1 Apr 2009

Broadband investment plan leaves some cold

8:51 am on 1 April 2009

Farmers and some regional areas have objected to being left out of the Government's plan to contribute $1.5 billion towards an ultra-fast broadband network covering 75% of the country.

The Government is planning to create a Crown-owned company to invest the money in fibre-optic broadband infrastructure covering 25 cities and towns.

Farmers say the rural sector has been left out, despite its considerable contribution to the economy, but Communications Minister Steven Joyce, who unveiled the plan on Tuesday, says laying fibre to every farm is not practicable.

Mr Joyce says the Government will announce further rural broadband plans in a few weeks' time.

But West Coast mayors have expressed disappointment that their region has been left out of the strategy.

Grey District Mayor Tony Kokshoorn says the region should not be left out because it is booming and is making a contribution towards government revenue, while Westland District Mayor Maureen Pugh says decisions should not be made solely on a population basis.

Federated Farmers president Don Nicolson says towns and cities covered by the broadband plan already enjoy the best internet connections in the country.

Mr Nicolson says the rural sector will be expected to help get New Zealand out of recession and deserves immediate access to broadband to assist with domestic and international trade.

Mr Nicolson acknowledges that the Government has set aside $48 million for a separate rural broadband fund, saying he will be interested to see how that will be spent.

The Telecommunications Users Association welcomes the plan but believes the Government should aim to reach more than just 75% of the country. It says small and rural communities would arguably benefit the most from the service because of their isolation.

Investment structure

The Crown Fibre Investment Company will be established to invest in joint ventures with the private sector to develop the fibre network.

Mr Joyce says joint venture partners could include telecommunications companies, local authorities, electricity lines companies and iwi.

Mr Joyce acknowledges it is possible the scheme could cost more than $1.5 billion, but will not make an open-ended commitment to the scheme. The focus will initially be on business, schools and health providers.

Telecom is already spending billions of dollars installing fibre to thousands of new roadside cabinets, while energy network firms, including Vector, have been aggressively pushing into building fibre-optic networks.

New Zealand's three biggest telecommunications companies will not be able to exert a dominant role under the plan.

Guy Hallwright, an analyst at Forsyth Barr, says industry estimates suggest the Government's plans could cost between $4 billion and $6 billion, which would mean the private sector would have to come up with between $2.5 billion and $4.5 billion.

Mr Hallwright says Telecom, Vodafone and TelstraClear are barred from becoming majority shareholders in any of the regional investment companies, leaving utility companies to take a majority stake.

Vector says it intends to take part.

Mr Hallwright says the plan does not reveal any big drawcards for companies wanting to participate, such as a guaranteed rate of return.

He also says the plan seems designed to force control of the telecommunications network out of Telecom's hands.