Ultra-fast broadband investment proposal finalised
Hon Steven Joyce
Minister for Communications and
Information Technology
16 September 2009
Media Statement
Ultra-fast broadband investment proposal finalised
Communications and Information Technology Minister Hon Steven Joyce today released the details of the government’s $1.5 billion ultra-fast broadband investment initiative.
“Access to ultra-fast broadband is part of the essential infrastructure of a productive and growing economy and will be crucial to New Zealand improving its competitive advantage in the global market.
“The future of broadband is in fibre, and taking it right to the home will bring significant gains for productivity, innovation and global reach.
“The government is committed to partnering with the private sector to accelerate the roll-out of ultra-fast broadband services to 75 percent of New Zealanders within the next ten years.
“Submissions, alternate approaches and a range of regulatory issues have been carefully considered, and I believe this proposal will give best effect to the government’s goal.”
Key highlights of the proposal include:
*An open, transparent partner selection process, which will be initiated in the next month.
* Government investment directed to an open access, wholesale-only, passive fibre network infrastructure.
* A new Crown-owned investment company (“Crown Fibre Holdings”), which will be operational by October, to carry out the government’s partner selection process and manage the government’s investment in fibre networks.
* Crown Fibre Holdings and each partner establishing a commercial vehicle, a “Local Fibre Company” (LFC), to deploy fibre network infrastructure and provide access to dark fibre products and, optionally, certain active wholesale Layer 2 services.
* Provision for national and regionally-focused proposals, as well as consortium and proposals aggregating any combination of LFC regions.
* Independence, equivalence and transparency requirements for LFCs.
* Expansion to 33 candidate coverage areas based on the largest urban areas (by population in 2021).
Mr Joyce says a lot of work has gone into getting the approach right for the government to co-invest with the private sector in broadband infrastructure.
“Already a number of companies have shown interest in the government’s broadband initiative. Now it’s time to get on with finding the right partners to build these networks.”
Further details on the government’s proposal are set out in an overview document available at www.med.govt.nz/ultra-fast-broadband. Details and criteria for partner selection will be made available as part of the partner selection process.
Questions and
Answers
Why is the government investing in
broadband infrastructure?
Private sector companies
have decided, on behalf of their shareholders and as a
commercial decision, not to invest in a nationwide network
of fibre-to-the-home at this point in time. The government
understands this, and so wishes to assist and work with the
private sector in improving the business case for ultra-fast
broadband.
The government is also getting involved in order to encourage the provision of widespread open access dark fibre services, which will facilitate the best possible competition outcomes in emerging markets and encourage innovation in wholesale and retail services.
What is
the government’s objective for dark fibre infrastructure
investment?
To accelerate the roll-out of ultra-fast
broadband to 75 percent of New Zealanders over ten years,
concentrating in the first six years on priority broadband
users such as businesses, schools and health services, plus
greenfield developments and certain tranches of residential
areas.
Why is the government only investing in dark
fibre?
Government investment at that level will
facilitate the competitive commercial provision of
ultra-fast broadband services over fibre with the minimum
regulatory intervention. In very simple terms, this is the
most “raw”access to the underlying infrastructure, and
provides the best competition outcomes because the wholesale
customer has full control and flexibility and has the
ability to innovate in downstream services.
How has
the government’s broadband proposal changed?
The
government’s proposal is consistent with the draft
consulted on earlier this year, with modifications that
provide greater flexibility for proposals, more regional
coverage, specific design requirements for open access
products, and more detail on commercial arrangements and
technical issues.
What is the process for partner
selection?
An ‘Invitation to Participate’ (ITP)
will be released for proposals for co-investment in fibre
networks. The initial ITP will be released by the Ministry
of Economic Development in the next month, pending the
formation of a Crown-owned investment company (‘Crown
Fibre Holdings’ or CFH), which will be responsible for
assessing proposals and selecting partners.
The ITP will set out the terms and conditions of any investment in line with the UFB Overview document released today.
Who will
be eligible to submit a partnership proposal?
Any
entity or consortium of entities, including local or
regional government, iwi, trusts or equity funds will be
eligible to submit proposals.
How can potential
candidates participate in the process?
The government
will publish an ITP which interested parties can respond to.
What are the criteria for partner
selection?
The detail of the ITP process will be
clearly communicated closer to the time, including via the
Ministry of Economic Development’s website at
www.med.govt.nz/ultra-fast-broadband.
What if some
regions are not ready yet?
It is expected that the
CFH will hold future tenders for those regions who are
currently not yet ready to participate.
How will the
government balance national and regional
proposals?
The tender process will allow for both. It
will allow for proposals focused on individual candidate
regions, proposals focused on any combination or aggregation
of candidate regions, and national proposals.
What are
the candidate regions? Are proposals limited to these
regions?
The list of candidate regions has been
expanded to 33 regions based on the most populous urban
areas using 2021 population projections. Proposals can be
for all or parts of these candidate regions and may also
include other adjacent regions that are not listed where it
is economically sensible to do so. CFH will have the
flexibility to negotiate the boundaries of proposed coverage
areas with prospective partners, with an overriding mandate
of achieving the government’s 75 percent coverage target.
Does the government have a preferred partner in
mind?
No – the process of partner selection will be
a transparent competitive process based on clear criteria.
The government encourages credible candidate providers to
participate in the process.
What is the timeframe for
partner selection?
The process will be initiated in
the next month by the Ministry of Economic Development,
pending formation of CFH. The overall process to completion
of commercial agreements with successful partners is
expected to conclude in the June quarter of 2010.
What is the timetable for establishment of Crown Fibre
Holdings?
CFH will be formed in late October and will
assume responsibility for the partner selection process from
that time.
What will be the role of Crown Fibre
Holding?
The core role of CFH will be to operate the
contestable partnership selection process and to manage the
government’s investment in fibre networks. It will be
tasked with:
* assessing responses to the ITP
* investing the Government’s $1.5 billion in fibre companies so as to achieve the Government’s 75 percent ultra-fast broadband target as quickly and efficiently as possible
* appointing board members to government-funded networks
* monitoring the performance of the government’s investment
* approving technical and operational standards to achieve national consistency across networks.
What
is the process for establishing Crown Fibre
Holdings?
The Chair and Board members of CFH will be
appointed in October. The Ministry of Economic Development
will provide support and expertise to CFH for a transitional
period, until staff to the CFH are appointed.
What are
the government’s plans for rural broadband?
An
announcement on the government’s rural broadband strategy
is imminent
What was the Government’s response to
Telecom’s proposal?
Telecom put forward an
alternate nationwide proposal to the Government’s
preliminary proposals. The Telecom proposal has been
carefully assessed by MED. At this point in time,
Telecom’s proposal is not sufficiently attractive to
justify moving away from a contestable regionally-based
process. Relative to indications from potential partners,
Telecom’s proposal covered fewer homes and businesses,
only provided ducts and not the fibre itself, and did not
clearly result in significant additional private sector
expenditure above “business and usual” levels.
Are
there any issues with Telecom participating in the
competitive tender process?
The Government is very
supportive of any potential partners who can meet the tender
criteria. We have specifically stated that bids covering a
combination of regions, including national bids, will be
acceptable.
Will Telecom have to structurally separate
its network business to participate?
Any such
decisions are up to Telecom. The Government has made it
clear that it will only invest money into fibre companies
that are not controlled by shareholders who also operate
retail telecommunication businesses. The Government is also
clear that potential partners who already own fibre assets
can table options that involve those fibre assets being
vended into any new fibre
companies.
ENDS