Kiwis surprised by Aussie NBN spend

The reaction across the pond in New Zealand to the Federal Government's $43 billion network announcement is one of surprise at the size of the proposed investment, and "the Aussies trumped us again".

This reminds me of the Bledisloe Cup in about 2000 when NZ had the game in the bag and the Aussies came from behind and gazumped us!

TUANZ CEO Ernie Newman

NZ Communications Minister Steven Joyce and his governing National Party recently committed to a NZ$3 billion broadband investment, half funded by the government, and the other half by private interests. This will deliver a fibre-to-the-premises network covering three-quarters of the population by 2015, with a Crown Fibre Investment Company providing wholesale, open access to it.

Chief executive Ernie Newman of the Telecommunications Users Association of New Zealand (TUANZ) didn't mince his words today, when asked about Australia's own effort: "This reminds me of the Bledisloe Cup in about 2000 when NZ had the game in the bag and the Aussies came from behind and gazumped us!"

"Their government's move, in response to failure by the incumbent especially, and the rest of their industry, to put up a viable proposal, is very gutsy. It's a huge decision," Newman said.

Comparing the two plans, Newman said that while the NZ National proposal looked visionary a year ago, it now looks comparatively limp. He hoped that the NZ government will study the implications with great care, and see whether the country can coat-tail in some way on the Australian plan. "Australia, of all countries, is one we cannot afford to drop behind," he warned.

Skirting ZDNet.com.au questions on whether the NZ level of funding would be sufficient after the Australian announcement, Minister Joyce claimed today that "there are many similarities between the New Zealand government's plan to roll out fibre-to-the-home, which we detailed last month, and the just-announced Australian scheme."

Steven Joyce
(Credit: NZ Govt)

According to Joyce, both schemes share the aim of delivering ultra fast broadband to the premises through public private partnership models. Joyce also believes that having Australia and New Zealand working towards similar fibre goals will make it easier for the region to attract the skills, experience and investment needed to ensure the success of the government's broadband plan.

IDC New Zealand telco analyst Rosalie Nelson said the scale of government intervention and the clear signal of unwillingness to push for a negotiated industry solution was extraordinary.

The bold move potentially overbuilds and marginalises all existing PSTN and current fibre investment, Nelson said. This is really raising the stakes for Telstra, which (unlike Telecom NZ) has spent the last three years further vertically integrating its businesses, she added.

Changing the fundamental structure and competitive dynamics of the Australian market like this carried a risk of unintended consequences, Nelson said, pointing out that "the track record of government-led broadband initiatives in NZ and Australia is hardly luminous".

It is easy to be blinded by the eye-watering scale and speed of this — and the $43 billion price tag — when comparing it to NZ

IDC NZ analyst Rosalie Nelson

"It is easy to be blinded by the eye-watering scale and speed of this — and the $43 billion price tag — when comparing it to NZ," Nelson said, when asked how the money and goals compared to the New Zealand plan.

The real issue came down to successful execution of the plan itself, Nelson stated.

"We have the potential in NZ for a closer partnership model between government and the industry," she said. "This will help to minimise the risks of overbuild and allow for a more orderly migration from legacy to fibre."

Looking at some of the advantages New Zealand may have, Nelson said the operational separation of Telecom NZ with the creation of [network infrastructure arm] Chorus had already shifted the industry towards a more open access model based on regulatory equivalence.

"My instinct is that Australia is a very long way from the model of 'co-opetition' (cooperation and competition) that has been forced on the industry here," she said.

Nevertheless, Nelson said it was "fascinating" to watch the shift in the Australian government's approach, from facilitating industry-based competition to active intervention and resumption of state investment with ownership, in order to achieve social and economic outcomes.

"The world will watch with interest," she concluded.