Rural fibre pioneer shut out of govt broadband scheme

Focus on national proposals excludes Palmerston North provider

InspireNet, a Manawatu-based provider of rural fibre broadband, has been shut out of the $300 million Rural Broadband Initiative (RBI) following the government’s announcement yesterday that it will only consider national proposals.

James Watts, InspireNet's director, says the company is out of the RBI and it can’t participate in the Ultra Fast Broadband scheme because it is a vertically integrated telco — that is, it builds the infrastructure and sells the services on the same network.

In 2008 Watts partnered with FX Networks to build an open access fibre backhaul loop connecting Dannevirke and Eketahuna to Palmerston North, with the business case supported by Tararua District Council as its anchor tenant.

He also connected a school in the small rural settlement of Mangamaire to the Taraua loop. The school then became the centre from which fibre was rolled out to surrounding farm houses. It was a kind of forerunner to the government's plan of building fibre to schools, which are then intended to act as connectivity hubs for the surrounding communities.

But yesterday’s announcement means Watts is out of process. “I haven’t quite had a chance to absorb the entire RBI, but as best I can tell it’s all over for us. It’s a little disappointing, but just part of life,” he told Computerworld. “I guess it should be no surprise since it seems the government has been heading down the 'hand it all to Telecom “lets call it Chorus” path' for quite a while.

“I think the really disappointing thing will be watching the Government pay someone to dig into schools that are already connected to open access fibre courtesy of the communities own hard work to get their schools connected, along with the help of the Tararua District Council and myself over the last few years.”

He says he’s annoyed that so many people put time and effort into the RBI in the faith that they’re bids might stand a chance. “It will be pretty hard for any group of people/companies to get their collective bid together for a full RFP in the time available I would expect, meaning the likely winner most likely had to be Telecom or the New Zealand Regional Fibre Group (NZRFG) might stand a vague chance.”

The government received 39 Expressions of Interest in the RBI in May, and ICT Minister Steven Joyce told an industry conference in June that nine were national proposals.

NZRFG CEO Vaughn Baker is confident the group of independent fibre providers and lines companies can put a coordinated national bid in 12 weeks. He says the MED had signalled for some time that it was planning on recommending the government adopt a national proposal at the expense of a region to region approach.

IDC telecommunications analyst Rosemary Spragg says a national solution will enable a coherent approach with consistent pricing and access regimes across regions. “It is likely to be lower cost in terms of the infrastructure build and a national rural provider would be able to leverage its scale to deliver rural retail services at a comparable cost and quality to the services currently available in urban areas today.”

She says although a regional approach is appealing in that it offers localised solutions, “it comes with risks — particularly regarding the ability of the smaller regional providers to achieve scale economies and invest in infrastructure upgrades over time.”

Spragg says that the preference for a national provider in the RBI shouldn’t be interpreted as a nod towards a national solution for the UFB. Whether the government opts for a regional or national solution — and who it picks to partner with — in the UFB is expected to be announced in October and is, according to Spragg, “too close to call.”

Telecom’s reaction to yesterday’s RBI announcement was brief, releasing this short statement to Computerworld: “We note the Minister’s statement and will continue to stay engaged in the process. We agree that a national approach is likely to deliver broadband to rural areas more efficiently than any other method. We remain collaborative and open to working with others.”

Meanwhile Federated Farmers is disappointed that the government isn’t being more ambitious in its delivery of broadband to rural communities, despite lobbying hard in this area. It released a statement late yesterday, in which telecommunications spokesperson Donald Aubrey claimed that the potential of rural broadband is being underplayed.

“This is another positive step in the right direction, but we have already campaigned hard to life Government’s sights, resulting in a lift in commitment from $48 million to $300 million. The question rural New Zealand has before it now is, are you happy with a second rate service?”

Federated Farmers CEO Connor English told Computerworld that RBI’s goal of offering 5Mbps meant that rural people would always be playing catch up. He pointed out that the 25 percent of the population covered under the RBI is responsible for two-thirds of New Zealand’s export earnings and he had hoped the government would lift its game in the rural fibre rollout.

“We’re having to make a silk purse out of a sow’s ear here,” he says.

He saysFederated Farmers has maintained its relationship with Telecom despite submitting a rival bid in the EOI process, under the entity Fedztel Limited, and its membership in the campaign against Mobile Termination Rates, ‘Drop the Rate Mate’.