Dear Minister,

In their 25th March 2011 letter to you, Telecom New Zealand state: “The RBI requires that the RBI services be provided on non-discriminatory and open-access terms – a commitment we are happy to make.” They specifically mention the “rural schools objective” and the “rural community objective”, but not necessarily in relation to the variations sought.

Telecom fails to mention another part the government’s stated Rural Broadband Initiative policy:

(f) The achievement of the RBI will be consistent with the following principles:

(i) making a significant contribution to economic growth;

(ii) neither discouraging, nor substituting for, private sector investment;

(iii) maximising the use of existing infrastructure; and

(iv) ensuring affordable broadband services.

It is apparent based one particular example noted in Telecom’s variation request that although Telecom is willing to meet the rural schools objective and the rural community objective, they are not willing to do so in a manner consistent with the principles stated above.

The new clause, 113, sought in Telecom’s letter will hinder significant economic growth in rural areas, it will discourage private sector investment, and it will guarantee against affordable broadband services for all but schools and home users. Clause 113 attempts to perpetuate the stranglehold on rural infrastructure already in place.

The one example in particular can be found on page four of Telecom’s submission:

“Under the RBI Contract, the ANS Unit will provide a layer 1 inter-exchange backhaul service on specific backhaul connections where new end-to-end fibre has been deployed under the RBI Contract, at a price agreed as part of the RBI Contract. It will not be a breach of clauses 31.1, 56.1, 21.1 or 48.1 if the ANS Unit offers the same or similar service at a higher price over backhaul connections where fibre has not been deployed under the RBI Contract.”

I would like to draw your attention to an example of what will happen in rural communities should this clause be allowed. The attached document is printed from NZTelco, a blog I maintain online to discuss telecommunications issues. The diagram in the attached document shows a small section of central Hawkes Bay. It shows fibre from FX Networks entering Waipukurau. Telecom are proposing that because RBI funds are not specifically being used between Waipukurau and Waipawa (as there is existing fibre on the route not deployed under the RBI Contract), they will not be required to offer a dark fibre service, or even one at a low cost, between these two towns.

Allowing the insertion of clause 113 and the interpretation by Telecom as above will violate the principle “ensuring affordable broadband services”. It will cause economic hardship to the Central Hawkes Bay District Council, who currently have a sub-1mbps “OneOffice” service from Telecom between Waipukurau and Waipawa – for commercial, not technical reasons. It will cause economic hardship to other rural businesses such as Eastern Equities who maintain offices in the Central Hawkes Bay (and also use overpriced OneOffice services). Economic growth will be hindered, and alternative service providers such as FX Networks will be discouraged from building beyond Waipukurau into Waipawa.

The example noted above is just one of hundreds throughout New Zealand. I urge you to consider a sampling of use cases before proceeding with any additional variations to the Operational Separation Undertakings.

Regards,

Jonathan Brewer