14 Dec 2010

First fibre laid as broadband competition continues

7:42 am on 14 December 2010

Northpower is laying the first Government-funded fibre optic cabling in Whangarei, as companies continue to compete for involvement in the Government's ultra-fast broadband project.

The Whangarei contract was among the first awarded by Crown Fibre Holdings, which on Monday named Telecom as the preferred bidder for up to 80% of urban New Zealand.

Northpower has already laid fibre in Whangarei and expects to finish work on the network in three years.

By contrast, Telecom faces a difficult road, including a possible split so it can take part in the project.

A partner with Milford Asset Management, Brian Gaynor says the regulatory issues involved are formidable.

The New Zealand Regional Fibre Group, which represents other key bidders, says despite Telecom's status as a preferred bidder the door remains open for other companies to also win contracts, especially given the challenges faced by Telecom.

Telecom is considering splitting off its Chorus network arm to participate in the government initiative, and Forsyth Barr telecommunications analyst Guy Hallwright says the move would need shareholder approval.

Mr Hallwright says that process will take some time, and other parties will be in a stronger position to sign an agreement earlier.

Although he is optimistic Telecom can secure a deal, he says it's not clear whether Crown Fibre would allow a conditional agreement with Telecom or whether the whole process would be delayed..

Telecom will now start negotiations with Crown Fibre Holdings to provide a fibre network in 25 of 33 regions.

It has missed out on the Whangarei region and the central North Island, which account for 16% of the initiative.

In the Christchurch and Rangiora area, Crown Fibre Holdings is talking with Enable Networks, while in Dunedin it is negotiating with Flute Joint Venture. The situation in Timaru remains uncertain.

The most disappointed contender will be Vector, which had hoped to secure Auckland, where it's already building a fibre network to diversify its earnings.