Debate over broadband technology flared up this week as the Government opted for a slower, more stable internet service for rural New Zealand.

The Government announced on Monday it would enter commercial negotiations with Vodafone and Telecom to build its rural broadband network.

The deal is not completed and is subject to the success of ongoing discussions. The broadband initiative hopes to connect 93 per cent of country schools to fibre, providing speeds of at least 100 megabits a second.

Eighty per cent of rural households and businesses would receive speeds of five megabits a second or better.

The build would take six years and cost an estimated $285 million.

Shortlisted bidders who missed out on the scheme include OpenGate, made up of state-owned enterprise Kordia, Woosh Wireless and FX networks, and Torotoro Waea, which is a partnership between iwi groups and industry.

The front-running bid involves extending Telecom's network into rural areas and hooking most schools directly into fibre lines. Households and businesses would then connect through slower copper wires to the main fibre line, or connect to wireless broadband from one of 154 fibre-connected cell phone towers.

These towers would also extend 3G (third generation) mobile broadband coverage to more parts of rural New Zealand, which means cellphones and other devices would be able to access the internet.

3G coverage is already available in many parts of the country, and can transfer data at a rate of 2 to 5 megabits a second, with the potential to peak at 50 megabits in the future.

After the announcement, Kordia's chief executive Geoff Hunt accused the Government of choosing old technology which will not close the "digital divide" between rural and urban areas.

"The 3G element of the Telecom/Vodafone solution is being superseded all around the world by 4th generation [4G] wireless. Australia, India, China and the US are all planning to roll out this technology now," Hunt said.

The OpenGate consortium proposed 4G LTE fixed wireless for rural customers, with no added mobile coverage.

4G LTE offers faster speeds than 3G and OpenGate claimed it would offer two-thirds of rural households rates of 20 megabits a second within two years, four times faster than what is being promised by Telecom/Vodafone.

This piqued the interest of Federated Farmers chief executive Conor English, who said he would like to explore the possibility of 4G.

"It looks like it's got a lot to offer and so the Government has to justify why it's not using it," he said.

However, Joyce said 4G LTE is not tried and tested technology and he preferred going with a safer bet.

The spectrum (radio waves) which 4G wireless is carried on would not have the capacity for broadband until television went completely digital in 2013, Joyce said.

Hunt disputed this and claimed OpenGate could use Woosh Wireless' spectrum to host a 4G network now.

But the chair of telecommunication and network engineering at Massey University, Richard Harris, confirmed the "additional complexities" of 4G meant reliability was still an issue.

"New Zealand would probably want to watch neighbouring countries ... to see what they do and if they encounter problems in implementation," he said.

While it is unlikely 4G will reach rural communities before 2013, Vodafone confirmed it has a 4G plan when spectrum becomes available.

"We've got a roadmap to start rolling out 4G in the next three to four years for both mobile voice and data as well as full-blown broadband," said Vodafone's general manager of wholesale and new business development, Steve Rieger.

* 4G has the potential to offer speeds of up to 100 mb/s for home computers and cellphones.
*Is being rolled out in Australia, China and India.
*Is much faster than the 3G network that is likely to be extended to rural communities, offering speeds of 5 mb/s.