UFB changes a 'mixed-bag' for users

Workers install ultra-fast broadband cables on Cook St in 2011. Photo/File

Ultra-fast broadband contract changes announced today are a "mixed-bag" for users but good for Chorus, says advocacy group InternetNZ.

Chorus and the Government body looking after the UFB scheme have announced changes to make the internet initiative more cost effective and help reduce some of the infrastructure company's $1 billion funding gap for the project.

Chorus will not get any more Government funding funds under the changes nor will they remove the network builder's obligations to finish its part of the UFB project by the end of 2019.

Chorus shares were trading down 1c around 11:30 this morning following the news.

Crown Fibre Holdings is responsible for $929 million of taxpayer investment in Chorus' part of the UFB network, which will see fibre lines rolled out to 75 per cent of the country.
Chorus and CFH have been in talks about possible UFB contract changes since December last year after the former Telecom unit said Commerce Commission broadband price cuts would lead to a $1 billion funding hole for the project.

The two organisations unveiled a number of changes this morning including giving Chorus more flexibility around the fibre deployment.
"For example, Chorus now has greater flexibility to manage the build programme in conjunction with local councils and other utilities to optomise cost and minimise any disruption in the community," a statement from Chorus said this morning.

CFH also agreed to a scheme which will better match CFH investment in fibre with Chorus' costs of building the network.
Chorus also agreed to reduce its marketing costs on fibre from $5 million to $2.5 million each year.

Jordan Carter, chief executive of the industry advocacy group InternetNZ, said the changes were "mixed bag" for broadband users.

"We are pleased that Chorus and Crown Fibre Holdings have been able to agree some changes that look acceptable on first glance...some people in multi-unit dwellings should get access to UFB faster - but if that means using existing [copper wires] instead of rolling out fibre, they may miss out in the long term on all the speed and reliability fibre offers," Carter said said.

"The mix of changes announced should help Chorus through the peak period of capital expenditure pressure the company faces in 2015/16, as they defer some investment costs into the future and should save some costs in the short and medium term. More flexible use of the CFH financial contribution is a welcome concession that won't cost taxpayers more, but will help Chorus. More flexibility in the deployment schedule has the same effect, though it may mean some prospective users get fibre later than they would have done otherwise," Carter said.

Chorus chief financial officer Andrew Carroll said the initiatives will "help Chorus to deliver UFB faster, smoother and more cost effectively".

"[The changes] give Chorus a greater degree of flexibility to manage its own costs effectively while still achieving the same outcomes and also facilitating the uptake of UFB. In particular, this flexibility will enable Chorus to better manage its cash flow through the peak of the balance of the capital intensive period of the build, as well as addressing some of the $1 billion funding gap.
Carroll said.

"There is no one silver bullet that will address this issue, but several small incremental changes all help towards navigating a very challenging period. At this stage it is not possible to put a specific dollar value to Chorus on the changes as it is dependent on a range of factors, but we thank CFH for its flexibility in supporting Chorus," he said.