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
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.
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
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
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.