Wholesale fast web to start at $40 a month

The Government has given an indication of prices for its ultrafast broadband initiative, with Communications Minister Steven Joyce describing them as "very, very competitive."

"And if we are able ... to lock them in for the next nine years, that is of great benefit to New Zealanders all over the country," he said yesterday.

Joyce was referring to prices agreed with two electricity lines companies, WEL Networks and Northpower, which have won the tender to partner with the Crown in local fibre companies to serve Hamilton, Tauranga, New Plymouth, Whanganui, Whangarei, Cambridge, Te Awamutu, Hawera and Tokoroa.

Those cities and towns represent about a sixth of the three-quarters of the country the Government wants to have access to ultrafast broadband within 10 years.

Wholesale access prices for households will start at up to $40 a month for an entry-level product (with a download speed of 30 megabits per second) and $60 a month for 100mps.

Households will not be charged for connection to the network; that cost is built into the wholesale price.

But companies offering services over the network will have their own costs and margins to cover as well.

Labour's telecommunications spokeswoman Clare Curran said the access prices were like the lines charge in an electricity bill.

"People will get a connection for $40 or $60 a month but will have to pay on top of that for any services they get down it. Who knows what that cost will be."

When asked if these prices represented a benchmark for the rest of the country, Joyce said: "The numbers will depend on negotiation but, yes, they will be of that sort of order," adding later that it would be wrong to suggest prices would be massively different elsewhere.

Legislation due to be introduced to Parliament this week would put access prices for the new networks out of the Commerce Commission's purview for nine years.

Asked in that context if the prices announced yesterday would stick in those cities for that period, Joyce said they would "largely" stick, though there might be some adjustment in line with the consumers price index.

Whether Telecom and the other parties Crown Fibre Holdings is negotiating with over the other 25 regions are equally sanguine remains to be seen, however.

Telecom did not comment on pricing yesterday, merely reiterating its view that a structurally separate Chorus - its network business - would be the most efficient way to deliver the Government's fibre vision.

Goldman Sachs' telecoms analyst Tristan Joll said that on face value yesterday's announcement looked as though the new fibre networks would provide wholesale inputs that were very competitive relative to the current copper ones.

"My suspicion is they are probably the relatively cost-effective ones to build. Will other providers with different build costs and expectations of returns be able to marry up their realities with those particular prices?"

The Telecom Users Association (Tuanz) said the pricing announced yesterday appeared to be set at a level that would drive uptake for household, business and school users.