Govt narrows rural broadband race to Telecom, Vodafone

Photo / Hawkes Bay Today

The Government is close to striking a deal with Telecom and Vodafone for its multi-million rural broadband initiative, it said today.

Communications and Information Technology Minister Steven Joyce said this morning the government had commenced negotiations with both telcos to boost broadband speeds in rural New Zealand.

Negotiations are expected to be completed by the end of March, with the roll out due for completion by 2016.

TUANZ chief executive Paul Brislen said the open-access nature of the rural broadband network would guard against a Telecom regaining a monopoly.

Open-access means that although Telecom and Vodafone will build the rural network, other teleco's will be able to use the lines to offer service to customers.

Brislen said he did not see Telecom returning to its former dominant position, despite it looking likely that the telco would build a good deal of the country's broadband infrastructure.

Both Vodafone and Telecom today welcomed the news, which they said was based on existing infrastructure, capability and experience.

The companies said they would continue to compete fiercely for rural customers.

Telecom and Vodafone submitted a joint proposal to the $285 million Rural Broadband Initiative (RBI) tender last November, and were among three proposals, including state-owned Kordia Group, who were shortlisted for the contract in December.

Telecom is also the priority bidder in the Government's ultra-fast broadband initiative for 25 regions around the country, including Auckland.

Joyce said the proposal was based on proven existing technology, and provided the government with confidence that it could be deployed.

He said the government had specifically asked for parties to consider collaborating on joint bids to reduce construction costs.

"This bid does just that."

Currently only 20 per cent of customers in rural New Zealand can access speeds of at least 5 Mbps.

About 86 per cent of rural households and businesses and 95 per cent of rural schools would receive an ultra-fast connection once the initiative was rolled out, he said.

"For many remote and not-so-remote rural areas this will be light years ahead of where they are today and will ensure they participate in the promise of the digital economy," Joyce said.

National farmers' lobby, Federated Farmers, was sceptical but suspending judgment on the government's decision to negotiate only with Telecom and Vodafone.

Federated Farmers chief executive Conor English said farmers feared an outcome in which "we might get speeds in six years' time that Wellington had six years ago."

"This is a $300 million donation (by the government to rural ultra-fast broadband providers) and we've got to get a massive change. We don't want incremental stuff. The government is really putting itself out there with this. It's a brave decision."

Based on what was known of the current proposals, "it would be an enormous amount of work to get it close to the expectations we have."

The joint bid involves an extension of Telecom's fibre network to deliver fixed wireless and fixed wire broadband to 252,000 customers in rural New Zealand, and the construction of fibre-connected cell phone towers to enable fixed wireless broadband to rural customers.

The joint proposal was the only one that increased mobile coverage, and it would ensure "serious competition in the last mile with many rural customers being able to choose from fixed wireless, ADSL2+ and mobile broadband", Joyce said.

Joyce said he expected to see affordable wholesale and retail prices from the investment.

"I have also been clear that strict open access rules will be included in any contract. This will promote healthy competition in both the rural wholesale and retail broadband markets.

Unsuccessful tender parties were being encouraged to start working with Telecom and Vodafone to look at ways to further improve solutions for rural New Zealand.

- Susie Nordqvist, Hamish Fletcher and BusinessDesk