Kiwiblog

News.com.au reports:

On Monday, NBNCo, the Government organisation tasked with creating one of Australia’s most ambitious — and at $46 billion, one of its most expensive — pieces of infrastructure, was forced to deny claims the project was heavily behind schedule.

According to Fairfax Media an “internal progress report” said the project was two-thirds short on its benchmark construction timetable, and had only approved connections to 663,000 premises, rather than the 1.4 million planned.

In a statement, the NBNCo said it had met or exceeded every key target for six quarters in a row. This included having 2.6 million homes “ready for service” by year’s end, one million homes using the network and more than $300 million in revenue.

The company said it would not be drawn on “alleged internal documents” but admitted, “this is an incredibly complex project unlike any infrastructure build anywhere in the world.”

The squabbling over how many homes have been connected and how much the project has cost is all a long way from the Coalition’s glittery launch of its NBN policy in 2013.

United on a Sydney stage, then-Prime Minister Tony Abbott and Mr Turnbull promised that the Coalition’s version of the NBN would, by this year, deliver minimum download speeds of 25 megabits per second, possibly as much as 100mbps, for just $30 billion. Hardly the kind of coin you find down the back of the sofa, but significantly less than the $44 billion Labor was predicting their system would cost.

“There will be billions of dollars that Labor has wasted that we cannot recover but we will save many billions of dollars, at least $60 billion, by taking the approach we have described,” said Mr Turnbull at the time.

Labor’s fibre-to-the-premises (FTTP) proposal would take that fibre all the way to the home while the Coalition’s cost saving was to be made by cutting back on important chunks of infrastructure. Called fibre-to-the-node (FTTN), Turnbull’s NBN would see the fibre cables — a veritable motorway of data — halting on the street corner. The last leg would take all those tunes, films, images and Skype calls down the picturesque side road of the more limited copper network.

Amy Adams has announced:

Communications Minister Amy Adams has today released a raft of proposals to help speed up the installation of Ultra-Fast Broadband (UFB).

The discussion document outlines four proposals for change:

• amending the way in which network operators seek permission to access private property (in situations like shared driveways and apartment buildings)

• enabling better use of existing utility infrastructure to more efficiently roll out fibre networks

• providing more certainty to network operators regarding their ability to maintain fibre infrastructure installed on private property

• establishing an expanded and accessible disputes resolution process to ensure that land access disputes can be resolved quickly and fairly.

They look like useful proposals, which should be implemented.

TUANZ have said:

TUANZ also strongly supports the proposal to investigate a new statutory right of access which would enable fibre companies to utilise existing assets, even when those existing assets traverse private land. “We see this as being key to extending fibre further especially into rural New Zealand as it significantly reduces the cost of build which is a key barrier in improving rural connectivity” said Mr Young.

One shouldn’t need permission from neighbours to install fibre, any more than to install water or electricity.

The Herald reports:

Chorus, the regulated telecommunications network operator, has called on the government to enact changes to the Resource Management Act to speed fibre rollout to multi-unit properties and those with shared driveways, which currently takes six times longer than for stand-alone homes.

The median time to complete a fibre installation in a simple property, such as a stand-alone house, representing 80-to-85 percent of builds, was 18 days, chief executive Mark Ratcliffe told a briefing in Wellington today.

More problematic were more complex builds, with multi-dwelling unit installations taking a median 130 calendar days and a property down a shared right-of-way taking 110 days.

Ratcliffe said the major delays caused in the consenting process came from Chorus having to find neighbours to confirm they didn’t object to the build, or from ongoing disputes between neighbours or third parties.

“The best role the government could play is help with the consenting stuff, that’s the one thing the industry can’t sort out on its own,” he said.

“We’ve got a pool of properties where consents have been refused, and the way that those work at the moment, we don’t get back to those for another six months, otherwise there’s just more cost involved.”

I support RMA changes in this area. Neighbours shouldn’t be able to say no to a fibre installation any more than they should be able to stop power or water to a house.

Amy Adams announced:

Fibre growth connections in New Zealand have tripled in the last year, putting us first of all 34 countries in the OECD, says Communications Minister Amy Adams.

The latest OECD Broadband Portal penetration statistics show New Zealand is now number one among developed countries for annual growth of fibre connections from June 2013 to June 2014, with an annual growth of 272 per cent.

The average annual growth of fibre connections in the OECD was 12.4 per cent.

“In the year to December 2014, fibre connections in New Zealand grew from 19,000 to 69,301. This is an impressive jump and demonstrates the impact that the Government’s $2 billion investment in the Ultra-fast Broadband and Rural Broadband Initiative programme is having on the telecommunications services available to New Zealanders,” says Ms Adams.

We are coming off a low base, but that’s excellent growth.

“Over the past ten years, we have moved up from 22^nd place out of 30 OECD countries in June 2004 to being 15^th out of 34 OECD countries for fixed broadband subscriptions as at June 2014,” says Ms Adams.

“We are now ahead of Australia, the US and Japan for fixed broadband, with more than 31 broadband subscriptions for every 100 New Zealanders signed up for this service.

Good to now be in the top half. The reforms of both this Government and the previous one have helped.

MBIE has the latest quarterly report on UGB progress.

• 43% of homes in the target areas are now UFB capable
• Almost 70,000 homes now have fibre connected and working
• Northland is 100% complete, Waikato 77% complete and Bay of Plenty 68% complete

Stuff reports:

A further 5 per cent of New Zealanders will get ultrafast broadband if National is re-elected, the Government has announced.

National communications spokeswoman Amy Adams said the footprint of the fibre-optic cable network would be extended from the original target of 75 per cent of the country to a new target of 80 per cent at a cost of between $152 million and $210m.

The extended programme would be funded from the Future Investment Fund.

Adams listed 35 towns she said would be “strong contenders” to join the existing 33 cities and towns getting UFB. They included some large towns such as Westport and Picton.

The UFB programme was the “most ambitious communications infrastructure programme in the world, given our low population density”, Adams said.

Excellent. A few shares in Air New Zealand or some power stations in exchange for another 5% of the population gaining fibre. A great move, and very welcome I am sure by the 200,000 extra New Zealanders who will now get fibre under this plan.

The towns named by Adams as strong contenders for UFB are: Te Puke, Motueka, Morrinsville, Kerikeri, Huntly, Thames, Matamata, Otaki, Kawerau, Waitara, Kaitaia, Dannevirke, Alexandra, Stratford, Whitianga, Cromwell, Taumarunui, Picton, Foxton, Kaikohe, Marton, Te Kuiti, Katikati, Temuka, Waihi, Waipukurau, Warkworth, Carterton, Dargaville, Opotiki, Snells Beach, Te Aroha, Wairoa, Paeroa and Westport.

National has led the way on having a fibre connected country. In 2008 all Labour was promising was VDSL to more of NZ. National promised and is delivering fibre to 75% of NZ, and now 80% of NZ. On top of that a big investment in rural broadband.

Telecom have said:

It’s time for a ‘Giganation’ says Telecom as UFB coverage hits 100%

Telecom, soon to be Spark New Zealand, says the time has come for Gigabit per second data download speeds to be available across all of New Zealand’s Ultra Fast Broadband (UFB) fibre network.

Telecom made the call today as its Ultra Fibre products became available in the Taupo area – making it the only Internet Service Provider (ISP) selling fibre broadband services everywhere in New Zealand where the UFB network is currently active.

“When the UFB network rollout began in 2012, the standard download speeds available were 30 or 100 Megabits per second (Mbps),” says Telecom’s General Manager Product and Service Delivery, Lindsay Cowley.

“Since then, we’ve seen encouraging product innovation and speed increases across the four fibre companies who are contracted by the Government to build the UFB network and offer wholesale services to ISPs. Telecom has worked constructively with all LFCs to bring fibre products to people around New Zealand.

“A top download speed of 1000 Megabits, or 1 Gigabit, per second – the maximum technically possible under the UFB network’s current configuration – is now on the table as Ultrafast Fibre Ltd has announced it will launch the product throughout their coverage area of approximately 162,000 addresses in the central North Island.

I agree with Telecom. I love being on fibre and have chosen a 30/10 package as that is all I need for now. But demand keeps growing and we want everyone on UFB to have the option of a 1 Gb/s connection so people can choose the connection speed (and price) most suitable to them.

Stuff reports:

New Zealand spends millions of dollars on software to work out what and when to feed cows to maximise the yield from dairy herds.

But Chris South, team leader at Ministry of Education spinoff N4L, says that if you asked five history teachers at schools that were in the same deciles and areas, and had the same-sized rolls, what they used in their classrooms to help with their lessons, “you would probably get five different answers”.

“There is not just a disparity in knowing what resources are out there, but also in knowing how to use them,” he said.

“There are lots people getting totally different results from the same things.”

That could all change with Pond, a portal being developed by N4L.

It is designed to be the place in cyberspace that teachers will visit to find, use, adapt and comment on educational content uploaded by fellow teachers, professional providers of educational resources and useful material available on the wider internet.

Next year, the portal will also be opened up to students.

It could transform education or turn into an unholy mess. Failure won’t be through a lack of resourcing.

With a total cost of about $3.5 billion, the ultrafast broadband initiative is one of the country’s biggest infrastructure investments, and the priority is to hook up schools.

On top of its $1.35b contribution to the UFB initiative, the Government has committed a further $211m to pay for a managed network offering uncapped broadband to schools.

A big reason for all this spending is to provide better access to the content in Pond, which, like the managed network, is the responsibility of N4L, which has been set up as an independent Crown entity.

“The problems Pond solves are the difficulties of accessing fantastic content,” marketing manager Andy Schick said.

“We all know there is no such thing as page 2 on Google. You just look at page 1 and if it’s on page 2 it may as well not exist.”

So true.

I think the high speed Internet has huge potential for the education sector, It is potentially transformative. The investment in N4L could be one of the most important the Government has done – if it is managed well.

A few hundred teachers gathered in Wellington last month to get some hands-on time with the portal, which N4L is intentionally opening up only slowly to schools.

N4L is recruiting about 500 teachers to become “pioneer educators” in Pond.

Their job is to help N4L knock the portal into shape, so when N4L opens up Pond to the other 64,500 teachers this year there should be less chance of them navigating away forever in horror.

Trialling and testing is vital. 500 is a decent number to trial.

Also the Herald reports on a modern Christchurch school:

A high-tech new Canterbury school, which produces all of its own power and even boasts an internal radio station, was today described by the Prime Minister as a “window into the future” of what all New Zealand schools will eventually look like.

Pegasus Bay School, 30km north of Christchurch, is the first major school project completed as part of the Government’s $1.137 billion shake-up of greater Christchurch’s schools after the devastating earthquakes.

With solar panels on its roof, it is the first net-zero energy school in New Zealand.

It has ultra-fast broadband, its own radio station, and large, open classrooms — without any desks.

“It’s probably vastly different from what many people will have experienced in their own education but it’s the modern face of the future, and it’s what will be the hallmark of Christchurch as we build 21 of these schools as a result of the rebuild of Christchurch schools,” said Prime Minister John Key as he officially opened it today.

“This is a window into the future. All of the academic research shows you that these open, modern learning environments, with bigger classrooms, but with shared teachers, they are the way of the future, the way of making sure we life the professional development of teaching, but also doing the very best for our kids.”

The Herald has a photo. Looks great.

Ms Parata and Mr Key said that while Christchurch “went through a lot” while the government unveiled its education shake-up for the region, Pegasus Bay School has set the example for other schools as to what can be achieved.

“In the end, it’s like all of those things — people often resist change, but when they actually get to see the new product — as we said at the time of the debate — parents will be flocking to bring their [children] here,” Mr Key said.

I think parents and kids will e pretty happy.

The Internet Party has a policy to extend fibre from the current proposed 75% of NZ homes to 97.8% of NZ homes. They claims this can be done for a Government investment of $200 million.

I am a supporter of getting faster broadband out to rural NZers. Fibre is the best broadband technology, and is the preferred option – if affordable. But I have very significant doubts that you can connect up most of rural NZ for anything close to a $200 million subsidy.

First of all consider that $1.5 billion is barely enough to subsidise fibre to the most urban 75% of NZ. So if the most urban 75% needs $20 million per 1%, it defies belief that the rural 23% could be done with $8.7 million per 1%.

Most reports say rural fibre costs six times as much as urban fibre.

How much would it cost? This would mean laying fibre down almost every road in NZ. We have over 93,000 kms of road. Fibre was estimated to cost by the NZ Institute in 2007 to be around $150,000 per km.

A report by Dr Murray Milner on fibre costs also estimated open trenching costs of $120,000 to $150,000 per km (and up to $600,000 per km in very difficult areas)

That would be be a cost of $14 billion to get fibre down every road in NZ. Now I know the policy is only 97.8% but you get the general feeling that a $200 million subsidy will not get you anywhere near 97.8% coverage.

I think fibre can be extended out beyond 75%. But there comes a point at which the cost is too prohibitive, and satellite and wireless technologies are a better investment.

The 75% target for fibre is (from what I can tell) the most advanced in the world. When complete in a few years, I don’t think any other country will have fibre available to such a high percentage of the population. So lets not think 75% is bad – it is top of the class. Now again, I think we should debate what to do with the remaining 25%. But a policy that says you can get 98% of the population connected up to fibre for a mere $200 million extra subsidy is not credible – by a long shot. You can’t just wave a wand.

If the Internet Party did want to credibly contribute to the debate, then maybe they could fund an independent study of what the costs are of various broadband technologies to the most rural 25%, and then we could focus on what is the best solution.

Very impressed with the new fibre plans from Chorus. Less impressed that I phoned Vodafone three days asking to be switched to fibre and they have not yet ring me back, despite saying they’d do so in 20 minutes.

Anyway here’s the plans now available at a wholesale level:

• Fibre 100/20 $40
• Fibre 100/50 $45
• Fibre 100/100 $50
• Fibre 200/20 $55
• Fibre 200/50 $60
• Fibre 200/200 $65
• Fibre 1000/1000 $275

The 100/100 plan looks very attractive to me.

Great to see Chorus responding to demand.

Stuff reports:

The occasion certainly did not pass unnoticed, with the prime minister in town to visit Manaia View School, the first location to connect to fibre back in 2011.

Principal Leanne Otene proudly showed John Key the ways in which fibre has benefited her pupils, eliminating frustration and decreasing truancy rates.

Otene says her students no longer remember a time before fibre and now have digital, rather than wooden, desks to store their school work. …

Board of Trustees member Kirsten Holtz says the technological transformation at the school has been “absolutely amazing”.

“There’s now one device for every two kids, and fibre has made online learning more accessible and instant, there’s no waiting around so there’s more learning.”

“Children are engaged, and engaged children are children that are learning,” she says.

In the next few years fibre will not be just in every school, but available to 75% of NZ homes.  The impact in education is starting to show. The impact for other sectors will take longer to be realised, but may be no less significant.

Stuff reports:

The roll-out of ultrafast broadband as far as the street has been completed in Whangarei, Communications Minister Amy Adams has confirmed.

The city, where fibre has been laid by a subsidiary of lines company Northpower, is the first to complete the communal roll-out. Chorus is not due to finish laying UFB in the 24 cities and towns for which it won its roll-out contract until the end of 2019.

Adams and Prime Minister John Key visited Manaia View School in Whangarei to acknowledge the milestone. “As the first fully-fibred city in New Zealand, Whangarei is in the enviable position of getting a head start on the rest of the country,” Adams said.

Well done Northpower and Whangarei.

Around three days ago I told Google drive to back up around 7 GB of photos to the cloud. The result has been my Internet connection has been a trickle for the last 72 hours.

Copper based broadband can do reasonable decent download speeds, but the upload speeds are just inadequate for proper cloud use such as backups. Hence I will be moving onto fibre in the near future.

A reader e-mails:

Here are some photos of the double telephone poles in Oamaru. I notice now that the fiber does not seem to be strung from pole to pole, but rather is undergrounded and goes back up each pole where it is terminated in some sort of junction box – see photos for details.

It seems the copper wires will be brought over to the new fiber pole and the old copper strung pole will be removed at some stage. This seems to have happened to some other double poles that until recently were like this down another nearby road. I am guessing the reason for replacing the old telephone poles is that they are quite old anyway. You can see they are gum tree trunks and no one has used gum tree telephone poles since the 1970s I think.

So now each street has a set of poles for electricity, copper and fibre. Wouldn’t it be nice if they could all share? Good to see the roll-out happening though.

Stuff reports:

The Government has rejected a call by Vodafone New Zealand chief executive Russell Stanners to scrap the roll-out of fibre-based ultrafast broadband in much of Wellington and Christchurch.

Stanners said the cost of the UFB scheme could be cut by $500 million and taxpayers could save $145m if people instead used its cable networks in the two cities.

Vodafone was all in favour of the UFB. Then it buys the Telstra-Clear cable network and suddenly it is all no, no we don’t want UFB – use our cables instead.

InternetNZ said earlier today it strongly opposed Stanners’ proposal.

“This suggestion by Vodafone begs the question, why would Kiwis choose to make use of a second-class network when we are already on our way to having a first-class network?” chief executive Jordan Carter said.

Fibre is a future-proofed investment.

UPDATE: Also if Vodafone really wants their cable network to be used instead of fibre, then they should do what Telecom had to do, and separate it out into a separate company with open access requirements to all retailers.

The decision by every other party and MP in Parliament (and the Conservatives outside it) to oppose legislating to overturn the Commerce Commission decision on the price of copper broadband was both bad and good for the Government.

The bad is that legislation was obviously a preferred option for the Government, even though the Telecommunications Review was only a discussion document. It is true that they had some weeks ago started to back off that route, and look at other options, but their statements up until then had quite strongly been in support of legislation.

I think it is a fair criticism that the Government should have talked to other parties at an earlier stage about whether they would support legislation, rather than fairly forcefully support it, and then realise you can’t do it.

So while the political management hasn’t been optimal, the upside is that having Parliament assert its right to say no to the Government, does actually assist the Government. It removes the legislative option off the table, and will I believe lead to more constructive dialogue between all parties on where to go from now. The members of the Coalition for Fair Internet Pricing (Kiwiblog is a member) will I believe be keen to engage constructively not that the risk of over-riding the independent regulator is gone, and Chorus can’t demand the Government do something it is clearly incapable of doing.

The decision by Amy Adams to have an independent financial review of Chorus was an excellent one (and something I had called for), and the way I see it is there are four steps ahead of us on resolving this issue They are:

1. Does Chorus have financial problems under the current settings, and the Commerce Commission determination?
2. If the answer to 1 is yes, Are there changes Chorus can make to solve those problems themselves?
3. If the answer to 2 is no, then what are the factors that got Chorus into this state?
4. If the answer to 2 is no, then taking account of 3, what options are open to the Government, and which are preferred

We will soon get the answer to No 1. I am sure it will be a comprehensive report. I’ve had a financial modelling expert take me through what they expect the report will find, and that it will conclude on current settings Chorus will breach their debt financing agreements – specifically the acceptable ratio of debt to EBITDA. The Commerce Commission determination will increase debt and decrease EBITDA and this means the banks could withdraw their loans to Chorus which could plunge it into an Air New Zealand type situation.

Note that this does not mean Chorus will be bankrupt or even unprofitable. The report could well conclude that over the next six years or so Chorus will still make small profits, and even have marginally positive cashflow. The issue is likely to be mainly around debt and timing of cash requirements.

So if the answer to 1 is yes as the Prime Minister has (correctly it seems) warned, then we get to whether Chorus can make changes themselves to prevent a breach of their debt agreements, or can renegotiate their financing.

Obviously one change is a reduction of dividends. I say this with sadness as a Chorus shareholder, but if you have a debt problem, then you can’t expect to pay out dividends. Once you are getting the full benefits of the fibre investments, then they would resume I expect. I note Chorus has already started to head down this path by saying their proposed dividends are likely to be reduced.

It is unlikely that change would be enough. So the report needs to also look at whether other changes will be enough to prevent a debt default. Can opex be reduced. Can capex be delayed.  With that in mind we note the story yesterday:

Network company Chorus is flying about 200 staff from Wellington to Auckland today for an annual get- together – despite “crying poverty”.

Mr Bonnar said Chorus had twice been recognised as one of the best employers in Australasia, “and a big part of that is once a year we get all our people together”.

“It’s to hear from the senior people in the business where the organisation is at, where it’s going, what its strategy is and how what they do fits in with it.”

Now I don’t have a problem with Chorus doing this as a private company. But if you are sticking your hand out for Government assistance, then decisions like this will face public scrutiny. The cost is minimal to their overall opex, but taxpayers will expect Chorus to be as fiscally frugal as possible, before any additional taxpayer money is considered.

But what happens if the report concludes that Chorus does both have a debt problem, and can’t solve it internally. Well then I think you need to identify the factors that got Chorus into this state. I don’t mean a blame game, but identifying what contributed. Obviously the Commerce Commission determination is a significant factor, but is it the only factor? Have there been UFB cost over-runs? Was Chorus too close to the debt rations anyway, regardless of the determination?

Then after you have identified the factors involved, do you look at potential outcomes for the Government and Chorus. Off the top of my head, they include:

• Chorus defaults on its debt (highly undesirable)
• Chorus defaults on the UFB build (highly undesirable)
• Chorus renegotiates the debt (would banks agree?)
• The Government guarantees the debt for Chorus (the banks may call it in immediately)
• The Government makes the repayment schedule for the UFB build financing longer (will it make much difference?)
• The Government loans Chorus more money
• The Government slows down the UFB build (undesirable)
• The Government takes a stake in Chorus

I’m not against the last option. In fact the Government already has some preference shares in Chorus as part of the UFB contract. When it comes to commercial trading companies, I believe the Government shouldn’t own any shares at all. I’d sell 100% of the power companies etc. However just as I can accept the state should own Transpower as the national electricity grid, there is a case that the national fibre and telecommunications grid should be a government utility also.

Put it like this, if you were back in 1987, knowing what you know now, you would have split NZ Post telecommunications division into a Telecom and a Chorus on day 1, and have sold Telecom and kept Chorus. You sell off the competitive elements and own and regulate the monopoly.

So I’m not ideologically against the Government taking a stake in Chorus. It also would mean that both current Chorus shareholders and the Government would both share in the pain of getting Chorus out of its debt problems – which is preferable to it being just the Government (or worse Internet users as originally mooted).

To a degree, I’m getting ahead of myself. Let’s see what the report says on 1, 2 and 3. Then we can focus on the “least bad” option for ensuring Chorus can deliver on the UFB project and 75% of New Zealand homes get fibre access to ultrafast broadband.

Stuff reports:

Chorus says it could default on its loans and may not be able to complete construction of its share of the ultrafast broadband network, following a ruling by the Commerce Commission this morning.

The NZX-listed company issued the dire warnings after the commission released a “final determination”, which ruled that the company should be allowed to charge $10.92 a month for its copper broadband connections.

Its shares have plunged 8 per cent this morning, and were trading down 21 cents at $2.42 within minutes of the NZX opening at 10am.  

Chorus has a contract with the Crown to complete its work on the UFB network by 2020 but the company said that if the Government didn’t intervene, it would be left with a $1 billion “funding shortfall”.

Chief executive Mark Ratcliffe said Chorus would “simply not be able to borrow the money we need” to complete its UFB contract.

The company had notified its bank lenders that unless the Government intervened, the ruling would have a “material adverse effect” on the firm.

“If this did occur lenders would be entitled to trigger an event of default,” the company said in a statement.

Chorus would also “discuss with the Crown whether Chorus is still a credible UFB partner” and how it might still deliver on its contract, the company said.

No one wants to see Chorus bankrupt or defaulting on its loans. But wise politicians would do well to remember the words of Mandy Rice-Davies who basically said “Well he would say that, wouldn’t he?”

The price set by the Commerce Commission is almost half way between the draft determination and the price the Government indicated in its discussion document it might set.

Now I can totally understand that the Government doesn’t want the UFB project derailed, or worse Chorus to go bankrupt or default on its loans.

But please please please I hope they don’t just take Chorus’ words for it, and make a decision based on a press release. This is not to suggest that Chorus is wrong. Just to say, that a very high level of certainty should be required before you intervene. It should be the last option, not the first option.

If the Government really thinks there is a risk of that magnitude to Chorus, then it should hire the best accountancy or financial analysis firm in New Zealand to go into Chorus, and do an independent review of its income, spending, profitability, debt and the like and have them report back on whether they concur with what Chorus has said. Release that report publicly and allow people to peer review it.

As Chorus is asking the Government for a special law change, that would benefit it by hundreds of millions of dollars, surely they could not object to an independent review?

I understand the Government is stuck between a rock and a hard place. They have to make a decision. My plea is for them to make a decision based on the best independent data there is, not on the basis of a press release from a monopoly provider.

Also the Government could do worse than play a bit of hardball themselves. If Chorus is going to threaten the Government by saying it may default on the UFB project, then maybe the Government should open talks with Vector and other UFB bidders and see if they would be willing to step up if necessary. Use the same tactics that Steven Joyce used with Novopay – keep the pressure on the company, by looking at backup options.

Personally I think it is almost beyond belief that Chorus would seek to default on its UFB contracts, considering that would leave the company with almost no long-term future – being a copper provide only in what is a fibre future world.

Maybe the price recommended would cause them issues with their debt. If so, let’s have the details.

As I said I understand the difficult position the Government is in. But this is a decision they should take great care about. Both because it may set a precedent, and also because it will affect almost every Kiwi household.

Chorus has announced new fibre products and/or prices. The details are:

• Entry level going from 30 Mb/s down and 10 Mb/s up to 50/20 – price remains $37.50/month
• Mid level of 100/50 dropping in price from $55/mth to $45/mth
• Business package of 100/100 going to 200/200 – price remains $175/moth
• A new top end package residential package of 200/200 for $65/mth
• A 100/100 package for $50/month

This is a great move by Chorus, and very welcome.  I’d probably go for 100/50.

I remain puzzled by what the Government is proposing (or consulting on possibly doing) around the price of copper broadband. I blogged in detail on this issue two weeks ago.

I genuinely don’t know why the Government is proposing to change the law in a way which will deliver a huge amount of extra money to Chorus (note it is more money compared to the draft Commerce Commission determination, but is less money than they currently get), because they seem willing to gift this money to Chorus and not actually get anything in return for it. That is what baffles me.

If you compare the proposed actions here, with other interventions by the Government, the other interventions are easy to understand in terms of benefits (even if one may disagree on them). They are:

• Sky City – in return for some pretty minor regulatory changes, Auckland gets a $400 million convention centre. A great deal for taxpayers.
• Warners – in return for a slightly increased subsidy (for all productions) and some minor employment law changes, we retained not just The Hobbit in NZ, but also a viable film industry, protecting thousands of jobs and also a huge tourism gain.
• Rio Tinto – while I personally did not support this deal, I understood the rationale – if Rio Tinto abandoned Tiwai point it would be a huge loss of jobs in Southland, so the deal was to guarantee they remain operating Tiawi Point for at least the next few years.

But the proposed law change to benefit Chorus is, well bizarre, because neither taxpayers nor consumers will receive any benefit from it. Chorus is already contracted to deliver fibre to their portion of 75% of NZ homes. The proposed law change will not require them to deliver one extra centimetre of fibre to anyone.

I really can not work out why the Government thinks this is a good idea. And if I, a pretty passionate supporter of the Government, can’t work it out – then I think most people can’t.

There have been two major rationales put up for the proposed law change. They are broadly:

1. Chorus may go broke without it
2. We don’t want the price of copper to undermine uptake of fibre

Taking the first rationale, let me say if there is a chance that Chorus could go broke under the draft determination, then of course that would be a concern. I am a shareholder of Chorus. I don’t want them to go broke. But what I am surprised about is that the evidence for Chorus being unable to be profitable under the draft determination is based on no official analysis. If the motivation for this law change is to stop Chorus going broke, then I would expect Treasury to be involved, just as they are with Solid Energy.

But of course the taxpayer owns Solid Energy, and does not own Chorus. I am unsure how you can justify bailing out Chorus, yet not bailing out Solid Energy.

But the reality is that Chorus would not go bust under the draft determination. They do not say they will. The market analysts do not say they will. Yes the draft determination will adversely impact their profitability and dividends, and that is bad for Chorus shareholders like myself. But that is one of the risks of investing in regulated monopolies.

My concern is that if No 1 reason is the rationale for the Government, then they will set a precedent that will come back to haunt them. If all you have to do is tell the Government that a (draft) decision by the Commerce Commission will affect your profits, and you get a law change, well the queue to the Beehive door will be long. Think Vector, Auckland Airport and others.

So let us look at the second rationale, which is we do not want the price of copper undermining the price of fibre. I personally am unconvinced the relative prices will be a major factor, but for the sake of debate am happy to concede the point that this could be undesirable. However what I can’t get is why you would just gift the extra money (being the gap between the proposed price and the price the Commerce Commission says should be charged in its final determination) to Chorus in return for, well nothing.

Chorus has signed a legally binding contract with the NZ Government to roll out fibre to their portion of the 75% of NZ target. Steven Joyce and his team did a great job negotiating that contract. There was no requirement in that contract for copper to be at a particular price. It was well understood that the price of copper would be set by the Commerce Commission (as it has been for decades) under a cost plus calculation (instead of retail minus).

So again I honestly do not understand why the Government is proposing what it is proposing. If someone from the Government can explain it to me, and others, that would be good. While there are some commercial players involved in this debate who of course have financial motivations – most of the people I talk to on this say they are genuinely baffled. They support the fibre rollout, but don’t see how the proposals advanced will be beneficial to anyone but Chorus.

Adding to the confusion is the fact that the Government appears to be contradicting itself with its own arguments. We have been told the major rationale for this law change is to stop the price of copper dropping (in line with the Commerce Commission determination) as this will undermine fibre uptake. Yet the Government has also argued that if the wholesale price of copper drops, then the retail ISPs will not pass the savings on, and hence consumers will not benefit.

Well I’m sorry, but pick one of those arguments, but you can’t pick both. You can’t argue this proposed law change is to stop the price of copper dropping significantly, and then also argue that the price of copper won’t in fact drop as the ISPs will not pass on the savings.

So you see why I am confused.

I don’t think the Government has any bad motivations around this. I just don’t understand what benefits this will bring, as opposed to all the other deals where the benefits (a convention centre, jobs, tourism) have been well understood.

I was chatting to someone on this yesterday, and he had what I thought to be a good suggestion as a compromise.

1. Wait for the final Commerce Commission determination
2. If the price recommended is at a level that the Government thinks could undermine fibre uptake, then proceed to set a minimum price for copper
3. However have the difference between the Commerce Commission price and the Government price go to Crown Fibre Holdings rather than Chorus.
4. Have Crown Fibre Holdings use the extra revenue to extend their fibre programme to more New Zealanders – go beyond 75% to 80%, boost rural broadband, help with access in more deprived areas etc.

While this compromise still has elements that I regard as undesirable, it would at least have the advantage of there being benefits in return for keeping the copper price higher than recommended. And while Chorus would of course rather get the extra money directly, they would still benefit by no doubt winning additional tenders by Crown Fibre Holding to extend fibre even further than the current 75%.

But as I said at the beginning, I just can’t understand why a law change is being promoted that simply would deliver more money to Chorus (compared to the Commerce Commission determination) that doesn’t deliver any benefits to consumers, taxpayers and Internet users. The proposals are just a consultation, so I hope that the Government takes the feedback as constructive and seriously looks at if there is a better way to achieve what they want – which is a fibre connected country.

Amy Adams has announced:

Communications and Information Technology Minister Amy Adams is calling for expressions of interest from companies who are considering building a new international telecommunications cable between New Zealand, Australia and the United States. 

“To ensure we have sufficient international capacity in the medium to long term, the Government is making a $15 million contribution available, and would commit to an anchor tenancy on a new cable for research and education purposes,” Ms Adams says.

This is the same commitment the Government made towards Pacific Fibre, and it is very good to see the Government make the same commitment to other companies who are seeking to build a second cable for us.

The commitment that REANZ would be an anchor tenant is probably more important than the contribution, even thought both are useful.

Some people want the Government to be directly involved in constructing a second cable, but my string preference is for the private sector to do it and I know that Hawaiki at least have a proposal out there. Their proposals includes having the cable connect a dozen or so Pacific Islands, which would be a great boost for them.

InternetNZ has commented:

InternetNZ (Internet New Zealand Inc) is delighted the Government is contributing $15 million and calling for expressions of interest for companies to build an international telecommunications cable between New Zealand, Australia and the United States.

InternetNZ Chief Executive Jordan Carter said this was an excellent move by the Government to help New Zealand’s telecommunications industry.

“Like the Ultra Fast Broadband and Rural Broadband Initiatives, we think this is a fantastic step towards ensuring New Zealand maintains our robust connectivity to the world.

We have sufficient capacity at the moment, and for the near future. But getting greater competition with international connectivity will be good for prices, and having supply meet demand.

Stuff reports:

An alliance of internet and consumer groups will today launch a campaign claiming Kiwis are paying $12 a month too much for broadband, through a government subsidy for network company Chorus.

It’s not a government subsidy. It’s a proposed government law change that would see the price Chorus charges for copper broadband not fall as much as the Commerce Commission has said it should.

Rural Woman and Consumer New Zealand will stand alongside the likes of Internet New Zealand and internet service provider Orcon to launch the “axe the copper tax” campaign.

It will argue that Chorus is effectively being given hundreds of millions of dollars in subsidies on the amount it charges broadband providers for the old copper-based communications network.

The subsidy is effectively from Internet users on DSL broadband packages.

Sources said last night that some members of the consortium had already been placed under political pressure not to publicly criticise the Government’s position.

However, it is understood that David Farrar, the National Party’s own pollster and the man behind the National-sympathetic Kiwiblog, is still a sponsor of the campaign.

I am, and no one has asked me not to be involved. The reason I’m involved is simple – on this issue I don’t agree with what the Government is proposing. This is not a exceptional thing. I blogged at the end of last year a list of over 50 times in 2012 I disagreed with or criticized the Government.

Like most people, I have a mind of my own. I support the Government overall strongly, and agree with probably 90% of what they do. But no-one ever agrees 100% – even Keith Holyoake once said he only agreed with 80% of what his own Government did. Mind you, I imagine Muldoon agreed 100% with what his Government did

In the Internet space, I have been and remain a massive fan of the policy to roll out fibre to the home to 75% of New Zealanders. It is world leading. I’m in Shanghai at the moment as a guest of Huawei, and talking to them has made it clear very very few countries are taking fibre all the way to the home as NZ is. It’s a great forward looking policy, and I’m proud National campaigned on it in 2008 (Labour did not commit to it), and have implemented it.

I also think they way the police has been implemented has generally been excellent. The regional tenders worked well, and the requirement for open access by regional fibre providers led to the structural separation of Telecom into Telecom and Chorus, which is a huge boost for competition.

Also I very much admire the negotiating skills of the Government, led by then Minister Steven Joyce who managed to get contracts signed for 75% of NZ’s population for under the $1.5 b funding package. That was a pretty remarkable achievement when you consider a similar policy in Australia was budgeted to cost $43 billion!

So what is this current issue, and why am I against what the Government is proposing. It is important to note that the Government has not actually made any decision in this area of copper pricing. They have a review document out for consultation. I hope that the consultation will lead them to decide not to change the pricing principles for copper. Anyway, here’s the background. It is a fairly complex area, so bear with me.

When Chorus was part of Telecom, The wholesale fee for copper broadband products was determined by the Commerce Commission on a “retail minus” basis. Basically they looked at the charge Telecom had for copper broadband, and deducted off their certain retail costs to determine the fair wholesale price. You can argue that the Commerce Commission shouldn’t be involved at all, but the reality is that monopoly utility charges (especially in telecommunications) are regulated in pretty much every country on Earth. The Commerce Commission is independent of the Government, and makes decisions based on lengthy hearings of law, economics and engineering. Their job is to be the independent regulator under the Acts passed by Parliament.

Once Chorus was split off from Telecom, a “retail minus” pricing calculation was impossible. So the Government and Parliament changed the law to have the Commerce Commission determine the price another way, a sort of “cost plus” methodology. You look at what the actual costs of the copper network are, the appropriate return on capital and determine the price that way. Part of that involves international benchmarking.

The Commerce Commission did its job and came out with a draft determination that the price of copper broadband should drop by around $12 a month. The draft determination meant, if finalised, that ISPs would pay a lot less for copper broadband service, and with competition you should see fees drop for consumers.

Now Chorus, one can appreciate, didn’t like a draft determination that would see its revenue drop significantly. They, and the Government, have criticized the draft determination. It is important to note that any criticisms of how the Commission has done its job can be made in the consultation on a final determination (which is ongoing), and if people think they have interpreted the law wrongly, then you submit that to them. You can even appeal to the Courts on matters of law. That is how independent price regulation should work – draft determination, final determination, court appeals if necessary.

If people really thought the Commerce Commission had got it wrong, then they’d wait for the final determination, and if necessary take court action. But instead what is being proposed is a law change.

The law change (discussion document is here) basically says that the cost of copper services should be much the same as the cost of fibre services. There are two arguments for this. One is that the cost of a network should be calculated on the cost of the replacement network (fibre) and the other is that you don’t want cheap copper broadband resulting in few people taking up fibre. I’ll deal with those two points in turn.

The Government is quite right that generally the cost of a utility should be priced on the cost of its replacement network. You do this to ensure the utilities have enough money to fund the replacement network. This is how pricing works in electricity generation for example.

However this overlooks the major difference. Chorus have been given a significant Government subsidy through the contract with Crown Fibre Holdings to deliver their portion of the fibre roll-out to 75% of New Zealanders. They now have a contractual obligation to deliver that fibre for the contracted price to so many people. That contract means that the argument you need to price copper at the same price as fibre is not a valid argument, as far as I am concerned.

The contract was signed in the knowledge that the Telecommunications Act was going ot price copper under a different methodology. There was no provision in the contract that Chorus will be guaranteed a certain price for copper.

Now there have been stories of price over-runs at Chorus, and that they basically signed up to deliver the fibre at too cheap a cost, and are struggling to do it. Well, in a nutshell, tough bikkies. And I say that as a shareholder of Chorus.

They bid in a competitive tender for the right to build the fibre network with the Government subsidy (actually a loan). They had competitors such as electricity lines companies also bidding. The lines companies would not have been relying on income from copper to fund their fibre build. They were bidding on income from the fibre services themselves.

If Steven Joyce was such a good negotiator that they bidded too low to win the contract, that is not a good reason to increase the price of copper. If their lawyers were not up to scratch and they failed to get a guarantee of a minimum copper price in the contracts, then again why is that a reason for a law change?

So the existence of the contract means I can’t accept the argument that the price of copper should be based on the price of fibre to fund the fibre network. That argument only holds if they had not signed a piece of paper agreeing to do so, in return for most of the $1.5b subsidy.

That brings us to the second argument, which is should we keep copper prices higher than they would otherwise be, in order to encourage consumers to switch to fibre.

Reasonable people can disagree on this second argument. I’m personally sceptical of it, as I don’t think over-charging people for a product is a good way to encourage migration. I think some people will want fibre and happily pay more for it (like me). Others won’t need it, and having them pay $10 a month more than they have to is unfair. It is important to note that the Government is not looking to put the price of copper up from the status quo. They are looking to change the law so the price of copper broadband doesn’t drop by as much as the Commerce Commission has calculated it should.

But in terms of this second argument, the major problem for me, is that even if you accept there is justification for charging copper users more, to encourage people onto fibre, why would you effectively gift that money to Chorus? Chorus have, again, signed a contract requiring them to establish in most parts of NZ a fibre network. They must build this regardless of the copper price.

If the Government truly thinks it is necessary to have the price of copper much the same as fibre in order to promote fibre uptake, then don’t gift what could be up to $100 million a year to Chorus. Be upfront, and call it a fibre development levy, and have the Government collect it and use it to fund fibre outreach for the 75% of NZ not covered by the current UFB project. It could fund ultra-fast broadband in rural areas, or economically deprived areas.

Note that I am not advocating per se for an Internet development levy. I am saying that if you are determined to have the price of copper and fibre the same, then it is better to have the Government spend that money on actually getting more people onto fibre. If you just allow Chorus to have a higher wholesale price for it than justified under the law, that won’t result in one extra home getting fibre.

So that is why I’m not supporting the proposed changes in the Telecommunications Act Review. Copper users should not be over-charged or taxed to fund the fibre development.

I have no commercial interest in the outcome. I just want what is best for Internet users in New Zealand, and to my mind that is the status quo. I think the major beneficiary of the proposed changes would be Chorus, and I don’t believe in corporate welfare – for Rio Tinto or Chorus.

Technically I am arguing against my own self-interest as a (very minor) Chorus share-holder. But for me it is about the public interest.

InternetNZ is also involved in the campaign, and I am a former office holder and chair their policy group. But that doesn’t mean I always agree with them. On the GCSB bill for example, I had a much more benign view of the law change.

In my role as Kiwiblog, I am a official sponsor of the Axe the Copper tax campaign. It wasn’t InternetNZ that asked me to join. The campaign co-ordinator did, and after reading the campaign proposal, I decided to do so on the basis I agreed with its aims. I am reluctant to join a campaign which is asking the Government I support to change course but I will do so when I don’t believe they are on the right track.

My hope is that the Government will conclude that the status quo (which was put in place by them!) is working, and allow the price of copper to drop to whatever the Commerce Commission determines it should be under the law passed by Parliament. In the cases where we do have price regulation (a necessary evil as I see it), the prices should be set by independent regulators after hearing all the evidence, not by politicians. They should make the law for setting the price, and not second guess the Commerce Commission. If the Commission gets it wrong, their decisions can be appealed in court on matters of law.

UPDATE: A much more readable opinion piece on this issue is at NBR by Paul Brislen.

Chris Barton writes in the NZ Herald:

The PM further fuelled the uncertainty flame following the release of the commission’s report saying: “It has significant implications both for [Chorus] and for UFB. It substantially reduces the income of that company and its capacity around broadband.”

Here’s what John Key might have said: “Well, thems the breaks. The Commission has arrived at its determination after careful consideration. The determination was signalled in 2010. The process has been in law since 2011 and we’ve been expecting it since before Chorus was formed, following the de-merger with Telecom. No one, including the analysts, should be surprised by this. If they are, then they haven’t done their homework.”

To which an enquiring journalist might have asked: “What about the extra cost Chorus is facing on the UFB?

Key: “Well that’s a bit rich. We’ve given Chorus $929 million interest free for 14 and half years, making it a loan worth about $1.2 billion, to build its part of theUFB.

That’s a pretty generous deal agreed by both parties on commercial terms. That’s business. For Chorus to be moaning about extra costs – well that’s its problem – we acted in good faith.”

Journalist: “So you’re not at all worried that Chorus could fail and the UFB won’t get rolled out in time?”

Key: “Not at all. Look, 18c per share is still a good dividend. Chorus is still a good business with a captive market. It has until 2020 to get just 20 per cent of users onto its part of UFB and has from 2025 to 2036 to repay the loan. That seems quite doable. Meanwhile it has a guaranteed revenue stream from its existing copper network. Nothing to see here.”

But of course John Key didn’t say that. Instead he set in train Adam’s intervention to hold copper broadband prices artificially high.

I think the planned intervention is not well justified.

Even if one accepts that it is in the public interest (not that I do) to have higher (than they would be if no intervention) copper prices so that people migrate to fibre, I don’t understand why you would gift the extra revenue to Chorus – rather than use it to fund further fibre roll-out – or rural broadband.

I’m a Chorus shareholder, but I don’t want Chorus to benefit from regulatory changes that are not good for consumers.

I quite accept that there are legitimate issues over how to price the copper network, and should it be based on its current cost, or the cost of the replacement network – as it is in electricity.

But the complicating factor is that the future network is being delivered by way of government contract and subsidy through contracts with Crown Fibre Holdings. So the investment decisions shouldn’t be based on revenues from copper (well not for 75% of the country).

By coincidence, I was at a Chorus announcement last night, and it was an exciting one. They announced that they will connect an entire town in New Zealand up to 1 GB/s fibre. And they are effectively having a competition where towns will say what they would do with it, how they would market themselves, and the winning town will be chosen, and made the fastest town in the Southern Hemisphere when it comes to the Internet.

That’s a great initiative to get communities involved in thinking about their fibre future, and will attract lots of attention. I suspect, sadly, Thorndon doesn’t qualify as a town

Paul Brislen writes more about the Chorus announcement:

Chorus has launched a promotion that will give one town in New Zealandgigabit speeds on the Ultra Fast Broadband network.

One gigabit per second is fast. OECD rankings suggest that only four countries in the world offer national 1Gbit/s plans – Turkey, Slovenia, Sweden and Japan (this was in 2011 so there may be more by now) and that most top out at about half that speed.

We’re talking about 1000Mbit/s. Today I get 15Mbit/s download so to call it a step change is something of an understatement. My upload speed is barely 1Mbit/s.

We tend to get complacent about the fantastic advances technology makes each year. A doubling of capacity, a tripling of speed, these numbers become run of the mill and users are blasé about them. But a thousand fold increase in my upload speed would be startling to put it mildly, so good on Chorus for trying this out.

The economic potential of offering such a service is astonishing. Think what having such a speed would do to the way we think about remote working or having to live in the main centres. Think about what access to the world at those kinds of speeds would mean for start-up software developers and to our migration patterns. Software companies should be lining up for our cheap housing and staff with no fear of us being too removed from the world.

I am excited about a fibre future. But I also want copper not over-priced during the transition to fibre.

Telecom have announced:

Telecom, Vodafone and Telstra announced today they have signed a non-binding memorandum of understanding (MoU) to co-invest in the construction of a new submarine cable between Auckland and Sydney.
The new cable, tentatively titled the Tasman Global Access (TGA) Cable, will significantly improve New Zealand’s international telecommunications connectivity as well as strengthen links into fast-growing Asian markets.

The total cost of the TGA cable is expected to be less than US$60 million. The cable will incorporate three fibre pairs with a current design capacity of 30 terabits per second – approximately 300 times the current internet data demand out of New Zealand.

30 terabits a second isn’t bad!

The TGA cable will achieve significant international connectivity benefits for New Zealand at a fraction of the build cost of another, much longer trans-Pacific cable, the consortium partners said.

It would be nice to have another trans-Pacific cable also, but this announcement is good news as it means more competition and more capacity. What is pleasing is that it is not just Telecom (who have the biggest stake of Southern Cross) but also Telstra and Vodafone.

Telecom chief executive Simon Moutter and Vodafone New Zealand CEO Russell Stanners jointly commented: “The business case for a new cable between New Zealand and Australia is compelling, providing greater capacity and global redundancy capability. It also reflects the growing importance of trans-Tasman internet traffic: for example, around 40% of both Telecom and Vodafone’s international internet traffic is now Australia to New Zealand, versus just 10% in 2000.

“We are seeing increased data content being provided from Australia-based servers by global companies and being accessed by New Zealand internet users. An additional cable connection with Australia will strengthen the business case for international data servers to be located in New Zealand.

I’ve blogged on this in the past. NZ will never be big enough to have global datacentres here, but if we can get the Googles and Apples of the world to do regional datacentres in Sydney, then we will pull more and more of our data from Australia rather than the United States.

Stuff reports:

The price of broadband could fall by about $12 a month in two years’ time if internet providers pass on swinging cuts to Chorus’ charges that were proposed yesterday by the Commerce Commission.

Good.

But Scott Bartlett, the boss of New Zealand’s fourth largest internet provider, Orcon, is doubtful. He said Telecommunications Commissioner Stephen Gale already seemed to be signalling “almost in code” that the commission would back down from the steep cuts when it finalised its decision on wholesale pricing in June.

Prime Minister John Key signalled that the Government was concerned about the effect cheaper copper-based broadband could have on the fibre-optic ultrafast broadband network, in which the Government has agreed to invest $1.3 billion.

He did not rule out using legislation to overturn the proposed price cut yesterday.

I think that would be a bad thing. The Commerce Commission should be left alone to set the price of copper access based on existing competition law.  I’m a huge fan of the fibre rollout, but we shouldn’t try and get people to move to fibre by having copper priced artificially high.

Chris Keall at NBR writes:

There are a number of reasons a Kim Dotcom-backed cable will never fly.

Pacific Fibre co-founder Rod Drury added another when he talked to NBR this morning: the accused pirate wouldn’t get approval to land the cable in the US.

Mr Drury saw Mr Dotcom’s overtures to Pacific Fibre as little more than clowning around on Twitter.

Amazing how one tweet gets so many stories. Keall notes:

Even at the height of Megaupload, Mr Dotcom didn’t have $US400 million to spare for a Sydney-Auckland-LA cable.

His Plan A is to fund the new cable through his revived file-sharing service, Megaupload – due to launch January 20, but its success is far from assured (the entrepreneur is asking for investors via a recently launched splash page).

His “plan B” proposal to fund the project by suing Hollywood studios is the stuff of fantasy.

And as for the parallel suggestion of crowdfunding … that’s a neat idea for a $ 1 million project. Not so much for one that costs half a billion.

Nice to see some critical analysis.

The HoS reports:

Kim Dotcom is proposing free broadband to all New Zealanders as he tries to resurrect the ill-fated Pacific Fibre cable connecting New Zealand to the United States.

Dotcom last night revealed his ambitious plans to build the $400m cable – which would double New Zealand’s bandwidth – set up his new Me.ga company, creating jobs and a data centre to service the rest of the world.

He would provide New Zealand internet service providers such as Telecom and Vodafone with free access for individual customers and charge a fee to business and central government.

Kiwis would still be charged a fee by the internet companies, but it would be as low as one-fifth of current bandwidth plans and three to five times faster with no transfer limits.

The $400m would be partly funded by Mega, raising additional funds from investors.

He added he could fund the project by suing Hollywood studios and the US Government for their “unlawful and political destruction of my business”.

I am keen to get more international bandwidth for NZ, and more competition with international cables.

However this pledge can in no way affect the legal process that Dotcom is facing. The extradition hearing in March 2013 must be based on the law, and whether the charges by the US Government are ones that warrant extradition. It is not the job of the NZ court to determine guilt or innocence – that is the job of any actual trial in US courts.

If Dotcom wins in the US courts, then I’ll welcome his investment in fibre for NZ. But his pledge can not and should not affect the legal process underway.