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Chorus fibre build plans for 30,000 premises on hold

Chorus puts plans for an extra 30k fibre connections on the back burner. One NZ faces opposition to Dense Air acquisition. Copper withdrawal code tweaked.
Chorus fibre build plans for 30,000 premises on hold
Photo by Matthew Buchanan / Unsplash

Chorus says a planned $200 million extension to the fibre network connecting 30,000 premises is on hold.

In the meantime the company has committed to investing $40 million to connect another 10,000 premises to the Ultrafast Broadband Network. This will expand the national network coverage by less than half a percentage point. At the time of writing there are around 1.8 million fibre connected premises.

The company says the 10,000 additional connections will be in areas on the fringes of the existing fibre network. The work will be finished during the 2025 financial year and Chorus says it will announce more specifics about where the network will be extended in the coming weeks.

Revised proposal

Previously Chorus talked about spending as much as $200 million extending the network to an additional 30,000 more premises and pushing nationwide fibre coverage close to 90 per cent.

That could still be on the cards, but a stock exchange announcement issued this week quotes Chorus CEO JB Rousselot saying:

"We've revised our regulatory proposal to reflect the confirmation of the 10,000 premises and the reduced amount of investment that falls within the new regulatory period.
"This change leaves approximately $200 million of investment that would be required to unlock significant socio-economic benefits for about another 30,000 premises. We’ll continue to investigate ways that we can extend our fibre footprint further, but this discretionary investment remains contingent on pricing, market and regulatory developments.
"In the absence of current clarity on the conditions for that investment, we've removed approximately $200m from our main proposal and would instead include it in a separate individual capital expenditure proposal if and when the conditions to support such investment are satisfied."

In other words, more of rural New Zealand can get the benefits of a fibre network, but the government and the regulator need to come to the party. Chorus is a business and it wants a clearer idea of what it can expect from further investment before committing.

One New Zealand's Dense Air acquisition faces regulatory challenge

2degrees has come out punching as the Commerce Commission
investigates the competition issues surrounding One New Zealand's acquisition of Dense Air's local operation.

Dense Air's only meaningful assets are two 35MHz blocks of 2600MHz spectrum. One NZ has said it would use this spectrum to boost speeds and capacity on its network. At the time the acquisition was announced CEO Jason Paris said the move would be like adding an extra motorway lane.

The Commerce Commission can halt the acquisition if it feels the move would weaken market competition.

Fixed wireless broadband

That is the nub of 2degrees' argument. The 2600MHz band is important for fixed wireless broadband. 2degrees has no spectrum in this band and says that means it can't compete effectively with One NZ or Spark for the lucrative fixed wireless business.

Fixed wireless makes up around a third of the broadband business for both One NZ and Spark. 2degrees is a long way behind. Margins for fixed wireless broadband are higher than in other telecommunications market sectors, so this serves to make 2degrees less competitive in the bigger picture.

Spark has more suitable fixed wireless spectrum than One NZ or 2degrees. This means the acquisition would level the playing field between One NZ and Spark while leaving 2degrees even further behind.

Few alternatives

As the Commerce Commission notes in its statement of issues there are unlikely to be other opportunities for 2degrees to pick up additional spectrum "to remove, or materially reduce, the disparity in its holdings and capacity relative to those of One NZ.”

A second line of opposition to the acquisition comes from Wisp NZ, the trade body representing the smaller, regional wireless internet service providers. Wisp NZ argues that transferring Dense Air's spectrum to one of the mobile network operators will put further pressure on the small operators grappling to compete with the major mobile companies.

The Commerce Commission is aiming to make a decision on the acquisition by April 3, but warns the date could be extended if the investigation requires more work.

Comment: Historically governments were willing to let market forces rip when it came to spectrum ownership. If anything the goal was to maximise the windfall that came from spectrum sales.

Over the last decade New Zealand's government and the Commerce Commission have moved more towards a model that aims to make the best use of spectrum.

Stopping One NZ from acquiring the Dense Air Spectrum would be a bigger step down the intervention path. That could be what is necessary to keep the mobile market competitive, but it would be a departure and it will affect both how carriers plan future spectrum purchases and the book value of spectrum assets.

ComCom tweaks Copper Withdrawal Code

The Commerce Commission says it has amended the Copper Withdrawal Code it established to ease the transition from copper to fibre networks. The Code is a list of rules for Chorus to follow as it pulls copper services from areas covered by the fibre network.

Chorus can only halt copper services once the code's requirements are met.

While the copper withdrawal process has worked well, Telecommunications Commissioner, Tristan Gilbertson, says: “There are opportunities for improvement that we’re addressing through these amendments.


“The amended Code reinforces the key consumer protection requirements of the original Code, provides additional clarity in a number of areas, and gives Chorus more flexibility in terms of how it delivers on its obligations.

“This should improve communication and engagement with consumers, increase certainty for all stakeholders, and allow the process to better accommodate the different needs and requirements of individual consumers".

The updated Code will apply from April 5 and cover the 200,000 copper lines that Chorus has earmarked for withdrawal.

Bridges pitches Auckland's global tech hub future

Auckland may be New Zealand's largest city by a country mile, but historically it has punched below its weight as a technology hub.

The Auckland Business Chamber wants to change that. Its CEO Simon Bridges, a former communications minister, puts telecommunications at the core of this ambition. On LinkedIn he writes:

"Auckland must focus on unconstrained wireless coverage and fibre networks. Ongoing investment and adoption of 5G and beyond is required to support emerging trends such as IoT, autonomous vehicles and a “business anywhere” approach.
"A robust national and international fibre network is integral to accommodate the anticipated surge in AI cloud and AR/VR traffic demands.
"Simply put, without continued investment and innovation from the telecommunications sector, Auckland will not be able to realise the ambition to become a global tech hub."

There's a report prepared using data from Deloitte and sponsored by 2degrees outlining steps needed to make Auckland a global tech hub.

Auckland's main advantages over other New Zealand cities are its sheer size, its diversity, the academic institutions and its position as the main entry point to the country.

Wellington, Christchurch and even Queenstown can claim to be vibrant technology centres, but they are not global cities in the same league as Auckland.

In other news...

For a few days last week the tech world was enthralled by a story suggesting three million smart toothbrushes were behind a series of denial-of-service attacks.

It was an eye-catching yarn with all the right ingredients, but as Mathew Schwartz at Euro Security Watch points out, it wasn't true. Schwartz says there is no evidence that three million toothbrushes are connected to the internet.

At BusinessDesk Ben Moore writes about Quic, a Timaru-based retail broadband operation with no customer support. You'll need a paywall subscription to read this.

Juha Saarinen is now working for Interest.co.nz where he has written about the Pall Mall Process. It's a declaration to establish guiding principles for legitimate nation state "commercial cyber intrusion capabilities" and New Zealand has signed up.

The Download Weekly is supported by Chorus New Zealand.