New Zealand: Ultra Fast Broadband: If You Build It They Will Come…

Last Updated: 8 April 2009
Article by Jason Woolley and Mark Williamson

Or, more accurately, if you build part of it they will come to Oamaru. That is how the government hopes the private sector and local authorities will respond to its draft broadband investment initiative released last week for comment.1

The proposal is to set up a Crown Fibre Investment Company (CFIC) to invest $1.5 billion in up to 25 local fibre companies (LFCs) that will deploy and provide access to fibre optic network infrastructure to the 75% of New Zealand's population located in our 25 largest cities and towns. Oamaru is 25th on the list.

This fibre-to-the-home (FTTH) initiative is intended to achieve broadband speeds of up to 100 megabits per second (Mbps), over the next 10 years. This compares to the 10-20 Mbps that will be achieved for 80% of the population under Telecom's current fibre-to-the-node rollout which is scheduled for completion by 2011.

The Proposal

The CFIC will invest alongside private sector co investors in the LFCs. The paper says the phrase 'private sector' is used loosely to refer to any non central government partner, thereby opening the way for local government participation.

Of the $1.5 billion, $150 million is already earmarked to be spent on making schools 'broadband ready'. This leaves $1.35 billion for a broader FTTH network. The government is looking to the private sector to provide the remainder of what the paper estimates will be a total cost of $3 to $6 billion to roll out a FTTH network to 75% of the population. In return, the private sector partner will secure shares in the LFCs and the government's acknowledgement that its own shareholdings in the LFCs may be 'concessionary' and in particular subject to a lower rate of return than the shareholdings of its LFC partners, at least for the initial period (which the paper defines as 'for example up to 10 years'). Partners are expected to offer both investment and the commercial and technical ability to deploy and operate the fibre network.

The proposed structure is:

The proposal paper expressly states that there is to be no 'regulatory holiday' for the LFCs. In other words there is to be no undertaking from the government that, in return for investment, the LFCs will not be made subject to regulation under the Telecommunications Act 2001 or the Commerce Act 1986. This means that, while pricing will initially be determined commercially, there is scope under either of those Acts for the Commerce Commission to make recommendations to the relevant Minister that prices be regulated.

However, the proposal also recommends that existing telcos with retail operations be ineligible to participate as partners in LFCs unless they either:

  • fully divest themselves of their retail operations, or
  • do not appoint the majority of the directors to the board of the relevant LFC and the chair of the LFC board is independent and agreed to by all shareholders.

The intention of this is that any incentive for an LFC to engage in anti competitive behaviour by favouring its own retail operation would be eliminated.

What exactly this means for Telecom is not clear. On the one hand it has just undergone a hugely expensive and difficult operational separation whereby its retail, wholesale and fixed network divisions have been separated and structured in such a way as to ensure they behave as separate entities. On the other hand, those divisions are still part of the same legal entity and Telecom's retail division would not appear to meet the paper's test of being 'fully divested'. This has prompted media speculation that Telecom's network arm, Chorus, will be structurally separated from the rest of Telecom, leaving it free to control any LFCs in which it invests.

Who Gets What?

One of the key selection criteria that the CFIC is to apply when selecting proposals is achieving a roughly proportionate spread of the available government funds across regions. This means in relation to the 25 cities and towns referred to in the proposal an approximate distribution of the available funds would be as follows:

As noted above, of the $1.5 billion, $150 million is already earmarked for making schools broadband ready so that to secure the full level of funding indicated in the table, proposals will presumably have to assist the CFIC in meeting that objective.

Points Of Interest

Some points of interest are:

  • The proposal leaves open the door for a single party to submit a bid covering a number of regions. At the extreme this means a single bid could cover all 25 regions and there could therefore be a single LFC to which the CFIC then provides funding.
  • The proposed structure of the CFIC is as a Public Finance Act 1989 Schedule 4 entity (a current example of such an entity is the New Zealand Lottery Grants Board). The paper envisages the CFIC would have a secretariat of around 5 10 full time staff and would have operational costs in the order of $4 million per year which would come out of the $1.5 billion.
  • The initial priorities under the proposal would be to make fibre available to priority users such as business, schools and health services plus green-fields developments. This is slated for the first six years of operation of the CFIC. The secondary goal is to make fibre available to 75% of the population within 10 years.
  • The proposal envisages that LFCs would have company constitutions requiring them to operate in certain ways and to avoid certain activities. The proposal envisages a shareholder's agreement would be put in place between the CFIC and the LFC partner. Further, LFCs would be required to adhere to common technical and commercial standards. LFCs are to operate purely as fibre infrastructure carriers providing wholesale access to dark fibre but would have the option of providing other wholesale services such as bitstream services (bitstream services are suitable for wholesale customers with less of their own infrastructure).
  • The proposal refers to the current fibre-to-the-node/ cabinetisation program being undertaken by Telecom's operationally separate network division, Chorus. This was part of the commitments made by Telecom in connection with its operational separation undertakings finalised in March 2008. The paper notes that Telecom may not have made that investment had it known of this new FTTH initiative. It refers also to the risk to Telecom that the value of its fibre-to-the-node/cabinetisation investment might be eroded as customers move to the proposed FTTH network. The paper says this risk is mitigated in that Telecom can compete to access the government's CFIC investment. It also notes that Telecom can seek a review of its operational separation undertakings.
  • Areas outside the 75% coverage area in the proposal will, according to the paper, be addressed through the review of the Telecommunications Service Obligations Regime.
  • Officials have been directed to report back to the relevant cabinet committee on whether a National Environmental Standard and/or legislative amendment is necessary to cover:
    • fibre cable deployment on telephone and electricity poles
    • access to local authority-owned passive infrastructure such as ducts
    • microtrenching; and
    • fibre optic cable 'drops' from the street-side zone into customer premises.
  • The proposal does note that the local fibre companies may be new companies or could be based on existing companies where existing companies are suitable vehicles for fibre deployment.

What Will FTTH Deliver?

In terms of economic benefits from FTTH, the paper refers to independent estimates of improved productivity, global connectivity and capacity for innovation valued at between $2.4 billion and $4.4 billion a year. In answer to the critics who say that the benefits of a step change in broadband capacity are speculative, and that even the experts still can't say exactly what many homes and businesses could usefully do with up to 100 Mbps of extra bandwidth, the paper's response is in part 'if you build it they will come'. The paper notes that in the short term there could be significant productivity improvements for ICT dependent businesses but that for most residential users the applications available with FTTH as compared to the status quo are unlikely to be significantly different. However, the paper puts its faith in new applications being developed in the future and references the massive growth in applications over the last 10 to 15 years on the back of incremental increases in available bandwidth. The paper notes:

' 10 years' time it is likely we'll be talking about ultra fast broadband at speeds of 100 Mbps and there are very likely to be applications that will demand this bandwidth.'

Submissions on the proposal close at 5pm on 27 April 2009. The timetable after that proposes a report back to cabinet by the end of May, the appointment of the CFIC by mid June 2009 and thereafter indicative dates whereby an RFP would be released by the CFIC by mid August 2009, proposals due by mid October 2009, and the initial decisions made by the CFIC by January 2010.


1. The proposal is available at

Phillips Fox has changed its name to DLA Phillips Fox because the firm entered into an exclusive alliance with DLA Piper, one of the largest legal services organisations in the world. We will retain our offices in every major commercial centre in Australia and New Zealand, with no operational change to your relationship with the firm. DLA Phillips Fox can now take your business one step further − by connecting you to a global network of legal experience, talent and knowledge.

This publication is intended as a first point of reference and should not be relied on as a substitute for professional advice. Specialist legal advice should always be sought in relation to any particular circumstances and no liability will be accepted for any losses incurred by those relying solely on this publication.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.