According to Tom Pullar-Strecker in today’s DomPost there is still a strong possibility of the government taking a stake in Telecom’s network arm Chorus.
This is despite Communications Minister Steven Joyce ruling it out last week in the House when he was asked:
Clare Curran: Will he guarantee that the funds the Government has set aside for investing in new fibre infrastructure will remain dedicated to the roll-out of new fibre infrastructure?
Hon STEVEN JOYCE: Yes.
Clare Curran: Does he agree that there is no public benefit in diverting funds into a purchase of Telecom’s old copper network?
Hon STEVEN JOYCE: The Government has been clear all the way along that it does not intend to spend money purchasing existing infrastructure from any existing bidder.
The Government hasn’t really been that clear about anything. There is a veil of secrecy around its process to choose a vehicle to roll out ultrafast broadband to the country. The industry is very confused. And increasingly unhappy with what appears to be the big problem: What to do about Telecom?
Telecom is struggling to work out what to do. It has now proposed structurally separating though how it plans to do that is very unclear. It has talked about a de-merger, which is curious because in order to de-merge (like for instance AOL-Time Warner), you have to have first merged. Telecom and Chorus are not a merged company. Are Telecom and Paul Reynolds making it up as they go along?
Did Telecom think that they would have to be part of the fibre roll-out and that the government would have to pick them? How have we ended up in a situation where a few weeks out from a deadline for preferred tenderers to be announced, Telecom have suddenly gone into a tail spin about structural separation. Or has there been a parallel process going on behind the scenes all along between the Govt and Telecom?
I’ve recently made several points about this:
This is NZ taxpayers money, it’s an investment in our future. We must not sink public money into a project that could ultimately about delivering profit to shareholders. Especially if those shareholders aren’t NZ-based.
Fibre is the future, copper is the past. Telecom are fixated on their copper network and don’t believe that the country should migrate to fibre straight away. Should they lead a fibre company wont that mean ongoing delays to rolling out fibre? We must not be making a decision that takes us backwards and is ultimately about buying into the past.
Investment in fibre will allow a new generation of providers to develop. We must allow that to happen.
And just as has been the case with mobile termination rates, market behaviour, posturing and stand offs should not influence the ultimate decision. A deal that requires the Crown Fibre Holdings Company to effectively buy out or invest in Chorus is questionable. No matter how such a deal is dressed up.
Should a company that has demonstrated its failure to properly design and build a 3G network be handed more than a $1b of taxpayer money? Telecom must not be propped up to save its bacon. It must be a decision based purely on merit and what’s best for NZ.
What is Telecom’s future? And what does the government really want? I think they are trusting the market to deliver the outcome. And I’m not sure that’s going to work. It certainly doesn’t appear to be working for Telecom. But more importantly it doesn’t appear to be working in the public interest.
Given that they wont have a conversation with the industry or the public about the best way to spend public money on ultrafast broadband, here’s what I think.
That the roll-out of fibre infrastructure needs to be via a regulated monopoly. Perhaps all the parties could agree to work together to achieve this. The Regional Fibre Group, led by Vector, Chorus and Vodafone/Axia. A collaborative solution. To do this requires a circuit breaker. And of course the public need to assured that the Commerce Act wasn’t being breached through collusion. But NZ’s interests are not being served by the current situation. And Steven Joyce must reassure the public that a parallel process behind the scenes with Telecom is not occurring.
Problem is, Telecom still seems to think they can manipulate government. Old habits. And it still seems to be down to who will blink first. Doesn’t seem to me to be in the public interest.
Hmmmmm, no surprise since corporates are not created to consider public interests ahead of shareholder interests, just the opposite in face. Sometimes the two sets of interests may align, great, but the rest of the time corporates serve their shareholding masters first and foremost not you and I.
I’m sure it’s buying a company per se, it will be paying for something that ANOTHER company wont have to pay for, otherwise known as a grant
Agreed with all that you say – except it is unlikely that in the forsee-able future fibre optic cable will appear at a door near me, in small town NZ, so I do hope that copper wire is maintained for a few years yet. As for the secrecy in a transparent open Government, with a stragegy org by Joyce, you would wonder what they have to hide since it was already planned before the last election.Promises. Promises.
/facepalm
More bureaucracy, more complexity, more chance to fail.
One government owned organisation rolling out the fibre and maintaining the network. It’s the simplest and cheapest option available and one that’s actually likely to work. We even already have the SoE with the experience necessary to do the job in Kordia.
Service providers then compete over that network.
The real situation is that the ex-telecom crowd within CFHL and Chorus leadership have had a long term ongoing cross chatter.
It is possible the Steven Joyce is not fully aware that the system put in place to make the Govmt broadband plan happen has been generally hijacked since day one.
There is widespread ‘in private’ lack of confidence throughout the NZ network industry about the CFHL competency and integrity.
It is a serious pity that CFHL is fundamentally compromised.
Love this post… it’s a speck of real Labour spirit in a massive several decade long saga of weakness and boredom from the Labour party.
I would say more but Draco T said it. The Government is the only NZ body with the orginisation and funds that can get a public project like this going. The govt being so keen on getting privateers involved – weak NZ ones with little capital for investment – has stifled progress on more occasions than this one.
More specs of Labour spirit please
Isn’t demerger a proper accounting term that you use when splitting a company? I dont think it matters whether a merger happened in the first place.
Everyone hates a monopoly until they own one.
Yeah well, our Govt used to own a few monopolies and given your comments they strangely had will power issues holding on to them.
Lol Loota we all know why that is
Hmm I wonder what should be a stronger incentive though. Holding onto a private monopoly so you can charge prices way unrealistically high or holding onto a public monopoly to protect it from a private one. The Govt should have been even more keen on owning the monopolies than the privateers are.
Maybe laying broadband cables could be linked in the cycle way.
By getting chorus the government could get a tourism business as well as the broadband bit done aswell.
A monopoly in both industries
We are a small county and hopefully should remain so.
Telecom bought a world class system for a song and ran it down extracting profit to boost share prices. Ownership has drifted off shore as per most listed service companies.
With the Telecom share price now low due to bad business practice of paying high dividends while investing little in a very much changing technology perhaps it should come back to public ownership before any handouts are given to provide a new network.
The government should never provide a network for ownership of private companies again.
We are small and US models have not worked here.
Relying on an expanding economy is living in la la land.