Much ado about telco deals in NZ

There has been plenty of whinging and whining over the New Zealand Government this week confirming long-standing speculation it is in talks with Telecom and Vodafone over them building the $300 million Rural Broadband Initiative.

Much harping centres around the pair being greedy private monopolists, which we are often told should be punished. I admit, the gruesome twosome have been naughty boys in the past but the trouble is, they know what they are doing, and this is why the government has probably made the right decision.

ICT Minister Steven Joyce made this point very clearly himself when the uproar, much from sore losers, led him to make further statements to media defending his controversial decision.

The Telecom-Vodafone bid was "considerably better than the alternatives" because it offered better uplink speed, superior guaranteed ground coverage and mobile towers that allowed for co-location (meaning another carrier, such as 2degrees, could install its own transmitters around Telecom-Vodafone gear), Joyce said.

Competition concerns are addressed too.

"I have been clear that strict open-access rules will be included in any contract," said Joyce. "This will promote healthy competition in both the rural wholesale and retail broadband markets."

Such a view is confirmed by Paul Brislen, chief executive of the Telecom Users Association of New Zealand lobby group, though he later questioned how the rules might work.

Brislen says he does not see Telecom returning to its former dominant position, despite it looking likely that the telco will build a good deal of the country's broadband infrastructure. He believes Telecom and Vodafone's involvement should draw wider industry involvement in the initiative.

Says Brislen:

...these two do indeed have the experience, the existing infrastructure and the know-how to build and deploy a high-quality fixed and wireless hybrid open-access network. If Vodafone is involved then so is 2degrees (it roams on Vodafone's network where it has yet to build) plus the virtual partners of both providers (companies like TelstraClear and Orcon that don't have their own network but sell space on someone else's). It also makes it easier to connect the [rural broadband initiative] and [ultra-fast broadband] if one participant (in this case Telecom) is involved in both halves.

Furthermore, Brislen also notes that failed contenders Woosh Wireless suffered problems with Project Probe, an early government broadband project. Meanwhile, it is a bad look for the government to give work to state-owned outfit Kordia. Woosh and Kordia formed OpenGate and put together a bid with FX Networks, a fibre optics company.

I will add that the third contender, Torotoro Waea, a Maori organisation, was little known until it devised its bid.

Thus, by picking experienced and knowledgeable partners, the New Zealand Government is playing safe with taxpayer money. It has also addressed the valid concerns over competition and open access.