Future of NZ$28 million fibre fund in doubt

Negotiations loom between network operator Chorus and New Zealand government company Crown Fibre Holdings over the future of a stranded fibre connection fund.

A fund established in 2012 to help finance free residential connections to New Zealand's Ultra-Fast Broadband (UFB) network appears to be stranded.

Only NZ$100,000 of the NZ$28 million fund has been used, according to a parliamentary review of Crown Fibre Holdings, the government-owned company that manages the funding of the UFB rollout.

Chorus' "Non-Standard Installation Fund" was established to provide free UFB connections for premises beyond the standard 15-metre distance that the company connects automatically.

Paid for by Chorus, it was to cover the cost of connecting dwellings up to 200 metres from the network. However, because Chorus has progressively cut the cost of connecting apartments and rights-of-way, the future of the fund is now in doubt.

Spokespeople for Chorus and Crown Fibre Holdings have told ZDNet that negotiations over what to do with the money are looming. However, neither was prepared to outline the options being considered.

Chorus said the fund is "notional", and included in its connection capital expenditure. If the fund were to be discontinued, the company would update the market.

Chief executive of the Telecommunications Users Association (TUANZ) Craig Young said he would prefer to see the fund remain available, because as UFB adoption increases, more and more non-standard connections would need to be serviced.

The availability of the fund made it easier for service providers to sell UFB services, he said.

Crown Fibre Holdings told parliament that it does not have access to information on how the cost savings have been achieved, but that it believes they are the result of productivity and efficiency gains made after two years' experience.

"The savings are also in line with international experience, for example that of Verizon Communications Incorporated in the United States," the review report (PDF) said.

The Chorus fund was established at NZ$20 million in November 2012, and increased to NZ$28 million in March last year.

That boost was among a package of changes negotiated with Crown Fibre Holdings after regulatory intervention by the Commerce Commission threatened to slash revenue from Chorus' legacy copper network.

"Given the enormous benefits and the wide range of services UFB will offer, we want switching to fibre to be as simple as possible," IT Minister Amy Adams said in 2012.

"While the provision of free connections was already in place for the vast majority of homes, the uncertainty for those classed as non-standard was creating some concern for retail service providers and the public."

Crown Fibre Holdings also told the review that around 25 percent to 30 percent of premises face consenting issues to allow a connection, noting that the solutions to this rely on government policy and law changes.