KEY POINTS:
Private think-tank the New Zealand Institute is calling for a regulated monopoly company to lay swathes of fibre optic cable to jumpstart New Zealand's broadband capability.
But critics reacted with alarm at the idea of a new monopoly and question whether there is demand for super-fast internet to deliver such a company an adequate return.
It would cost the proposed firm - which the institute chief executive David Skilling dubs Fibre Co - $4-$5 billion to reach 75 per cent of the population over a decade.
It would deliver similar benefits to the economy each year, said Skilling.
The institute - whose members include Microsoft chief financial officer Chris Liddell and Stephen Tindall - was applauded last month for the first part of its report, warning that New Zealand needs much more investment to catch up with other country's broadband services.
But some in the telecommunications industry - like Vodafone - question whether the institute has become too caught up in expensive fibre optic infrastructure and was dismissive of other technologies.
"Private investors in fibre in New Zealand will look at this proposal with some alarm," said Vodafone general manager of corporate affairs Tom Chignall.
"The creation of a Fibre Co monopoly business will be a big drag in investment by others.
"It fundamentally changes the environment within which they made their investment decisions."
The company would include investment from the Government which would have a shareholding.
Telecom - which under the institute's proposal could sell on its copper wire networks to the Fibre Co - has welcomed the proposal saying it is a valuable contribution to the debate about infrastructure costs.
Responding to Government plans to split the company, Telecom last year proposed its network could be spun off into a separate company and sold.
Forsyth Barr telecoms analyst Guy Hallwright said some companies - film-maker Peter Jackson's organisation in Wellington was a good example - needed super fast speeds.
But they already had access to such services without the need for a new company like Fibre Co.
Skilling said that New Zealand should act with urgency to invest in fibre to build competitive advantage.
New Zealand's fibre future remains reliant on Telecom, which faced weak incentives to invest significantly in a fibre access network.
A price-regulated Fibre Co would own the infrastructure and would grant equal and open access to the fibre network to service providers and others at a regulated price.
"Fibre Co will be structured so as to attract the maximum amount of private capital," Skilling said.
"The proposed regulatory changes will make private investment in fibre more attractive than is currently the case.
"Targeting infrastructure investors who are comfortable with the risk, return, and time horizon properties that are associated with infrastructure assets like fibre, makes it more likely that private investment will be delivered.
"We estimate that the Government may be required to invest around $1 billion over the next 10 years to finance the portion of Fibre Co that is not fully commercial."
Telecom could have a key role.
Under the proposal, Telecom's existing copper and fibre last-mile networks would be sold into Fibre Co on an agreed commercial basis.
