UFB bidders scramble to revise bids

Bidders for the government's ultra-fast broadband initiative are scrambling to resubmit bids to government-owned Crown Fibre Holdings ahead of Monday's deadline, following revisions to the process announced last month by Communications Minister Steven Joyce.

While the Monday deadline has not been publicly announced, BusinessDesk inquiries confirm that serious bidders are putting finishing touches to their bids over the weekend for lodging first thing next week.

The three key bidding groups are Telecom New Zealand, through its Chorus fibre subsidiary; the New Zealand Regional Fibre Group, a 19-member consortium of largely community-owned electricity network companies led by Vector; and a bid led by a Canadian UFB network construction expert, AXIA, in partnership with Vodafone.

Final choices on preferred providers are due in October, with a view to pilot implementation being under way by the end of the year or early in 2011.

While all bidders may yet get a share of the action, and all say they could work together if necessary, the most important dynamic in the process is how or whether Telecom will be part of the initiative. 

The national carrier could end up as a competitor to the new UFB network, which is to reach 75 percent of New Zealand homes and businesses over the next decade.

Government funding worth $1.85 billion is on offer initially, of which $350 million is for a separate rural broadband initiative.

The government investment in the UFB roll-out is to be reinvested through a "revolving fund" approach, as long as there is sufficient customer uptake of new fibre capacity to release funds for reinvestment.

Behind the scenes, arguments rage over whether UFB will find a ready market or not, especially since ultra-fast services are increasingly available at competitive prices using the existing copper wire telephone network, assisted by the already large-scale installation of fibre-optic cable in and between major population centres.

The current UFB project is all about bringing fibre-optic cable the so-called "last mile" into workplaces, institutions and households.

With its local community ownership and national coordination, the Regional Fibre Group "embodies the local fibre company construct that is in government policy," the RFG's chief executive Vaughan Baker told BusinessDesk.

"We are proposing local community ownership, regionally focused, nationally coordinated and consistent."

To simplify a potentially complex bid because of its 19 member companies, the RFG has also boiled itself down into "fewer than 10" bidding entities.

"That helps us and it helps Crown Fibre Holdings", says Mr Baker, who sees strengths in having UFB rolled out by local players with intimate knowledge of New Zealand's diverse topography and population distribution.

While Mr Baker would not be drawn on whether the RFG would be able to offer a single national price for broadband services, there would be "nationally coordinated pricing," and some potential for centralised procurement, he said.

The RFG also faced none of the threats feared by existing telecommunications players , who may resist the principle of open access to the UFB infrastructure.

"This is where the incumbent telcos are closing ranks," Mr Baker said. "They're becoming hesitant in their support for the UFB policy because they have vested interests in their customer bases and legacy networks.

"This (UFB) will challenge business models through the industry, and telecommunications will be forever changed."