More Prioritised Bidders Announced for NZ Ultra Fast Broadband Initiative (incl Telecom NZ)

This just in via a Press Release issued by Crown Fibre Holdings this morning:

Crown Fibre Holdings (CFH) has announced the selection of a further three parties for priority negotiations in the ultra-fast broadband (UFB) initiative.

The three parties are:

• Telecom Corporation of New Zealand Limited: covering 25 candidate areas;
• Enable Networks: covering Christchurch and Rangiora ; and
• Flute Joint Venture represented by Aurora Energy Limited: covering Dunedin

These three parties have provided attractive proposals to CFH , including a combination of access prices in line with those announced last week, the ability to complete the UFB build within the Government's allocated budget, as well as having industry experience and financial strength," said CFH Chairman Simon Allen.

"CFH is very encouraged by these three proposals. In combination with the approved binding offers from Northpower Limited and UltraFast Fibre Limited, these parties have potential to deliver nationally consistent access prices at attractive levels. This provides confidence that the complete UFB initiative can be built within the government's allocated budget."

"CFH is also open to these parties partnering in their candidate areas in order to deliver greater infrastructural utilisation. Such partnering will be a matter between the parties," Mr Allen added.

"Negotiations in the next phase will be focussed on the three parties named today, as well as Alpine, but it should be noted that discussions will still continue with all respondents previously shortlisted."

"We are on track to achieving the Government's UFB objective. The inaugural deployment will be commencing this week in Whangarei, so building the UFB network is now underway," said Mr Allen. "I look forward to negotiations progressing to extend the UFB rollout to further towns and cities as a matter of priority."

The UFB initiative will lead to exciting consumer product offerings as well as enabling increased productivity for business and improving service delivery in health and education.

Q&A: First deals approved in NZ Ultra-Fast Broadband rollout

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.

Consumer

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

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.

Schools

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.

First Deals Approved in Ultra-Fast Broadband Rollout

This New Zealand news was released this morning from office of Hon Steven Joyce (Minister for Communications and Information Technology):

The cities of Hamilton, Tauranga, Whangarei, New Plymouth and Wanganui will be among the first to benefit from the government's rollout of ultra-fast broadband, says the Minister for Communications and Information Technology Steven Joyce.

Crown Fibre Holdings has concluded negotiations with two partner companies, following shareholding ministers' approval of the deals over the weekend. 

The partners are:

• Northpower Limited   
• and Ultra Fast Fibre Limited, owned by WEL Networks,

The new companies will rollout fibre in Whangarei, Hamilton,Cambridge, Te Awamutu, Tauranga, New Plymouth, Wanganui, Hawera and Tokoroa.

Northpower will commence its roll out in Whangarei before Christmas with Ultra Fast Fibre expected to begin laying fibre early in 2011.  Both companies will have completed their rollouts by 2015.

These joint ventures represent nearly 16 per cent of UFB premises and a combined value of more than $200 million.  The UFB Initiative will see 75 per cent coverage of ultra-fast broadband across New Zealand by 2019.

Mr Joyce says the availability of ultra-fast broadband is a key part of the government's economic growth agenda.

"This is very good progress in the roll out of UFB, which will see new fibre services available in Whangarei by the end of this year and in the areas covered by Ultra Fast Fibre Limited commencing early in 2011.

"The access prices CFH has negotiated will ensure the benefits of fibre are within reach of businesses as well as everyday New Zealanders."

Wholesale household prices will start at $40 or less per month for an entry level product and $60 per month for the 100 Megabit product.  There are no connection charges for households.

Mr Joyce says the two new partners share the government's vision of the transformative ability of ultra-fast broadband. 

"I am very pleased to have them on board and look forward to more partners being approved in the coming months."

CFH will shortly announce a list of parties with whom it will next elect to negotiate with in the remaining 25 UFB regions.

For more information please see:

Deed of Undertaking - Whangarei Local Fibre Company

Deed of Undertaking - UltraFast Broadband Limited

Fact Sheet - Agreement Northpower Limited

Fact Sheet  - Agreement with UltraFast Fibre Limited

Massive drop in price of Microsoft cloud offerings - what does it mean?

Today Microsoft have announced dramatic reductions in the price of their hosted editions of Exchange Server, SharePoint and Office Communications Server.

Microsoft's reductions in the cost of BPOS (Microsoft Business Productivity Online Suite) which consists of Exchange Server, SharePoint and Office Communications Server are by 33%, and they are reducing the price for hosted Exchange Server by 50%. Discounts refer to pricing for commercial customers - I am still investigating whether there is any additional discount being offered to not-for-profit organisations. At they same time they are increasing the size of hosted mailboxes to 25gb per user.

While the market for cloud hosted email, file storage and associated services is far from mature, it appears Microsoft is committed to positioning themselves as the market leader and 'default choice' as the market grows. Current estimates indicate it could be some years before even 5% of business email is hosted in the cloud.

Within the next week it is expected Microsoft will make Exchange Server 2010 available for download. Organisations signing up for BPOS and Exchange Hosting from Microsoft in the U.S. will be delivered Exchange Server 2010 going forward. It is understood however that customers in other countries such as New Zealand may have to wait up to 9 months before they can access the hosted edition of Exchange Server 2010.

Microsoft's huge pricing restructure is expected to have a big impact on the competition - especially Google who's hosted Email is now only fractionally cheaper than hosted Exchange (though it does include hosted apps also).

Competitive cloud based email and applications vendors have been pushing hard to get organisations to adopt their hosted email/office products - especially Google who are rumoured to be giving away their products in order to 'win' reference customers. My experience however is that there is a lacking in functionality, performance and ease of use of Google's offerings compared with the newest offerings from Microsoft. This is not a surprise as the web is a fairly young platform for applications and many apps have yet to be well translated to the web.

A key that Microsoft holds is a large user base - and users are very familiar with their products as most have been using Microsoft Outlook and associated products for years. Naturally many are not keen to move from powerful PC based applications to dulled down web based products which don't have the look and feel they're used to. Google however hold a similar key (particularly with younger users who have used their cloud offerings such as Gmail) and have lower expectations regarding what functionality an application must deliver.

In time the picture of web based apps and cloud offerings will change, but my immediate predictions for now are:

• Most existing businesses will keep the majority of their applications and data hosted in house
• As time progresses organisations will move more data to the cloud
• Organisations who are already running Microsoft Servers and products in house will typically choose to move to Microsoft hosted services. They will do this as they recognise productivity benefits of current versions of Exchange/Outlook, Microsoft Office, OCS, etc when compared to competing applications.
• Small organisations and start-ups who are more cost conscious rather value focussed are likely to choose Google Apps rather than Microsoft's hosted offerings despite the disadvantages
• Businesses started by those who use Gmail for their personal email so are already familiar and comfortable with the Google online offering
• Traditional hosting companies (Application Service Providers) and 'break fix' IT support firms will suffer

Certainly we're entering an exciting time as the pace of technology development and competition will continue to increase in the coming years. Who will actually lead the market in years to come is not clear. But I would suggest those predicting troubles for Microsoft should look at the last decade or so where they have competed aggressively with various Linux and Open Source vendors. They seem to have seen solid profits and steady market share in that period. I am certain they will be even more aggressive as they face off against Google and other providers in the Cloud arena over the next decade. And who's complaining because we'll all benefit from the incredible advances that competition brings between now and 2020.