Expect Telecom to tread softly

OPINION: Interested parties have until close of business today to make submissions to the Economic Development Ministry on the Government's $1.5 billion ultrafast broadband plan.

Cabinet warned in March when it announced the proposed investment that Telecom could throw a spanner in the works by signalling it would compete aggressively with the fibre-optic network by cutting the price of access to its copper network. That would create extra uncertainty for private- sector investors in the fibre network, who could be less sure of the returns they might achieve.

Telecom could also seek to review its agreement with the Government to improve broadband speeds through the "cabinetisation" of its network by arguing that the ultrafast broadband plan will undermine its own returns.

At the other extreme, Telecom has acknowledged speculation that it could embrace the Government plan by selling off network arm Chorus. Chorus would then be free to take a lead role in local fibre companies that will invest alongside the Government-created Crown Fibre Investment Company.

None of these scenarios is likely, because any strong reaction by Telecom would be an overreaction. It is probably fair to say that few people were ever under the illusion that $3 billion would be sufficient to roll out fibre to schools, businesses and 75 per cent of homes within 10 years.

The Australian government is proposing to invest four times as much per capita on its proposed fibre network. While it has a more ambitious goal of connecting 90 per cent of homes, Australia is a highly urbanised country and the scale of its plan probably gives a better indication of what fibre to the home would cost.

Australia's fibre plan is unlikely to meet its objectives, either. It is a safe bet that fewer homes will be connected, over a longer timeframe, at a higher cost than envisaged.

But while both schemes are set to fall short of their objectives, the difference is that the New Zealand Government's regionalised approach to the fibre rollout and its reliance on private-sector investment in local fibre companies means there is a risk that its plan may fail to get out of the starting blocks, and could achieve nothing meaningful at all.

Such concerns won't be strongly evident in the submissions. Instead, expect platitudes all round, as submitters, including Chorus, seek to pick up contracting work and investment subsidies from whatever infrastructure projects do get off the ground. If there are big doubts, the Government has made it clear that it does not want to hear them.

"At this stage, the Government is less interested in submissions setting out theoretical criticisms without providing a practical alternative approach," a Cabinet paper advises.

- © Fairfax NZ News