Following the announcement from Hon Steven Joyce this morning, Crown Fibre Holdings have published this Q&A:
1. What is the area covered by Ultra Fast Fibre Limited?
This will cover Hamilton (including Cambridge and Te Awamutu),Tauranga, Tokoroa, New Plymouth, Hawera and Wanganui. This accounts for just over 14 per cent of UFB premises (14.2%).
2. What is the area covered by Northpower Limited?
This will cover Whangarei - accounting for just over one and a half per cent of UFB premises (1.6%).
3. Are there any deployable assets which will be included in these agreements?
Yes - the LFC covering Whangarei has an option to buy Northpower's assets subject to technical due diligence. Further due diligence is required into potential assets in other candidate areas.
4. What will be the value of these agreements?
The value exceeds $200 million.
5. What is the agreed pricing for fibre services?
UFB pricing is at wholesale level and end users should bear in mind that prices of retail UFB services will reflect non-Local Fibre Company costs, such as national backhaul,international bandwidth, provisioning, billing and so forth. CFH, Northpower and Ultra Fast Fibre intend to publish final UFB wholesale prices prior to initial sales of retail UFB services. The following are indicative of expected products and prices and are initial prices only. Prices are per month excluding GST.
The price for the UFB entry-level product (30 Megabits per second (Mbps) Downstream / 10 Mbps Upstream with a 2.5 Mbps committed information rate will be $40 or less. This is lower than the current wholesale price for "Naked DSL" (Enhanced UBA)services.
The UFB premium product for the home (100 Mbps Downstream / 50Mbps Upstream with a 2.5 Mbps committed information rate) will be priced at $60 or less. This is approximately the current wholesale price for "Clothed DSL" (UBA plus POTS), depending on the end user's location. Subscribers would recognise this service as ADSL2+bundled with a standard home phone line.
Business products will be priced considerably below existing Dark Fibre where this is available in the market. Premium Layer 2services, such as 100 Mbps and 1 Gigabit per second symmetrical services, will also priced very competitively. For example, a 1Gigabit service will be priced at or less than $600, which is about half the minimum current wholesale price.
UFB products for schools are expected to be priced in a similar manner to business products. However, prices will be even lower than for businesses because of the Government's recent decision to cover 100% of the cost of the fibre "drop" from a school's boundary to its server room.
6. What will be the open access arrangements in these areas?
The Open Access Deed of Undertaking sets out the open access framework for the LFCs. The Deed of Undertaking which has been agreed by Northpower and by WEL Networks on behalf of UltraFast Fibre Limited is available on the CFH website at www.crownfibre.govt.nz.
7. Does the announcement reflect final and binding offers received from the Government's proposed partners? Will details of the agreements between CFH and its partners for the formation of the two new Local Fibre Companies (LFCs) be made public?
Yes, final and binding offers have been received from Northpower and from WEL Networks, parent company of UltraFast Fibre Limited. A high level summary has been published on the respective websites of CFH, Northpower and WEL Networks.
8. Given the government agreed to regulatory forbearance for LFCs until the end of 2019, what effect will this have on prices?
The regulatory forbearance regime will drive competitive prices in several ways via each LFC's contract with CFH and the Open Access Deed of Undertaking with the Crown. These include the following:
- LFCs are wholesale only, so they have an incentive to price to drive uptake in order to build revenues.
- Prices will be published to ensure they are transparent to service providers and end users.
- LFCs must be compliant with the Open Access regime as specified in the Deed of Undertaking, requiring pricing to be non-discriminatory.
- The general UFB policy of is to drive uptake, and to this end,CFH will conduct regular price reviews with LFCs.
Proposed changes to the Telecommunications Act will provide for regulation of prices by the Commerce Commission after the regulatory forbearance period.
9. What is a Local Fibre Company (LFC)?
A LFC is a joint venture between Crown Fibre Holdings on behalf of the Government and a private company to deploy, own and operate a fibre-to-the-premise network in one or more parts of New Zealand under the UFB initiative, and sells access to point to point dark fibre or Layer 1 Services, and lit fibre (containing electronics),known as Layer 2 Services.
10. What is the process for establishing the two LFCs?
The LFCs will be newly incorporated limited liability companies incorporated under the Companies Act 1993, in which CFH and the partner will be shareholders. Each will operate independently of its shareholders, with its own premises and staff.
Each LFC will be incorporated before the end of the year. Details of where the LFCs will be physically located, and how they will be staffed will be made publicly available in coming weeks.
11. When will the physical deployments of fibre begin and where?
The deployment will start in Whangarei before Christmas and in Hamilton, Wanganui and Tauranga in early 2011.
12. Why has a binding offer with Alpine Energy not been reached?
That is a matter between CFH and Alpine Energy. Alpine Energy remains a shortlisted party and CFH is open to further negotiations.
13. Where does this leave the other parties to the Central North Island Fibre Consortium?
The commercial arrangements between WEL its subsidiary UltraFastFibre Limited and the other participants in the Central North Island Fibre Consortium (Waipa Networks and the Hamilton FibreNetwork) are a matter for those parties. CFH looks forward to working with UltraFast Fibre Limited to conduct further technical due diligence on the assets of these parties as required.
14. When is a recommendation regarding Alpine Energy expected to be made to Ministers?
A recommendation to Ministers would only be made if agreement could be reached.
15. Is there any interest from retail service providers (RSPs) or ISPs in providing services on these networks?
CFH has been liaising with both RSPs and ISPs and identified strong interest in selling UFB wholesale products. Northpower, for example, already has keen and active service providers delivering retail services in the marketplace.
16. What measures have been taken to ensure uptake of services on these networks?
UFB fibre will be competitively priced so as to attract users.CFH and the Government are also working with industry and key stake holder groups on a range of initiatives to maximise potential uptake. Examples include:
- the recent decision to provide 100 per cent Government funding for the cost of the fibre connection from the street into school buildings for schools connecting to UFB, and
- the report released by CFH and TUANZ (the Telecommunications Users Association) on 3 December on potential UFB demand, uses and barriers to uptake in the business sector.
Further information on other such initiatives will be made available in due course.