KEY POINTS:
In the normal course of events, the Auckland City Council should not be considering investment in a fibre network to provide faster and cheaper broadband across the city by 2010. This is hardly the stuff of core council business, and, in a rates-sensitive environment, raises obvious questions. Yet Telecom's failure in this area provides logic enough for the council to be an investor of last resort in a public-private partnership.
The council has, like the Government before it, recognised the risk of not providing faster and cheaper broadband. Auckland is competing with the likes of Sydney and Brisbane to attract, and retain, businesses. Matching them, and cities farther afield, will not be achieved by going along with Telecom's plodding progress. The council, like its counterpart on the North Shore, which is in partnership with powerlines company Vector, has good reason to initiate its own network.
Telecom's announcement this week of a $1.1 billion capital return to shareholders underlined this. The company's sale of its Yellow Pages business in March reaped $2.4 billion. Long-suffering customers fondly imagined a large slice of this would be used to update and expand its creaking infrastructure. Instead, Telecom shareholders will be richly rewarded. This, along with investment in the problematic Australian market, means capital expenditure will, again, be strictly limited.
The blame for this market failure lies, ultimately, with those who drew up the conditions for Telecom's privatisation. The outcome is that public money is having to be used to remedy the investment shortcomings. It is an unsatisfactory scenario. The city council has been left with little option. In terms of Auckland's economic wellbeing, its response is a realistic one.
