The Government has started formal negotiations with preferred bidders Telecom and Vodafone to bring faster internet connections to rural areas.
New Zealand's two main telecommunications competitors joined forces in November last year to bid for the $285 million contract, which will take broadband to 95% of rural schools and 80% of rural households within six years.
As part of their bid, Telecom will extend its fibre network to 252,000 rural customers, Vodafone will build 154 cell phone towers to improve coverage and 719 schools will be connected to a ultra-fast broadband network.
Communications and Information Technology Minister Steven Joyce says the joint proposal is based on proven existing technology, which gives the Government confidence it can work.
Mr Joyce says the joint bid reduces construction costs and he expects retail prices that will be affordable. He says he wants contracts signed with Telecom and Vodafone by the end of March.
Kordia and Woosh Wireless, whose proposals were rejected, say the Government is wrong to opt for old-fashioned technology that is already becoming obsolete.
But Mr Joyce says Kordia's fourth generation technology is largely unproven and would have been too risky. He says the Telecom-Vodafone proposal will be a huge improvement for rural communities reliant on dial-up internet access.
However, Federated Farmers says rural broadband targets are too low and warns the rural community will spend decades playing catch-up with urban areas.
Telecom is also negotiating with the Government to provide an ultra-fast broadband network to urban and provincial centres.