KEY POINTS:
Communications Minister David Cunliffe says the Government may consider investing in rural broadband services and will also look at punishing telecommunications companies that under-invest in rural and regional infrastructure.
Cunliffe said "sanctions" for under-investment might be introduced as part of a wider review of telecommunication service delivery to rural communities.
He said it was too early to comment on what the sanctions would entail, but he would make further announcements before the end of the year.
"I want to say that I am hearing loud and clear from farmers and rural New Zealand a great deal of disquiet about the state of the network," Cunliffe said yesterday at the annual telecommunications and ICT conference in Auckland.
"Quite clearly, there has been a history of under-investment in rural telecommunications, and we want to see that turned around."
The minister did not rule out the Government footing part of the bill for the development of broadband infrastructure in rural areas.
"There is some emerging evidence of gaps, particularly around rural and regional backhaul," Cunliffe said.
"There is an arguable case for some Government intervention to address those gaps, but exactly the detail of the nature of the gaps and work around the nature of the options is still ongoing and those are key decisions the Cabinet needs to make in due course," the minister said.
New Zealand's small population dispersed over a rugged geography has made providing phone and internet services expensive in rural areas.
The Australian Government said last week that it would pay a $1 billion subsidy to a private partnership building a copper and wireless network capable of delivering up to 12 megabits a second into rural and regional areas.
Cunliffe indicated he could not give more detail on any future investment until it had been through the Cabinet process.
"We are currently examining some pretty full research around rural strategies and I will be bringing to Cabinet a proposal to substantially revamp the telecommunications service obligations [TSO], otherwise known as the Kiwi Share."
Telecom and its competitors pay TSO levies in proportion to their revenues, which subsidise Telecom's service to rural communities.
Cunliffe said given the technology changes and coverage obligations, there was a case that a contestable TSO funding might better serve the interests of rural communities.
Vodafone chief executive Russell Stanners described the TSO agreement as "complete bollocks. The TSO is just a simple tax on competition".
He said it was an archaic piece of legislation that needed to be thrown out.
"As we grow, we pay more money to Telecom to subsidise customers which we already cover with our network."
Stanners said rural broadband services would never be delivered by a fibre network because it was too expensive.
"It's going to be wireless," he said. "We're very well positioned to be a company that delivers it [wireless broadband] because we can deliver our 3G network right out into the rural areas."
Kiwi Share
* The Government is not discounting the possibility of investing in telecommunications infrastructure as part of a review of the Kiwi Share.
* The Kiwi Share is an agreement introduced before Telecom's 1990 privatisation to retain affordable access to residential phone services by rural and urban customers alike.
* Renamed the telecommunications service obligations (TSO) in 2001 when revised to include dial-up internet services.
