KEY POINTS:
David Skilling, the outgoing head of the New Zealand Institute think-tank, is fond of noting that distance from markets will be much less a tyranny for this country if there is no skimping on investment in technology, especially that involving high-speed access to the internet. Only last month, this credo led him to outline an ambitious plan to lay swathes of fibre-optic cable to jump-start broadband capability. Doubtless he is delighted that soon afterwards much of the thrust of his FibreCo model has been adopted by the National Party. Details are scant but it is clear that pragmatism is underpinning a drive for faster and cheaper broadband.
National's proposal would see a taxpayer investment of $1.5 billion over six years in a joint venture with the private sector to roll out fibre to the homes of three-quarters of New Zealanders. Telecom, the dominant telecommunications investor, is, logically, the main contributor to a public-private partnership that would establish a national fibre network at an estimated cost of $3 to $5 billion. The work would supersede the company's own $1.4 billion programme that takes fibre-optic cable to roadside cabinets, then to users via copper lines.
That is capable of delivering only what comparable countries now have, not reaping the benefits of a truly high-speed network. The latter point is important. New Zealand is competing to not only attract but to retain businesses, especially exporters seeking a cost-effective global presence. Matching overseas cities' infrastructure is pivotal to success. That would not be achieved, in terms of broadband speed or pace of implementation, under Telecom's present "next generation" network programme. Going straight to fibre seems logical.
Communications Minister David Cunliffe, though, sounds miffed by National's initiative. The Government has, after all, spent much time reshaping the telecommunications sector by enforcing a three-way split of Telecom and local-loop unbundling. "If this extravagant subsidy is ever rolled out, all the good work the Government, industry and business have done in dismantling Telecom's monopoly position will be lost," said Mr Cunliffe.
Telecom would, he added, be cemented in as the dominant fibre network provider. That is a risk, but National says regulations designed to stimulate competition will be part of its proposal. Harsh lessons about telecommunications hegemony must have been learned. The network must be priced properly.
National's advantage over the Labour Party in this area is likely to be shortlived. Given the work done by the Government, it seems certain to announce something similar, probably in the Budget. Nonetheless, National leader John Key has produced a proposal that adds substance to his frequent talk of Government leadership to lift economic performance and productivity.
Ideally, of course, Telecom and other internet providers would, of their own accord, be doing the sort of upgrade envisaged by National. But this will not happen, partly because of the conditions of Telecom's original privatisation. The company is still not subject to the intense competition that would spur investment, while the small size and perhaps questionable appetite of New Zealand's market raises issues about the risk involved in making such large-scale expenditure.
A Government is inured to the risk but it should be no less aware of it. For public investment on this scale we need to ensure that wireless communications will not render line technology redundant too soon.
