Govt unveils $300m rural broadband plan

Photo / Dannevirke News

Cabinet has approved a $300 million plan to roll out high-speed broadband services to rural New Zealanders while overhauling the way Telecom is compensated for supplying services that aren't commercially viable.

Under the proposal signed off by the Cabinet, broadband services of at least 5Mbps will be extended to 97 per cent of rural households, with the remainder getting at least 1Mbps, Communications Minister Steven Joyce said in a statement.

Part of the initiative involves connecting 97 per cent of rural schools, and therefore 99.7 per cent of students living outside urban areas.

"These speeds will ensure every student has access to fast internet that will help prepare them for living and working in the 21st century world," Joyce said.

Under the plan, school will become a hub for rural broadband. It comes after farmers and others who increasingly rely on the internet for communications, have clamoured for better speeds and connections, saying current slow or unobtainable services are hampering their business.

The cost will be met by a government grant of $48 million plus $252 million from the Telecommunications Development Levy, which replaces the TSO, at a rate of $42 million a year for six years.

Under the existing TSO, telecommunications companies pay a levy which is then paid to Telecom in compensation for maintaining rural services including free local calling.

Telecom issued a statement this morning saying that if the plans were enacted in their current form, Telecom's EBITDA (earnings before interest, tax, depreciation and amortisation) guidance for each of the 2011, 2012 and 2013 financial years would be adversely impacted by up to $56 million.

The government will put the project out for tender in April, with work to start in early 2011.