Bidders get chance to drop their price

By ADAM GIFFORD

A reverse auction has broken out as competitors struggle to match Telecom's low bid for the Government's Probe project subsidy to get broadband to schools in remote parts of the Auckland region.

Wired Country general manager Mike Lancaster said he was given the chance to "dramatically reduce" his price, but Woosh chief executive Bob Smith said paying a lower subsidy was probably not in the best interests of consumers.

The Government subsidy is to extend broadband beyond the reach of existing networks and will mostly affect rural Franklin District, especially its west and east coasts, parts of Manukau City around Clevedon, Rodney and the Hauraki Gulf islands, which come under Auckland City jurisdiction.

Project Probe spokesman Mark Ford said an announcement on which companies would be the preferred broadband access supplier for further regions should be announced this month, but he refused to confirm if Auckland would be among the next batch.

Project Probe is being run on behalf of the Ministries of Education and Economic Development by a private consulting firm, Amos Aked Smith, which is insisting on a high level of secrecy.

The three regions that were allowed to act independently in choosing a supplier, Southland, Wairarapa and Northland, went with a Walker Wireless-Vodafone consortium.

The first three done through the Government's consultants, Waikato, Taranaki and Wellington, chose a Telecom offering of a digital subscriber line (DSL) solution using the existing copper network, combined with a wireless system being rolled out by state-owned networks company BCL.

Price was cited as a reason for the choice, although the Government has so far refused to give any details about the tenders and is still negotiating on how much subsidy it is prepared to pay for each of the three regions.

The competing bids were presented to representatives from Auckland councils with names removed, although it was clear from the details given which companies were involved.

A source said while the Auckland representatives preferred the proposal put up by Counties Power-owned Wired Country, there was initially a "huge" price difference down to the Telecom offering.

"AAS [Amos Aked Smith] were extremely sympathetic to the Telecom position in terms of building a decent IP [internet protocol] network," the source said.

Negotiations over price have subsequently slowed down the process. Lancaster said Wired Country was given a chance to revisit its bid.

"We reduced the price dramatically because we were given more options, such as putting some remote areas on to the satellite service," Lancaster said.

"While this is all going on we and Telecom are growing our networks, so some schools which would previously have come under Probe are now covered."

He said missing out on the Probe contract would affect the buildout of Wired Country's network within the Counties Power home area, which stretches from Awhitu Peninsula to near Raglan on the west coast and across to Kaiaua and Miranda in the east.

This means while Waiuku and Pukekohe customers will be able to get at least 1 megabit per second access speed and a voiceover internet protocol telephone service, people a little further down the road at Awhitu may be stuck with 5 kilobyte per second real access speeds and expensive toll service.

"If someone else gets subsidised, it is hard for us as a commercial business to get to some of those areas," Lancaster said.

Wired Country was offering more than Telecom, as it was extending its basic open access network.

Woosh's Bob Smith, a former Telecom Xtra chief executive, said he expected Telecom to seek a low subsidy.

"It is a defensive strategy to protect its extensive network by blocking alternatives. I would suspect that is what they are doing," Smith said.

Telecom spokesman John Goulter said the Probe tender was a competitive process and Telecom was not going to make any comment while it was going on.