The outcome of a bidding war for ultra-fast broadband will result in a major shake-up of the local telecommunications sector, writes Simon Hendery.
A clutch of companies with aspirations to build the nation's new broadband network have their corporate fingers crossed as they await the Government's pronouncement on a massive technology sector lolly scramble.
Officials at Crown Fibre Holdings, the agency driving the nationwide ultra-fast broadband (UFB) initiative, have begun poring over competing bids for the project.
The outcome of the UFB bidding war will result in a major shake-up of the local telecommunications sector - whichever way the Government leans.
Battle-scarred industry incumbent Telecom's future strategic direction - not to mention its share price - will be shaped by the decision, as will the growth plans of more than 20 other telcos and lines companies who all have their hats in the ring.
National's pledge to spend $1.5 billion over the next 10 years building a fibre-optic network delivering super-fast broadband to 75 per cent of homes and businesses was one of the party's more high-profile and widely trumpeted promises during the last election.
It has been a controversial vision, panned by critics as a costly and unnecessary overbuild of existing private sector broadband infrastructure, which won't deliver any tangible return on investment.
Supporters, however, say the resulting nationwide "fibre-to-the-premise" network will give the country a significant economic fillip, including opening up new export opportunities for local businesses.
Cynics point to studies such as those carried out by Wellington think tank Motu which has concluded there is no discernible economic benefit to be gained by moving from "slow" to "fast" broadband.
Supporters of the UFB concept counter that a Motu-style analysis lacks depth and is akin to arguing, in the 19th century, that there would be no foreseeable benefits to building a national electricity network.
"I see the investment in ultra-fast broadband as an absolutely practical, inevitable response by the New Zealand Government," says Martin Stewart-Weeks, a Sydney based director of public sector initiatives for technology company Cisco.
"[The Government] are saying: 'This is probably the piece we need to step up and work on because once we do that we're going to unleash the kind of innovation and creativity we know from the rest of the world seems to be what happens when you give people a chance to get on these new platforms and do cool new things'," says Stewart-Weeks.
"The fact that we can't necessarily think right now of every possible thing we could do with this network is not the problem. In fact in some ways that's good because you need room to allow people to be really quite inventive about how they're going to use new sources of data or new connections to create new services."
He cites projects Cisco is involved with in Europe and the US which, while still in their early stages, are beginning to show the sea-change effects on communities and economies of delivering suburban access to super-fast broadband.
Access to business services such as high-quality video conferencing at suburban work centres means more flexibility for staff and leads to flow-on positive economic and environmental effects such as reduced pressure on transport networks because fewer people need to commute into the CBD.
Stewart-Weeks and others argue that in New Zealand's case, a fibre broadband network is a key part of the technology chain that local businesses need to link into if they want to trade effectively with the rest of the world.
The same high-quality video conferencing technology that suburban workers are embracing overseas could be put to work here as an effective alternative to some international business travel, a vital cost-saving for local firms facing the often-talked-about "tyranny of distance" associated with growing export markets from New Zealand.
Ahead of deals being signed to kick off the Government's UFB initiative, there are modest indications that local enthusiasm for broadband - on both the supply and demand sides - is improving. After languishing in the low-20s for several years, New Zealand has snuck up to 18th spot on the OECD's league table of broadband subscribers per capita.
With 23.2 fixed broadband subscribers per 100 inhabitants as of December last year, we now sit very close to the average penetration rate for all 31 OECD countries (23.3 subscribers per 100 inhabitants).
Pushing this type of broadband uptake metric into the mid- to high-30 per cent ground currently occupied by some of the world's most fibre-enabled countries is viewed by broadband enthusiasts as a vital for our future economic well-being.
But the major telcos - Telecom, Vodafone and TelstraClear - argue that the vision of broadband's potential as a business and lifestyle enhancement tool is not enough to drive the industry's success.
The CEOs of the three telecos used a major industry conference in Auckland in late June to claim consumer resistance to paying for technology, and the cluttered state of the market, were holding back the industry.
"There are more of us, spending more than ever, chasing a slice of the pie that's staying the same and the risk attached to every dollar of investment has risen dramatically," Telecom's Paul Reynolds told the conference.
It is the kind of gloomy line the company has been keen to articulate in the corporate tussling that has been going on ahead of the Government's UFB decision.
Telecom's message to the Government is that the economics of the national fibre network don't stack up unless it is allowed to bring its existing fibre infrastructure - 25,000km of cable - into the mix.
"The last thing New Zealand Inc. needs is for our largest private sector investor to be forced into competition with state-owned infrastructure. That's just going to end up with mutually assured destruction.
"It would quite simply be crazy," Reynolds argues.
"The best solution is for Telecom to be at the heart of the Government's UFB plans. We've got the fibre expertise, we've got the fibre in the ground, we've got the people to do it, and we've got the customers."
Not surprisingly, Telecom's major rival for the UFB work, a consortium of regional utility companies bidding as the Regional Fibre Group, takes a different view.
"If we look at what's happening in the advanced OECD countries we see major fibre roll-outs which are transforming their economies," says Simon Mackenzie, chief executive of Auckland lines company Vector, a major RFG participant.
"These fibre networks are not networks for the incumbent telcos, they're totally new networks that support a variety of solution providers and retailers, transforming how health, education, and even transport services are delivered to those economies to really give a big step-change in efficiency, quality of lifestyle and productivity."
Mackenzie says though he is not opposed to Telecom being in the running for the UFB work, he has concerns about the telco's ability, as a provider of both retail and wholesale services, to deliver the "open-access network" he sees as being at the heart of providing the competitive landscape the infrastructure needs to be built around.
"The true open-access networks are the likes of lines businesses such as ourselves," he says, referring to the electricity sector model of lines companies providing networks for competing retailers.
Vodafone CEO Russell Stanners, whose company has partnered with Canadian fibre network operator Axia to become the third bidder for the UFB development, is more accommodating of Telecom, saying he agrees its existing fibre build means it makes sense to bring it into the UFB.
With bids now in, Communications Minister Steven Joyce has the weighty job of deciding how best to divvy up a $1.5 billion project that is likely to form the framework for the country's digital infrastructure over coming decades.
As Telecom's Reynolds puts it: "This is a golden opportunity; let's get it right for everybody's sake."
The question Joyce needs to ponder is what getting it right looks like.
