre installation companies. The installation companies do not then complete the work on time."

According to Consumer NZ CEO Sue Chetwin, speaking last month at the Australian Communications Consumer Action Network (ACCAN) Conference in Sydney, there was a 250 percent increase in fibre installations last year, with installers unable to keep up with demand.

"Chorus, the infrastructure company that has the major contracts to install Ultra-Fast Broadband ... what they're promising they can't really deliver at the moment -- there's just not enough people to do it," Chetwin explained in relation to fibre connection delays.

"So increasingly, there are complaints about service people not turning up, or shonky installations ... the CEO of Spark just said a week or so ago that frustrated customers were cancelling their fibre contracts due to installation delays. So two-thirds of those who got connected were unhappy with the process."

The UFB project was 57 percent complete as of the end of the 2015-16 financial year, Chorus announced during its financial results.

The UFB will reach 80 percent of the New Zealand population once complete, while the Rural Broadband Initiative (RBI) will provide download speeds of 50Mbps to the remaining 20 percent. The RBI is 100 percent complete, with the project enhancing and extending fixed-line coverage to approximately 110,000 premises for NZ$282 million.

Chorus last month announced that it will be offering 1Gbps services across the entire UFB footprint, with Vodafone NZ following suit this month.