17 Mar 2010

All but Telecom happy with broadband plan - Govt

1:42 pm on 17 March 2010

Communications Minister Steven Joyce believes there is good industry support for the Government's rural broadband plan, aside from Telecom.

Cabinet has signed off on the Government's $300 million plan to roll out high-speed broadband to rural areas over six years.

Most of that, $252 million, will be funded through a levy on the telecommunications sector, with $48 million from Government.

Telecom says as the largest player in the sector it will foot about two thirds of the bill.

It has advised the stock market that its forecast earnings will be hit by up to $56 million a year for the next three financial years.

Its share price dipped 1.8% on the back of the announcement, closing down 4 cents at an all-time low of $2.17.

Generally good support - Minister

Steven Joyce, speaking on Tuesday, says he understands Telecom's position but user groups and others in the industry feel the Government's approach to rural broadband is appropriate.

He says the initiative will mean high-speed fibre connections are delivered to 97% of homes and schools throughout New Zealand.

On the levy being paid by telecommunications companies, he says: "It's been done quite commonly around the world to encourage rural broadband and rural telecommunications investment because often the market doesn't provide as they are effectively uneconomic customers."

Mr Joyce says the cost to the industry of the levy is expected to be offset by changes to the Telecommunications Service Obligation levy, or TSO.

Under the TSO, Telecom at present receives between $60 million and $70 million a year to subsidise the cost of providing basic phone and dial-up services to rural communities, but that will be scrapped under the Government's plan.

Contracts for the rollout will be put out to tender, with work expected to begin early in 2011.

Fed Farmers wanted $500m investment

Federated Farmers says Government investment to boost rural broadband infrastructure will not go far enough to ensure the community is provided with an adequate service, and it would have liked to see $500 million allocated.

Chief executive Conor English says while $300 million is a substantial investment, it is considerably less than what is being spent in urban New Zealand and doesn't get everything done that is needed.

Mr English says rural schools will be connected to fast broadband which is a "massive step forward", but getting ultra-fast speeds to farms and rural businesses within the budget will be a challenge, and more will need to be spent.

Correct balance - TUANZ

The Telecommunications Users Association says there were always going to be winners and losers from the Government's plan to roll out high-speed internet to rural areas.

Chief executive Ernie Newman says he can understand why Telecom is smarting over the design of the initiative, but he believes the Government has got the right balance.

"There's some government funding, there's some industry funding and some private sector funding so all in all putting it together I think it will work pretty well."

Mr Newman says the Rural Broadband Initiative dove-tails nicely with the Government's plan to develop a fibre optic network for urban areas.