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Viewing cable 09WELLINGTON102, NEW ZEALAND'S $1.5NZ BILLION BROADBAND DEPLOYMENT
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Reference ID | Created | Released | Classification | Origin |
---|---|---|---|---|
09WELLINGTON102 | 2009-04-22 03:03 | 2011-04-28 00:12 | UNCLASSIFIED//FOR OFFICIAL USE ONLY | Embassy Wellington |
VZCZCXRO5667
RR RUEHAG RUEHCHI RUEHDF RUEHFK RUEHHM RUEHIK RUEHKSO RUEHLZ RUEHNAG
RUEHPB RUEHRN RUEHROV RUEHSR
DE RUEHWL #0102/01 1120303
ZNR UUUUU ZZH
R 220303Z APR 09
FM AMEMBASSY WELLINGTON
TO RUEHC/SECSTATE WASHDC 5840
INFO RUEHNZ/AMCONSUL AUCKLAND 1953
RUEHBY/AMEMBASSY CANBERRA 5497
RUEHDN/AMCONSUL SYDNEY 0832
RHHMUNA/CDR USPACOM HONOLULU HI
RUCPDOC/USDOC WASHDC 0297
RUEAFCC/FCC WASHINGTON DC
RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHZU/ASIAN PACIFIC ECONOMIC COOPERATION
RUEHSS/OECD POSTS COLLECTIVE
UNCLAS SECTION 01 OF 03 WELLINGTON 000102
SENSITIVE
SIPDIS
STATE FOR EAP/ANP, EEB/CIP/BA FOR TIM FINTON, AND DOC/ITA/OTEC FOR
ANDREW BENNETT
STATE PASS TO FCC ROBERT TANNER
STATE PASS TO NTIA
STATE PASS TO PACOM FOR J01E/J2/J233/J5/SJFHQ
E.O. 12958: N/A
TAGS: ECPS ECON NZ
SUBJECT: NEW ZEALAND'S $1.5NZ BILLION BROADBAND DEPLOYMENT
INITIATIVE
Ref: State 27310
WELLINGTON 00000102 001.2 OF 003
¶1. (SBU) Summary. In March, Communications and Information
Technology Minister Steven Joyce unveiled plans for GNZ to offer up
to NZ$1.5 billion for building high-speed broadband infrastructure
to cover seventy-five percent of New Zealand. A Crown-owned
investment company is expected, along with private sector partners,
to invest a total of NZ$3 billion into "regional fiber companies"
which will install fiber-optic networks throughout New Zealand's top
25 most densely populated cities and towns. The effort is part of
the government's attempt to marry an overall fiscal stimulus package
with investment in new technology to produce long-range economic and
commercial benefits. The GNZ admits that there are challenges for
the success of the initiative and the Labour opposition has already
slammed the plan as a waste of tax payer money. End Summary.
GNZ to Invest NZ$1.5 Billion in Broadband
-----------------------------------------
¶2. (U) At the end of March, Communications and Information
Technology Minister Steven Joyce unveiled plans to create a
Crown-owned investment company known as the "Crown Fibre Investment
Co" (CFIC) with a mandate to invest up to NZ$1.5 billion of
government funds for building high-speed broadband infrastructure
throughout New Zealand. CFIC will, alongside private sector
investors, put money into "regional fiber companies" that will
install fiber-optic networks in 25 New Zealand towns and cities.
¶3. (U) The effort comes as part of the government's attempt to
marry an overall fiscal stimulus package with investment in new
technology which it hopes will generate long-range economic and
commercial benefits. The new company's goal is to boost broadband
speeds to 100 megabits per second - more than 50 times faster than
speeds currently available - by connecting fiber-optic cables to
homes and businesses. The money will be dispersed via private
companies on a regional basis in a series of "Public-Private
Partnerships." A feasibility study commissioned by the NZ Treasury
and conducted by Milner Consulting Ltd. projects that total fixed
investment (infrastructure costs) required to connect seventy-five
percent of urban New Zealand is expected to range between NZ$2.6 and
NZ$3.3 billion.
Seventy-five Percent of New Zealand to be Connected
--------------------------------------------- ------
¶4. (U) The 25 (initial) centers identified are based on population
and range from Auckland, with 1.2 million people, to Oamaru, with
population of 12,681. Once finished, the GNZ hopes this investment
model "will deliver on the government's commitment of ultra fast
broadband to 75 percent of New Zealanders where they live, work and
study over the next ten years," said Joyce. Those towns or rural
areas outside this initial group would eventually get "improved"
internet services but that would occur in the second phase of the
initiative. The more remote regions could expect eventual upgrades
to broadband but they would not have the fiber enabling the
ultra-fast broadband, said Joyce.
Commerce Commission Report on Current NZ Broadband
--------------------------------------------- -----
¶5. (U) Apart from the CFIC initiative, the New Zealand Commerce
Commission's latest report claims that the quality of current
broadband services improved greatly by end of 2008. The Commerce
Commission released its report just days after the government
announced the CFIC initiative. The report, drafted by IDC
Consultants and Epitiro (consulting firms contracted by Commerce
Commission), claims that Telecom, TelstraClear DSL, Vodafone, Orcon
and Slingshot (firms with the largest share of the current NZ
internet market) have boosted their broadband scores by between 99
percent and 166 percent over the course of 2008. Most of this was
due to investment in their current networks and additional
improvements stemmed from the inclusion of ADSL2+ technology
(Asymmetric Digital Subscriber Line - a data communications
technology that enables faster data transmission over copper
telephone lines).
WELLINGTON 00000102 002.2 OF 003
¶6. (U) As of June 2008, New Zealand ranked 19 out of 30 OECD
countries in terms of numbers of broadband connections, with about
20 broadband subscribers per 100 of population. Total broadband
connections, including fixed and wireless connections, had reached
915,000 by December 31, 2008. The overall quality of broadband
services has also improved, with major internet service providers
investing in extra network capacity. Nearly 60 per cent of digital
subscriber line (DSL) connections had now been upgraded to the newer
and faster ADSL2+.
Likely Investors Reviewing GNZ Proposal
---------------------------------------
¶7. (U) An internal report (Castalia consultants) commissioned by
the three largest telecommunications firms in NZ - Telecom, Vodafone
and TelstraClear - said their own investment plans would deliver
broadband speeds adequate for the needs of everyday internet users
without the need for a boost from the Government. Castalia
challenged the belief that high broadband speeds for households - up
to 50 times faster than what is presently available - would deliver
significant economic benefits.
¶8. (U) Telecom (largest NZ telecommunication firm) has set up an
internal "think tank" to formulate its response to the Government's
NZ$1.5 billion plan. Sources suggest there is still internal debate
within Telecom about the implications of the government plan.
"Telecom will be reviewing the opportunities the initiative presents
to work with the proposed CFIC to extend the reach of Telecom's own
ultra-fast broadband network, and to utilize the fiber networks
others may build," said chief executive Paul Reynolds. Reynolds
further opined that Telecom "looked forward to working with
government funding to complement the government's plans to take fast
broadband even further, including to those areas that currently are
not commercially viable." Telecom's current share of the retail
broadband market has slipped to 57 percent, down from 61 per cent in
¶2007.
¶9. (U) In addition to the traditional telecommunication firms
considering the CFIC's offer, Auckland-based Vector Energy is also
likely to be a prime candidate to join up with the new investment
company CFIC in rolling out fiber optic cables to homes and
businesses. Vector currently has 500km of fiber optic network laid
in Auckland's business districts and is expanding that network by an
extra 300km as part of an agreement with Vodafone.
Endorsements
------------
¶10. (U) Much of the GNZ's current CFIC plan was based on a March
2008 study by the Auckland-based New Zealand Institute entitled,
"Assessing New Zealand's Current Broadband Path: The Need for
Change." The NZ Institute concluded that the current state of NZ
broadband was insufficient. The NZ Institute maintained that the
announced investment by the major telecoms would not take NZ far
enough fast enough. Despite the dominant investor (Telecom) making
significant investments in fiber-optic, it had insufficient
commercial incentive to roll it out rapidly. Finally, the longer NZ
took to roll out its fiber-optic upgrade, the more costly it would
become thus shutting out all but the major urban centers.
¶11. (U) CFIC's plans have been favorably welcomed by the
Telecommunications Users Association, TUANZ. "The Minister's paper
is at the top end of our expectations," said TUANZ's chief executive
Ernie Newman. "It sets out a clear structure for the proposed
partnerships, and will give potential partners in the private sector
all the information they need to come up with regionally-based
proposals." Newman said the plan appeared to be "sector-neutral" -
meaning it opened the way for a wide range of potential co-investors
including telecommunications companies, power line companies, or
regional groupings. This was important, said Newman, as a greater
diversity of investors were "showing their hands and broadening the
range of innovative, cost-effective solutions."
Criticism of the Plan
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¶12. (U) Labour Party's Finance spokesman David Cunliffe accused the
Government of "performing a NZ$1.5 billion back flip." He said the
scheme largely mirrored the approach of Labour's NZ$325 million
Broadband Investment Fund (BIF), which the Government scrapped, but
was more wasteful of taxpayers' dollars. Minister Joyce responded,
saying the Government's plan differed from Labour's in three key
respects: its sheer size, the Government's investment in fiber
providers instead of handing out subsidies, and its focus on fiber
to the home, rather than a mix of other technologies such as
wireless and/or satellite broadband.
¶13. (U) The Government conceded that there was a risk that private
investors might not come forward with their share of the NZ$3
billion, that this might not be enough to provide the desired
network coverage, and that local fiber companies might fail. Laws
might be changed to make it easier for contractors to string cables
on power and telephone poles, and to lay fiber in "micro-trenches"
cut in roads. Tim Davin, policy manager at the Institute for
Professional Engineers, said 25,000 kilometers of cabling would be
needed. New Zealand did not have enough trained engineers to build
the network, but some could be brought in from overseas, he said.
Comment
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¶14. (SBU) Despite the contested nature of the high-speed broadband
debate, most seem to agree that the best way forward for NZ is
through the Government's proposed collaborative approach. There are
a number of technical issues yet to be worked through and engaging
with the country's major telecoms will help the GNZ to form a
clearer roadmap towards developing an effective plan for the
proposed NZ$1.5 billion in spending. The GNZ's commitment to invest
in New Zealand's broadband infrastructure clearly demonstrates the
importance the National-led government attaches to state-of-the art
information and communication technologies (ICT) as an enabler of
business and a driver of international competitiveness. To date,
too much of the broadband debate in NZ has focused on the "last
mile" of infrastructure and centered on broadband access alone.
Faster broadband will eventually encourage developments in areas
such as eHealth (real time remote healthcare monitoring and
diagnosis) and education through improved research and
communications technologies and enhanced distance learning - all of
which were National Party campaign promises. End Comment.
KEEGAN