Broadband plans unveiled

Steven Joyce has released details of the Government’s $1,500 million investment into ultra fast broadband so that it reaches 75% of NZers within a decade. Key details:

• A Crown-owned investment company called Crown Fibre Investment Co or CFIC will be established.
• CFIC will invest alongside private sector co-investors in regional fibre companies that will deploy and provide access to fibre optic network infrastructure in the 25 towns and cities covered by the initiative.
• CFIC will select local partners based on the amount of additional fibre coverage being proposed, the proposed capital structure, the commercial viability of the proposal, consistency with government objectives and the track-record of the partner.
• It will be an open infrastructure model that will ensure all telecommunications companies have the option of using the fibre.

The Govt also has a Q&A.

This looks a very good process. Most people in the industry thought a regional approach was preferable to a national approach. So there will be up to 25 local fibre companies that are part owned by the Crown and part-owned by private operators.

A key aspect will be the market structure:

It is expected that ISPs, network providers or other service providers will purchase access to dark fibre and install their own active electronics.  Local Fibre Cos themselves will have a limited ability to install their own active electronics as well, subject to Crown Fibre Investment Company approval.

In turn, these parties (except the Local Fibre Cos) may use these elements to produce a retail broadband (or other) service, which is sold to end-users.  The Local Fibre Cos cannot do this due to their restriction on selling retail services.

These parties may alternatively use these elements to produce a wholesale “bitstream” type of service, which is sold to ISPs or other service providers (Local Fibre Cos can undertake this activity, but as noted above this is subject to Crown Fibre Investment Company approval).  The parties that purchase these wholesale services will then use them to provide a retail service.

So generally the local fibre cos will provide access to dark fibre only. In some areas they may be allowed to provide wholesale bitstream services, but only if needed by the market. And in no circujstances can they provide retail services. Joyce is clearly motivated to avoid the vertically integrated monopoly legacy we have over the copper lines.

Also good to see focus on regulatory issues:

In addition, the government will assess how best to facilitate access to and use of fibre cable deployment on telephone and electricity poles, local authority-owned passive infrastructure such as ducts, micro-trenching and fibre-optic cable “drops” from the street-side into customer premises.  This may involve codes of practice or regulatory or legislative amendments.

And for those outside the 75%:

The government made a pre-election commitment to provide $48 million to improve rural broadband.  The Minister for Communications and Information Technology is currently developing options around this commitment and expects to make announcements regarding the direction of the government’s rural telecommunications policy in the near future.

The framework looks very good to me. The hard part will be evaluating the competing bids – a top class selection criteria, process and panel will be needed.