Rural broadband to be funded by TSO changes

Telecommunications Service Obligations reforms will fund rural broadband promises, according to a discussion document. Photo / Kenny Rodger

The Government wants to progress rural households' access to broadband and proposes reforming the Telecommunications Service Obligations (TSO) to achieve it, a discussion document shows.

Communications and Information Technology Minister Steven Joyce today announced the release of two discussion documents on the Government's rural broadband and the TSO.

Mr Joyce previously announced the Government would fund a $300 million rural broadband initiative.

Today, he said it would be funded through a $48m direct contribution, interim funding of $52m, and the rest through a new TSO.

The new TSO will be "a more transparent contestable industry-wide mechanism that focuses on developing rural telecommunications", Mr Joyce said.

The TSO levy has been in place since 2001 and involves the industry paying the levy which is paid back to compensate companies supplying service to rural customers.

Telecom has received $70m from the TSO but the changes will see that drop to $50m and be open to the industry.

There had been "considerable controversy" within the industry about the TSO and it needed to be more transparent, Mr Joyce said.

Changes to the TSO would not affect the obligation for companies to provide free local calls, he said.

"Likewise, there are no plans to further loosen rules around foreign ownership of Telecom."

Tony Baird, chief executive of Farmside - a rural broadband provider, welcomed the changes to the TSO.

Farmside provides its broadband using a satellite and wants to see greater recognition of the role satellite has in providing rural internet connections.

Satellite dishes cost $1500-$2000 to install and Mr Baird would like to see the Government help cover some of that cost, particularly for customers deemed not to be commercially viable.

Farmside's monthly broadband rate starts at $49.95 and they try and remain competitive with urban rates, Mr Baird said.

Satellite provided new challenges, with the threat of being knocked out of orbit by a comet or stray missile and disturbance in severe wet weather, he said.

However, fibre could be affected by earthworks, floods and earthquakes.

The main advantage of satellite was that it could be installed immediately, while it would take six years to lay fibre, Mr Baird said.

"I'm not saying satellite is the only solution but I think it should be recognised as a key component of the solution.

"Probably for 3-5 per cent of the population this is a really good way of doing it."

Mr Baird welcomed the changes to the TSO and said the fund should be used to fund a "range of technologies".

The two discussion papers are open for submission until October 30.

- NZPA