Vodafone, Telecom strike multi-million broadband deal

The Government has finalised a deal with Vodafone and Telecom for its $285 million dollar rural broadband initiative.

Communications and Technology Minister Steven Joyce described the news as a significant milestone in a journey towards a "better connected and digitally enabled, productive and growing economy".

Telecom and Vodafone submitted a joint proposal to the government's tender for the provision of broadband services in rural New Zealand last November.

In February the Government said it had commenced negotiations with both telcos to boost broadband speeds in rural New Zealand.

"Not only have we secured an agreement that exceeds the government's RBI objectives, but we will have 252,000 customers in rural New Zealand getting access to high speed broadband that compares well to urban levels of service and prices.

"I am confident that we have secured the best deal for creating a step change in broadband services for rural New Zealand," Joyce said.

The telcos are expected to begin the roll-out of infrastructure about the middle of this year, with the initiative expected to be completed over the next six years.

The initiative will provide 100Mbps services to 95 per cent of rural schools, and a minimum 5Mbps broadband service to over 80 per cent of rural households, within six years.

Mark Ratcliffe, chief executive of Telecom's network business Chorus, said he expected about 500 rural schools would be connected to fibre within the first year.

"Because we're able to build on significant existing infrastructure, capability and experience we can achieve a whole lot in a very short period of time."

Vodafone chief executive Russell Stanners said:"Not only does this deliver broadband access, but rural Kiwis will see a significant expansion of mobile voice, SMS and data coverage".

The final contracts with Telecom and Vodafone provide for:

* 86 per cent of rural houses and businesses having access to broadband peak speeds of at least 5Mbps (compared with 20 per cent of rural homes and businesses at present. The RBI objective was 80 per cent)

* The construction of 154 new cell phone towers and the upgrading of 380 existing cell towers to enable fixed wireless broadband to rural customers, as well as improved mobile coverage

* Telecom extending their existing fibre network by approximately 3,100 kilometres, with some homes on route being provided with the opportunity of fibre to the premise at urban prices

* An additional 6200 square kilometres of mobile coverage across New Zealand (making a total of 125,700 square kilometres)

* 700 rural schools connecting directly to fibre networks, and 48 schools having digital microwave radio connections - this equates to 95 per cent of rural schools having access to ultra-fast broadband speeds of 100Mbps (the RBI objective was 93 per cent)

* Wholesale prices comparable to urban pricing

* All competitors to Telecom and Vodafone being able to access rural broadband infrastructure funded by the government on a non-discriminatory basis.

* Telecom extending urban-like fixed-line broadband speeds to 57 per cent of rural customers

* An upgrade path to 4G.

Joyce said the Rural Broadband Initiative (RBI) was a high priority infrastructure project for the government.

"It has been important to ensure we achieve the best value we can for rural communities and taxpayers, while having the confidence that the providers selected can deploy a resilient network that at the same time allows for competitive products to be provided to rural customers."

Telecom applied for a revision of their operational separation undertakings as part of finalising the contracts.

"Concerns about the clarity of Telecom's proposed variation were raised by submitters. On that basis, I will be making a counter proposal with minor changes to Telecom to clarify the intent of the variation, which I expect to be responded to quickly," said Joyce.

"The revised undertakings will ensure that operational separation is upheld while enabling Telecom to offer RBI prices for services provided over government subsidised RBI infrastructure."