Telecom front-runner for rest of broadband project

Telecom may look like the broadband favourite, but negotiations will continue with other bidders. Photo / Brett Phibbs

Telecom has emerged as the front-runner to build the ultra-fast broadband fibre-to-the-home network for most of the country.

Crown Fibre Holdings announced yesterday Telecom had been selected for prioritised negotiations in all the areas covered by the Government's broadband initiative - intended to deliver ultra-fast speed to 75 per cent of the country within 10 years - other than the five cities and three towns for which WEL Networks and Northpower secured the contracts last week.

Telecom is now at the same stage those two companies reached in September. In the case of Christchurch and Dunedin, however, it is still neck and neck with two other companies with "prioritised bidder" status.

These companies are Enable Networks, which has already rolled out some fibre in Christchurch, and Flute Joint Venture, an offshoot of the Dunedin City Council.

Crown Fibre Holdings chairman Simon Allen said the three provided an attractive combination of access prices in line with those announced last week and an ability to complete the work within the budget the Government had allocated, as well as having industry experience and financial strength.

But he added that discussions would continue with other bidders shortlisted three months ago.

Vector chief executive Simon Mackenzie is taking comfort in that.

"They have made it clear the door is still open for negotiations and they are non-exclusive at this point," he said. "We have been encouraged to provide further information this week."

When WEL Networks and Northpower last week won the tender to partner with the Crown in local fibre companies to serve Hamilton, Tauranga, New Plymouth, Wanganui and Whangarei, it was at wholesale access prices of up to $40 a month for entry-level products (with a download speed of 30 megabits per second) and $60 for 100Mbps.

Communications Minister Steven Joyce said prices "of that sort of order" could be expected for the rest of the network and they would stick - apart perhaps for an adjustment for inflation - for the nine years in which they are to be off limits for any Commerce Commission review of pricing.

These prices were seen as competitive with existing offerings but that raises the question that if optical fibre networks could be built in much of the country at a price similar to the existing copper ones, why had that not already happened?

If Telecom misses out on the southern cities, it would be left with about 70 per cent of the new network.

Telecom spokesman Ian Bonnar said there were three parts to the deal - pricing, geographical reach and regulatory changes. "It's a package so if you pull on one end you have to push on another to make sure it is still a package our shareholders would vote for."

The regulatory dimension is a separate negotiation under way with the Ministry of Economic Development, rather than Crown Fibre Holdings.

It is about how Telecom's existing regulatory restrictions would be divided between a fully separated network business, Chorus, and the rest of the company, which would be providing services down the networks (fibre and copper) in competition with others - or dropped altogether.

Labour communications spokeswoman Clare Curran said yesterday's announcement looked like a win all round for Telecom.

It looked as if Telecom would have at least 70 per cent and possibly 84 per cent of the fibre network as well as a piece of the action for the rural broadband initiative, she said.

"That all adds ups to a dominant monopoly in charge of our newest network, with a history of underinvesting in its networks and no great incentive to transfer people from the existing copper network to fibre."