Broadband plan could lead to review of Telecom separation

The Government's high-speed broadband spend-up has opened the door for Telecom to seek a review of its operational separation undertakings.

The proposal document released on Tuesday acknowledged Telecom faced a risk that the value of its investments could be eroded by the Government-backed fibre network.

Under the amendments to the Telecommunications Act in 2006, which saw Telecom split in to three operationally separate arms - its network division Chorus, Telecom Wholesale and Telecom Retail - the separation undertakings could be varied.

Telecom spokesperson Mark Watts said it was a fact the company was aware of and would take into account as it prepared a submission.

"As we get to grips with the details there is a big backdrop we consider this stuff against, one of which is the investment commitment we have under way already and that's a mixture of investment that stacks up commercially, but also a whole lot of investment decisions that stem from the undertakings," Watts said.

Communications and Information Technology Minister Steven Joyce said it was up to Telecom to determine how it wanted to "interface" with the proposed fibre roll-out.

First NZ Capital analyst Greg Main said it was a "high-stakes issue".

"If the Government moves on Telecom's undertakings, the risk is that New Zealand falls into a broadband hole with little investment for the next few years," said Main.

"This potentially provides the Government with some leverage over Telecom. If Telecom plays hardball, the political and public backlash could be strong."

Telecom shares closed up 7c at $2.37 yesterday.

High-fibre future

* The Government plans to invest $1.5 billion in fibre-optic telecommunications networks to boost broadband speeds.
* Private sector partnerships will be formed with telcos and infrastructure companies.
* The networks will cover 25 regions and 75 per cent of the population.
* Stage one, targeting schools, hospitals, businesses and some householders, is expected to be completed within six years, with a 10-year timeframe for the remaining households.