A year of massive change as roll-out rolls on

It's the biggest telecommunications infrastructure project since the 80s and for phone network company Chorus it's meant a year of frantic work and massive change.

More than 200 Chorus field crews are busy connecting New Zealanders to a brand new high-speed broadband network, while the company itself has broken away from its former owner.

Chorus is one of four private firms contracted by the Government to roll out the Ultra-Fast Broadband (UFB) network in urban areas.

When completed in 2020 the UFB, a key election promise during National's 2008 campaign, will connect 75 per cent of New Zealand homes, businesses, schools and hospitals to a fibre-optic network capable of speeds of 100 megabits a second - around 20 times faster than the average rate recorded by the Commerce Commission in 2010.

Formerly part of Telecom, participation in the UFB scheme required Chorus to split off from its parent and become a stand-alone public company late last year.

At the break-up Chorus took ownership of the network assets, including 130,000km of copper lines, more than 27,000km of fibre cables and 500 telephone exchanges, with Telecom becoming a stand-alone retail business that includes its mobile network.

Chorus is now also responsible for building the UFB network in Auckland, Rotorua, Nelson, Wellington and a large portion of the South Island, with Ultrafast Fibre, Northpower and Enable Networks building the balance of the high-speed broadband network.

The expected cost for Chorus' share of the build is likely to come in at between $1.4 billion and $1.6 billion.

The Government, through its UFB investment vehicle Crown Fibre Holdings, will fund $929 million of the build with Chorus tipping in an estimated $471 million to $671 million.

Chorus' general manager of network build Chris Dyhrberg says having signed up to some big targets for the first year, the work programme started off at a huge pace.

Between August last year and the end of June it has taken the fibre network to 42,000 premises. Next year it is aiming for a milestone of a further 149,000 premises able to connect to fibre.

But it hasn't been all plain sailing. Looking back, Chorus chewed off more than it appreciated and could have done a better job of managing expectations, Dyhrberg says.

Chorus has chosen to run the majority of its network underground, digging up roadside berms and footpaths; work Dyhrberg admits has left some communities looking like war zones.

"The sort of disruption you inevitably cause a community when you're deploying the infrastructure there, that's something I think, on reflection, we could have done a much better job in preparing people, by letting them know what it is going to be like and the sort of timelines we are talking about."

Chorus is in regular contact with companies rolling out fibre networks in other countries and Dyhrberg says its experience is not unique.

In the first year big goals and publicly quoted targets are often missed, so the second year is about getting the quality, costs or resources under control, he says.

The Australian equivalent to UFB, the National Broadband Network, recently announced it had fallen well short of its anticipated connection targets and cost an extra $1.4 billion, 3.9 per cent more than originally forecast.

The delays have been blamed on the longer-than-expected time taken to nail a deal with Australian incumbent Telstra over access to existing network assets.

For Chorus, working with its service company and technology partners has seen significant improvements in design, plus reductions in cost and deployment time.

It is also boosting its communication efforts with affected communities.

"That ongoing innovation in process and approach is continuing and that's why we feel confident we'll get to the point where it's just basically a fibre factory that just keeps rolling on without a hitch."

Running alongside the UFB scheme is the Rural Broadband Initiative (RBI), aimed at connecting rural schools and hospitals to fibre, boosting mobile coverage and delivering high speed broadband to 252,000 rural customers.

A partnership between Chorus and Vodafone will build 154 new cellphone towers, upgrade 387 cellphone towers and extend Chorus' existing fibre network by about 3100km in rural areas.

Close to $300 million of funding for the RBI will come from an industry levy, with Chorus and Vodafone adding more than $100 million.

Senior telecommunications analyst Glen Saunders of IDC says he is waiting for Chorus' results announcement at the end of the month for a clearer picture of the company's progress.

"I think [Chorus] can be very proud that a lot has been achieved... all in all it's going pretty well, but it's pretty early and they'll certainly be worried about the cost of roll-out in the longer term," says Saunders.

Switching customers from the older copper-based network to the new fibre network will be an industry challenge, says Dyhrberg.

Chorus investors and shareholders are aware fibre networks have lower operating costs and higher capability than legacy copper networks so they're looking to the company to migrate from copper to fibre as cost effectively as possible and reduce operating costs by only having one network, he says.

By 2020 around 25 per cent of the network will still be connected to copper and it is unlikely 100 per cent of those who can connect to fibre will take up the offer, so Chorus will be charged with maintaining the copper-network capability for those customers until fibre-based services are ubiquitous.

The priority for the UFB network is schools, hospitals and business users but homeowners in some areas will be starting to see action at street level, including retail service providers like Telecom, Orcon, Vodafone and CallPlus marketing deals for services over fibre.

This financial year Chorus will start building the fibre network in Invercargill, Nelson, Oamaru, Queenstown, Timaru and Whakatane.

It has already begun the roll-out of the new network in Auckland, Ashburton, Blenheim, Dunedin, Napier-Hastings, Palmerston North, Rotorua, Taupo and the Greater Wellington region (including Masterton).

"We're really looking forward to having a successful year this year. We've got another big target and the aim is to deploy past 149,000 premises in the coming year," says Dyhrberg.

"The number of customers who will be able to connect to the network will be significantly higher again - it's usually in the order of about a third more customers than premises - so this year is going to be a good year.

"Our service companies are feeling like they've got their head around things a lot more; we're able to spend a lot more time optimising things and just providing high levels of confidence about deployment schedules and cost to deploy."