22 May 2009

Vodafone proposes $6b broadband consortium

image 21 05 2009 - Vodafone New Zealand has submitted a proposal to the Ministry of Economic Development (MED) for the government's plan to install a national next generation network (NGN), reports.

Vodafone’s white paper suggests a co-investment model, combining public and private investment to fund a new network business, dubbed FibreCo.

"Competitors become investors and investors become competitors," Vodafone said.


Vodafone said, ‘This idea assumes [industry-wide agreement] that we will not accept moving from a copper access monopoly to a fibre access monopoly.’ Vodafone’s plan calls for itself, Chorus - Telecom New Zealand’s network arm, and TelstraClear to put their network assets into the new business that would be jointly owned by the trio and the government, which would invest through its NZD1.5 billion (USD906 million) broadband fund. FibreCo would then provide wholesale services to its shareholders, and its shareholders would compete in retail markets.

How it would work

FibreCo would only sell to its shareholders and its shareholders would compete in downstream wholesale and retail markets. Non-investors would gain access to the network as wholesale customers of shareholders on competitive commercial terms.

FibreCo would treat its shareholder customers on an equal basis and be independent of them, operating on an arm's length basis.

By way of example, three shareholders could invest $1.5 billion each and the Crown could invest $1.5 billion to provide $6 billion for a network.

Effectively the co-investment model is a "pay then take" arrangement for shareholders.

FibreCo would operate at a modest profit in the long-term and not overbuild existing assets. It would have the ability to buy rights over shareholders' existing assets.

Where to from here?

Vodafone said it did make a submission to the Ministry of Economic Development (MED) on the government's broadband plan.

Its "white paper" released on Thursday was fuller than the submission and it was sent to MED on Wednesday.

Vodafone argued that the existing regulatory model may not be appropriate for next generation access networks.

"The FibreCo concept will rely on a commitment from the government not to intervene in the operation or FibreCo or its downstream markets," Vodafone said.

This agreement would be conditional on FibreCo meeting agreed criteria.

Vodafone said FibreCo was a big idea that required co-operation between the government and private sector.

"This idea assumes industry wide agreement that we will not accept moving from a copper access monopoly to a fibre access monopoly," Vodafone said.

Source: Telegeography

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