Schools, hospitals first in line for ultra-fast internet

Workers laying new fibre optic cable in a New Zealand neighbour hood. Photo / Chorus

Schools, hospitals and most businesses are first in line to receive a fibre internet connection under the Government's ultra fast broadband scheme.

Communications and Information Technology Minister Steven Joyce announced today that Telecom had won the lion's share of the Government's scheme to deliver fibre-based internet to 75 per cent of New Zealanders by 2019.

As part of the deal, Telecom will structurally split its retail arm from its network arm, pending a shareholder vote, by the end of this year.

This will mean that all broadband retailers can compete fairly to on-sell wholesale ultra fast broadband.

Joyce said the rollout would start immediately with schools, hospitals and 90 per cent of businesses hooked up to high speed internet by 2015.

Christchurch City Council owned Enable Networks has picked up the contract for Christchurch, Rolleston, Rangiora, Kaiapoi, Woodend, Lincoln and Prebbleton, creating an extra 250 extra contracting and construction jobs there in the next year.

Telecom's network arm Chorus said it planned to enter discussions with Christchurch City Holdings Ltd and its subsidiary Enable, which could see it taking up to a 50 per cent stake in that venture.

The Telecom deal will see the demerged Chorus entity design and build a fibre fixed line network in 24 candidate areas or about 70 per cent of the UFB coverage area - including Auckland, the eastern and lower North Island the bulk of the South Island.

It will start the design and build of the new fibre network in August.

Enable Networks chairman, Bill Luff said Cantabrians would reap "massive rewards" from the "largest telecommunications infrastructure project the city will ever see".

"We anticipate that for the initial 20 year spend of around $500 million, some 3500 jobs will be generated in the region."

Telecom's chief executive Paul Reynolds said the deal was in the best interests of the company's shareholders, the industry and New Zealand as a whole.

"Under the terms of the agreement, Chorus will become a new listed company completely independent of Telecom and form the cornerstone of New Zealand's fibre future," he said.

Reynolds said Chorus would be able to deliver fibre past all premises in the 24 regions by 2019 and ensure wholesale prices for fibre products were in line with current copper pricing.

See Telecom's full news release here.

See an outline of the agreement between Chorus and Crown Fibre holdings here.

The Government already has partnerships in place with Northpower which will roll out fibre to Whangarei and Ultra Fast Fibre, owned by WEL Networks covering the central North Island.

Vector, which was vying for the Auckland leg of the scheme, has been left out of the initiative.

Its chief executive Simon Mackenzie said Vector had put forward a proposal that made commercial sense and was confident the company would continue to operate a competitive fibre business.

The other main bidder, the New Zealand Regional Fibre Group (NZRFG), said it was disappointed more members weren't selected to build the fibre networks, but was hopeful it could still play a part in the rollout.

Chief executive Vaughan Baker said certain New Zealand Regional Fibre Group members may consider partnering with the contracted UFB partners to deliver UFB.

"We have the people on the ground in the UFB regions with the knowledge of the associated challenges with topography so it makes sense to utilise that local experience and regional understanding."

The Government will invest up to $929 million in Chorus to help fund the cost of the communal infrastructure.

Crown Fibre Holdings chairman Simon Allen said "the total cost including private sector co-investment is likely to be in excess of $3 billion."

The ultra fast-broadband scheme, one of National's election promises, aims to deliver internet speeds of 100 megabits per second to 75 per cent of New Zealand over the next 10 years. This is more than 20 times faster than the average urban speed recorded by the Commerce Commission last year.

The Government's objective is to concentrate in the first six years on priority broadband users such as businesses, schools and health services, plus green field developments and certain tranches of residential areas.

Communications and Information Technology minister Steven Joyce, said UFB would provide an economic boost to New Zealand.

"Ultra Fast Broadband is a key part of the government's economic growth plan. Broadband speeds of 100 Mbps and more will revolutionise the way many businesses operate - for example high-quality videoconferencing will remove the tyranny of distance enabling face to face contact with clients anywhere around the world without leaving the office."

Wholesale household prices will start at $40 or less per month for an entry level product and $60 per month for the 100 Megabit product. There are no connection charges for households.

- Susie Nordqvist