KEY POINTS:
The Government has given the strongest indication yet that it's willing to open its wallet to pay for improving the country's broadband infrastructure - and our links to the rest of the world.
Communications minister David Cunliffe's speech this morning at the Digital Summit talkfest underway in Auckland didn't feature any concrete new announcements on broadband investment, but there certainly seems to be appetite to step into the market in a handful of areas.
- Setting up of a private-sector utility company that would accept a lower rate of return on investment to build a fibre-to-the-node network beyond Telecom's.
- Invest in rural broadband infrastructure through Kordia.
- Set up a contestable fund to subsidise the building of a second fibre link to Australia.
- The Government wants access speeds of 20Mbps (megabits per second) to be available in towns of over 10,000 people. That's twice the speed Telecom is expecting to be able to offer.
Cunliffe says Telecom's $1.4 billion plan to push fibre out to roadside cabinets and improve broadband access speeds is "necessary but not sufficient" to achieve the Government's goal of getting into the top half of the OCED by 2010 and the top quartile by 2015.
He wants a more ambitious fibre to the node (FTTN) network to be built with the Government's ultimate aim to have a fibre cable going directly into homes. Who is going to pay for it?
Well, unlike the new Australian Government which plans to subsidise a FTTN build-out across the Tasman to the tune of A$4.7 billion, there hasn't been any money put in a pot for such a scheme - yet.
Cunliffe instead thinks there's scope for an investment group to be set up to provide an open-access utility service that would build and run a FTTN network open to all providers.
"A key barrier to investment in fibre to the node is the reluctance of... investors to accept the levels of return and longer time frame," said Cunliffe.
Instead, he's looking for "investments that are not driven by short term investment cycles" and investments that allow for "lower but still positive rates of return".
In some respects, what Cunliffe is hinting at has similarities to the Australian FTTN scheme, which will be matched by a large investment from the private sector - numerous groups have indicated their interest in investing, keen to take advantage of the Government subsidisation. The question is whether the same funding model will be adopted here.
In the rural sector, more investment will be needed, says Cunliffe, possibly through the state-owned broadband and broadcasting arm, Kordia.
He slammed Telecom for it's under-investment in the rural fixed-line infrastructure, pointing out that Telecom has spent on average just $22 million a year on its rural fixed line network for the last 13 years, when annual depreciation on that network runs at $50 - $70 million.
While some central Government funding was hinted at, Cunliife is looking to local and regional government to "step up to the plate" with broadband schemes.
Cunliffe also said there could be a "contestable subsidy" to build a cable between New Zealand and Australia that would reduce our reliance on the Southern Cross Cable - of which Telecom is an investor in. Such a build would cost big money, but Cunliffe says the cost of international connectivity is being held artificially high because of the lack of competition.
Some ambitious plans then, but to what extent will the Government contribute funding? The answer to that is numerous cabinet meetings, industry consultations and lobbying sessions away, but the looming election may be just the impetus to get the ball rolling quickly.
