TPS on fibre plan

Tom Pullar-Strecker reviews the investment plan:

Communications Minister appears genuinely chuffed with the financial model for the ultrafast initiative that he and his team of cerebral but experienced advisers have dreamt up.

The plan released on Wednesday is certainly ingenious.

The fact Steven is one of the very few MPs that has owned and run a major business, made him the ideal Minister for this portfolio.

The Government will, if necessary, foot the entire bill for rolling out fibre-to-the-street, minus any construction overruns, while private investors in local fibre companies (LFCs) will only buy back their share of the infrastructure as they connect up homes and businesses.

That could help nullify the “Catch 22” that threatened to leave the initiative stillborn – private investors couldn’t guess their return without knowing how ubiquitous the national network would be, which would depend on other investors’ assessment of their likely return.

And Steven has first hand experience of the need for commercial investors to be able to estimate returns.

There is another reason to take the initiative more seriously.

Instead of injecting a “one-off” $1.35 billion into the public-private partnerships in the vain hope that would be enough to garner sufficient private investment to get the whole job done, the Government is now considering investing far more over time. Investment vehicle Crown Fibre Holdings will be to recycle receipts from private investors as they buy shares in LFCs, after the first fibre customers sign up.

The Government’s investment at any one time will be capped at $1.35b, but the total it commits over the life of the scheme could be double or triple that.

“$1.35b is what Crown Fibre Holdings will have access to in order to fund the infrastructure,” says Mr Joyce. “There is certainly the possibility that some or all of the money will be reinvested, but it’s simply too soon to say how much will be reinvested or how many times that might occur.”

Does this mean 75 per cent of people can be assured of getting fibre within 10 years? Hardly. But instead of scuppering the scheme, if $1.35b is not enough to get the job done, it might simply take longer.

This is the most critical part. The big question I, and others, have had, is what if the planned level of investment is not enough to get to 75% of NZ. Do you then scrap the plan, or do you accept a lower coverage target. The answer is neither – you just recycle the crown investment, so you get there eventually, even if it takes a bit longer.

I am going to be fascinated to see what offerings are made by the various telcos, ISPs, lines companies and local government.

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