NZ plans NBN investment company

The New Zealand Government has announced plans to create a state-owned investment company that will spearhead its $1.5 billion National Broadband Network initiative.

NZ Communications Minister Steven Joyce (Credit: NZ Govt)

The country's Communications Minister Steven Joyce announced the plan this morning. The money would be made available on a contestable model to a variety of telcos, utilities and other organisations on a regional basis in a series of "public-private partnerships".

It's open to everyone. This is the beauty of the proposal. It's very inclusive

TUANZ CEO Ernie Newman

Open access "dark fibre" technology would be used, meaning companies have equal access to the network.

Joyce said the state-owned investment company (Crown Fibre Investment Co or CFIC) will drive the government's investment and will work alongside private sector co-investors that will deploy and provide access to infrastructure. The NZ Government expects private providers to match its funds, creating a $3 billion nationwide scheme overall, though some have put the total bill at $5 billion.

Some 25 towns and cities are expected to benefit, ranging from the smallest Oamaru, with a 12,500 population, to Auckland, which has 1.2 million residents. Joyce said the proposed CFIC would operate "an open, transparent and contestable process to select local partners".

Partners would be selected on the following 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

Draft proposals on the format of these "Local Fibre Companies" have also been posted on the Ministry of Economic Development's website. They show the government favours the retail telcos having a small share of the new regional LFCs, with the CFIC the major player.

The government has given the industry until 27 April to make submissions on the proposed CFIC. Industry response so far seems favourable. Reports for cabinet will be made in May and June. The CFIC would be appointed in June, RFPs issued in August, and proposals released in October, with initial decisions due in January 2010.

Ernie Newman, chief executive of the Telecom Users Association (TUANZ) said the minister'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," he said.

He told ZDNet.com.au he expected telcos and power line companies to put in "significant bids". There would also be local investors, council projects and other providers. "It's open to everyone. This is the beauty of the proposal. It's very inclusive," he said.

It will result in fairly rapid implementation of broadband in New Zealand. The fact that it's gone into an investment model is good as it allows flexibility, leading to quick delivery of services

Internet NZ president Peter Macaulay

However, he did warn that some potential providers might find the initial deadline for submissions challenging, but the government's intentions had been so well signalled, they should be prepared for it. Newman also added that the government might be too modest with its aim, adding as the broadband is rolled out, others would want to come on board, giving higher penetration sooner.

Internet NZ president Peter Macaulay called the proposed set-up "excellent". "It will result in fairly rapid implementation of broadband in New Zealand. The fact that it's gone into an investment model is good as it allows flexibility, leading to quick delivery of services," he told ZDNet.com.au.

Power lines company Vector has already laid out 500km of fibre cable in Auckland's CBD and is expanding that network by an extra 300km as part of an agreement with Vodafone. CEO Simon Mackenzie said that his company would make submissions to the government but it would be October before it would tender for any projects.

"So far this remains attractive to us. Generally this [announcement] is a positive step forward," he said. Vector had no budget or target of funds it sought, saying much would depend on the equity position with CFIC, plus issues of price, regulations and access.

But its fibre network with Vodafone showed a way. "We see we have a base to leverage off," he said.

Today's announcement is seen as a blow to Telecom, which with other telcos had warned, in a report by Castilia, the government's policy would threaten their own investment plans. However, Telecom this afternoon reaffirmed an earlier change of heart by welcoming the proposals; saying it looked forward to working with government funding to complement its plans to take broadband even further, including to those areas that are not commercially viable.

Chief executive Paul Reynolds said the telco would assess and evaluate the government's proposals in detail as it begins to prepare its own formal submission. "Specifically, Telecom will be reviewing the opportunities the initiative presents to work with the proposed CFIC to extend the reach of Telecom's own ultra-fast broadband network and to utilise the fibre networks others may build," he added.