Market Watch

Green Light for New Zealand's Next-Gen Broadband Plan

June 29, 2011

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New Zealand's Parliament has passed the Telecommunications Amendment Bill that after a third round of amendments lays out the procedures for delivering the government's next-generation and rural broadband goals. The bill should come into legal force on 1 July. The most significant points are:

  • The Ultra-Fast Broadband (UFB) plan aims to pass 75% of the country's population with 100Mbit/s using fibre-to-the-home (FTTH) by YE 2019.
  • The Rural Broadband Initiative (RBI) has set targets to provide 97% of households with access to at least 5Mbit/s speeds and the remaining 3% with 1 Mbit/s by 2017, using a mixture of connection types including fixed wireless, mobile broadband and even FTTH.
  • As part of the UFB plan incumbent telco Telecom New Zealand will split its retail arm and infrastructure divisions into two separate companies. Post separation the network infrastructure division Chorus will receive NZ$929m in government funds to build and operate a next-generation fibre network capable of speeds up to 1Gbit/s to end users. The company is bound by the terms of the government's UFB initiative to market its next-gen services at specific price points, with entry-level residential services starting at NZ$37.50 (€21.14) excluding tax for 30Mbit/s, increasing to NZ$55.00 (€31.01) for 100Mbit/s.

The passing of the bill will provide a push to rolling out next-generation broadband products in the country where investment has been slow. Fixed broadband penetration in New Zealand reached 61.1% at YE 2010 according to IHS Screen Digest data, up from 58.0% a year ago, though as yet none of the major ISPs market next-generation broadband services.

The New Zealand government estimates cost to pass and connect a home with FTTH between NZ$2,250 and NZ$2,750 (~€1,270-€1,550). By contrast, Verizon in the US has been rolling out fibre at a cost of €850-€1,000 per housing unit (flat or detached house), including the cost of running fibre to the building, end user equipment and engineer installation fees. With its NZ$929m in funding, Chorus is targeting 830,000 homes passed with FTTH, equivalent to around 52% total homes. This will significantly contribute to the government's target of 75% homes passed, or 1.2m, with next-gen networks by 2019. To actually connect via FTTH, based on a cost of NZ2,250 per home, Chorus' grant will enable the telco to link up roughly 410,000 homes with FTTH, equivalent to around 36% of 1.15m broadband connections or a quarter of total homes in the country.

Government conditions for comparatively competitive next-gen product pricing is likely to significantly bring down prices for current-generation broadband products which are typically expensive and limited by restrictive data-caps. Telecom New Zealand's broadband packages start at NZ$41.00 (€23.34) per month when taken with a phone line, but come with a 3GB data cap. The theoretical maximum speed of the package is 24Mbit/s, with a 40GB allowance costing NZ$81.00 (€46.11) monthly, excluding phone line costs.

Rivalry to Chorus' FTTH ambitions in the next-gen sector is likely to come from cable operator TelstraClear (subsidiary of Australian incumbent telco Telstra) which has already spent NZ$10m migrating its customers in Wellington, Kapiti and Christchurch to its DOCSIS 3.0 network. The operator has completed trials of 100Mbit/s services in Wellington, but as yet has not published a launch date for its high-speed services. TelstraClear's current high-speed broadband offer tops out at 25Mbit/s, and costs NZ$209.95 (€119.51) with a 120GB data allowance.

Find Out More > IHS Screen Digest Broadband Media Intelligence

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