Telecom says UFB deal good for shareholders and consumers

Telecom says it is confident it can balance its commercial interests with those of New Zealand broadband users as it takes charge of the country's largest infrastructure project -- the rollout out Ultra Fast Broadband (UFB).
The Government today announced it had signed a deal with the telco, which will see a fibre optic network built in Auckland, the eastern and lower North Island and most of the South Island.
Christchurch City Council-owned Enable Networks has also won a contract to build a UFB network for Christchurch, nearby Rangiora and surrounding areas.
As part of the deal, Telecom must split off its network arm Chorus into a completely separate company -- pending a shareholders' meeting at the end of the year -- so that all broadband retailers can compete fairly to on-sell wholesale UFB.
Communications and Information Technology Minister Steven Joyce said the split marked a major change for the country's telecommunications industry.
``The separation of Telecom into two separate companies with two different groups of shareholders -- an infrastructure player and a retailer -- will mean that for the first time we'll have a structurally separated industry which is actually leading the world in terms of what it will offer for retail companies.''
Telecom chief executive Paul Reynolds said the split would mean existing Telecom shareholders would essentially become shareholders in two companies.
He assured shareholders that they would be no worse-off as a result of the split.
``We are absolutely clear that this is a positive deal for our shareholders, as well as delivering an effective fibre programme for New Zealand.''
Under access prices negotiated by Government agency Crown Fibre Holdings (CFH) wholesale household prices will start at $40 or less per month for an entry level product and $60 per month for a 100 megabit product, Mr Joyce said.
The minister said he was unable to estimate how much the service would actually retail for, but estimated it would be consistent with or cheaper than current prices.
The total cost of the initiative would be around $3.5 billion, he said.
The Government already has partnerships in place to roll out UFB with ultra fast fibre led by WEL Networks, covering Hamilton, Cambridge, Te Awamutu, Tauranga, Tokoroa, New Plymouth, Hawera and Wanganui, and Northpower covering Whangarei.
A rural broadband initiative (RBI) is rolling out faster broadband to rural communities.
Mr Joyce also noted Chorus intended to have partnering discussions with Christchurch City Holding and its subsidiary Enable, which could result in it taking up to a 50 percent stake in a joint venture in Christchurch and Rangiora.
Today's agreements with Telecom and Enable meant the Government would reach its goal of bringing ultrafast broadband to 75 percent of New Zealanders by 2019, while priority sectors -- education, health and business -- would have UFB within four years, he said.
The New Zealand Regional Fibre Group, the other major contender for the contract which includes Vector, Unison, PowerNet and Horizon Energy, today expressed disappointment that its bid was unsuccessful but pledged to assist with the rollout nonetheless.
Chief executive Vaughan Baker said the organisation still had a critical part to play in New Zealand's fibre landscape and that some members may consider partnering in some form with the contracted UFB partners.
``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,'' he said.
Prime Minister John Key welcomed the deal, saying it marked a major step in meeting one of the Government's 2008 election promises.
``The ultra fast broadband initiative is a key part of the Government's economic growth plan. Ultra fast broadband is the way of the future.''
Health Minister Tony Ryall said the technology would give more than 6000 health premises access to UFB, which would make the transfer of information and services much simpler and faster.
The Government also announced today that the mandate of Nga Pu Waea, the Maori working group on rural broadband, will to be extended to include the UFB network.
Mr Joyce said the group was designed to ensure Maori can maximize opportunities created by the network and that Maori views are represented as the rollout progresses.