Connected Research

Union policy research in the 21st century

NZ plans public-private NGA partnership

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The New Zealand government – which has already instituted a programme of operational separation as regards Telecom, the former monopoly operator similar to the situation surrounding the establishment in the UK of Openreach, is to proceed with its plan for a NZ$1.5bn (£650m) public-private partnership to build a broadband network [registration required; limited viewing time].

The network would be set up via Crown Fibre Holdings, a new government company, while the government will select 33 regional and national partners, to be known as local fibre companies, that will build locally based fibre networks on an open access basis. Any organisation or consortia may invest in any of the LFCs – except that telecom service retailers may not participate, indicating that Telecom would be precluded unless it fully split Chorus, its network arm, from its retail operations.

Telecom, for which Chorus is already embarked on a NZ$1.3bn fibre to the cabinet network expected to be available to 84% of the population in two years, noted that the announcement ‘raised the issue of the relevance of [its] undertakings’ on operational separation and associated investment.

Aside of the issue of the apparent prevention of the participation of Telecom, this decision represents something of a stirring up of a nest of hornets.

Telecom has already criticised the decision as not going as far, or as fast, as its own separately-tabled plans – although the (centre-right) government has also been critical that Telecom’s own plans did not involve significant additional investment and would have covered fewer homes and businesses. Clearly, many things remain to be clarified about the plan, including the terms of access of the LFCs to Telecom’s own backbone network, without which the LFCs will not be able to deliver high-speed services whatever the speeds at which the local access networks run.

Additionally, the plan represents a fundamental turn around in the question of the ownership of and investment in communications assets, as well as the end of a single entity being responsible for end-to-end network provision. Whereas once we contracted, or formed, nationalised companies for such a network building task, high-speed broadband requires the building of a new infrastructure into which neo-conservative governments are seeking to inject neo-conservative models and assumptions about how the economy should run. In the midst of a global recession caused by the failure of such models and assumptions, this does represent an assertion of their continued relevance which is quite breathtaking.

At the same time, the creation of local fibre companies does engender somewhat cosy, nostalgic notions of local, community-owned organisations: practical reality suggests, however, the likely incorporation of these over a relatively short period of time into much bigger, much less local conglomerates with a rather low level of concern about the interests of the local communities concerned. It will be interesting to see what ownership restrictions, if any, are put on the LFCs and, if there are any, how long they last. It will also be interesting to see how long and how watertight the preclusion of telecom service retailers from the LFCs turns out to be, given that profits are unlikely to prove sufficient either from the retail of telecom services or from ownership of the LFCs alone. The natural run of things tends to suggest a likely blurring of the boundaries, and reasonably quickly, too.

It is always possible that Telecom itself could represent a potential purchaser of LFCs which, from a workers’ point of view, is likely to be a more acceptable outcome than the more likely alternative – but this depends in the first place on Telecom resolving the issue of the separation of Chorus, which decision is also likely to be a source of pain. Telecom has, however, confirmed that it has no plans for structural separation – that it was ‘just not on our radar. It’s not part of our thinking’ [registration required; limited viewing time].

Without ownership of local access networks, the future for Telecom in terms of traditional telecom services is as the provider of the national backbone network and as one of the retailers of telecom services. It’s likely, in this context, to be a lot slimmer one.

[Edited on 18 September to provide additional clarification on the position in New Zealand]

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Written by Calvin

17/09/2009 at 12:55 pm

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