Bidding opens for $210m in extra UFB funds

The race is on for small towns vying for a slice of $210 million in extra funding for the Ultrafast Broadband (UFB) fibre rollout.

Communications Minister Amy Adams officially opened the tender process this morning.

The Crown has so far chipped in $1.35 billion toward the UFB. The extra money will expand it from 33 main centres to smaller towns – though exactly which, and how many, depends on the result of the RFP (request for proposals) process that kicked off today.

An earlier registration of interest (ROI) process encouraged councils to submit expressions of interest, and partner with potential fast broadband providers – a move that was seen as opening the door for smaller rural and provincial internet service providers. However, Chorus (which dominates existing UFB contracts) has also signalled it will tender.

InternetNZ chief executive Jordan Carter this morning welcomed the RFP but added, "The government needs to remain vigilant and seek meaningful, competitive bids from fibre builders and hold them to account for delivery of these bids." 

Cynics worry the bulk of the extra money could go to Chorus [NZX: CNU], which has complained a drop in the regulated price of copper lines has left it with fewer funds than anticipated to complete UFB work. 

The government says Crown Fibre Holdings (CFH) will assess bids on a commercial basis.

These towns (PDF) responded to the registrations of interest process and are expected to be in the running for the UFB top-up. Also in the running are areas of UFB towns that are currently just beyond the reach of the public-private fibre rollout. Landing these fringe UFB areas would be a nice, efficient top-up for Chorus' revenue. On the flipside, as one industry insider puts it, "Ultimately Chorus is the biggest loser if this does go on the current LFC patches. It's facing a future of being the LFC in Auckland and Wellington and bits of the provinces but not the high growth belt in Taranaki/Waikato/BoP or Canterbury."

Another question is who will handle the backhaul between different UFB towns. Even if it doesn't win a lot of the new UFB business directly, Chorus will be angling for this mantle.

The tender closes October 28. 

CFH expects to sign contracts with the winning towns and providers by the middle of next year.

A parallel process to allocate $100 million in extra funding for the Rural Broadband Initiative, plus $50 million for mobile blackspots in remote areas, is expected to wrap up in the second half of 2016.

The UFB extension is being paid for with money from the Future Fund (that is, funds from the partial sale of power companies). The RBI extension is being paid for with a three-year extension to the Telecommunications Development Levy, a $50 million-a-year tax on larger companies in the telecommunications industry.

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