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It was pitched as a solution to the problem of flaky internet access in rural areas and the Government chipped in with millions of dollars in funding to make it happen.
But three years after Project Probe was set up to deliver wireless broadband to schools, farmers and rural communities, the service has attracted just 2000 customers.
The Government has never divulged how much money it devoted to Probe, but industry sources suggest it was more than $25 million.
Much of Telecom's share of that money went into supplying subsidised fixed-line broadband connections to schools but the wireless services consumed a significant amount. Telecom will not reveal how much.
"How it was allocated within our business, I've no idea," said Telecom's head of rural strategy, David Walker.
Operated by the state-owned broadcast and telecommunications infrastructure operator Kordia, the Extend wireless service (which is resold by Telecom to its customers as Xtra Wireless) is running at a loss due to poor uptake blamed on the high cost of the equipment and what Telecom claims is a 20 per cent failure rate with the service.
Kordia's chief executive, Geoff Hunt, said the company had invested "significant sums" in preparing 32 transmission towers to provide wireless broadband to rural areas covering 700,000 people.
Its current wireless network had capacity for 20,000 customers, but Kordia had only achieved 10 per cent of that.
"It was a very large expenditure for only 2000 customers," said Hunt, who has lobbied Kordia's main retail partner Telecom to put more resources into pushing the Extend service - without success.
Extend is a 'line-of-sight' wireless technology that operates from Kordia's network of broadcast towers, delivering wireless broadband and phone services up to 50km from the transmitter.
Partners such as Telecom, which claimed the lion's share of Project Probe funding when it won 11 of the 14 Probe tender regions in 2004, originally expressed enthusiasm for the technology, but that seems to have waned as it has become obvious that Extend is a hard sell.
While demonstrations of the service during the bidding war for Probe funding had featured a wireless telephone service, meaning farmers could effectively cancel their fixed line phone subscription, the phone service had never been offered by Telecom.
Hunt said Kordia's board had asked him to explain the low take-up of the Extend service and look at ways of boosting sales.
"Our frustration is in trying to influence take-up with other parties," he said.
"It's a simple commercial decision for Telecom. Where do they spend their marketing budget to get the best results?"
Telecom has pushed its Extend-based "Xtra Wireless" service at the Fieldays farmers expo and through partnerships with Fonterra and internet provider Bay City, but interest has been minimal.
"Customers have indicated that the high set-up costs and complexity of the Xtra Wireless product have not necessarily made it a compelling broadband solution," said Telecom spokeswoman Lenska Papich.
"At the point of installation there has been found to be around a 20 per cent failure rate due to a number of local factors such as shelter belts impeding the signal, which puts limits on the number of customers who can get the service," she added.
Project Probe was designed to subsidise the cost of the wireless technology and Telecom claims the grants made available in 2004 have reduced the cost of the equipment from $1475 to $700. Even that hasn't been enough to stir interest and now satellite services, which at the time of the Probe tendering were considered expensive, appear to be cheaper than Extend.
"Bay City will make inroads with their satellite service," Hunt admitted.
Federated Farmers vice-president Don Nicolson said feedback suggested the wireless service was too expensive for farmers, who were increasingly using broadband for farm productivity tools.
"Farmers are a major contributor to the economic wealth of the country and until there's closer parity to what their urban cousins pay, there's going to be limited interest," he said.
Nicolson, who is based in Southland, said Telecom was investing $10 million in its fixed line network in the region this year which would help extend DSL (digital subscriber line) services to more farmers.
Project probe
* Said to have received $25 million in Government funding.
* Has attracted just 2000 customers.
* Uses Kordia's Extend service - a wireless technology that delivers broadband and phone services to remote users.
* Telecom resells the Extend service as Xtra Wireless.
