$1.4b pledge for more broadband

Six months after baulking at investing in a faster broadband network, Telecom has announced it will spend $1.4 billion delivering quicker broadband to every New Zealand town and city.

Once submissions had been processed and Telecom's proposal researched, Telecom would be legally locked into its pledge, Communications Minister David Cunliffe said.

"So for the cynics out there who say they've heard it all before (from Telecom), you haven't because there hasn't been a plan this aggressive nor one that has been offered in legally binding terms."

Telecom's new chief executive, Paul Reynolds, said yesterday the company would extend the reach of its ADSL2+ technology to allow 80 per cent of New Zealanders to have access to broadband at speeds of up to 20 megabits per second by 2011.

Mr Cunliffe said the deal promised minimum speeds of 10 megabits.

The rollout will be to towns with at least 500 lines and include towns such as Edgecumbe and Ngatea in the North Island and Riverton and Methven in the South Island.

The network upgrade would involve laying fibre cables to many smaller centres and extending fibre closer to homes and businesses to improve speeds, enabling customers to use services like voice-over internet protocol, or phone calls over the internet.

The upgrade would be part of the deal with the Government in which Telecom will be split into separate network, wholesale and retail businesses, a move which is part of a raft of regulatory changes under the Telecommunications Act designed to reduce Telecom's domination of the telecommunications market and increase competition.

Mr Reynolds said the investment of $1.4 billion on a "world-class next-generation network" would rationalise and future-proof Telecom's infrastructure and provide greater opportunities for its wholesale and retail businesses.

"Needless to say, we believe this is a sensible and profitable investment for Telecom," he said.

Investors were less enthusiastic, Telecom's shares falling 11 cents, or 2.5 per cent, yesterday to a month low of $4.31.

In April, Telecom told the Government that under operational separation, which it said was fundamentally unworkable, it would be able to contribute only a third of the $1.5 billion needed to meet the objectives of the Government-driven Digital Strategy.

The strategy's aim is for 90 per cent of New Zealanders to be able to access broadband at speeds of 5 megabits per second by 2010.

Mr Cunliffe said getting faster broadband to the 20 per cent of remaining New Zealanders would be examined during the Digital Summit next month.

- © Fairfax NZ News