Questions and answers
[ Last Updated 12 November 2009 ]
Last updated 12 November 2009. Newly added questions and answers are provided at the bottom of the page.
About the Government's Ultra-Fast Broadband Initiative
1. Why is the government investing in broadband infrastructure?
Private sector companies have decided, on behalf of their shareholders and as a commercial decision, not to invest in a nationwide network of fibre-to-the-home at this point in time. The government understands this, and so wishes to assist and work with the private sector in improving the business case for ultra-fast broadband because of the public benefit to be gained from such a network.
The government plans to fund, with private sector partners, the provision of widespread open access dark fibre services, which will facilitate the best possible competition outcomes in emerging markets and encourage innovation in wholesale and retail services.
2. What is the government's objective for dark fibre infrastructure investment?
To accelerate the roll-out of ultra-fast broadband to 75 percent of New Zealanders over ten years, concentrating in the first six years on priority broadband users such as businesses, schools and health services, plus greenfields developments and certain tranches of residential areas.
3. Why is the government only investing in dark fibre?
Government investment at that level will facilitate the competitive commercial provision of ultra-fast broadband services over fibre with the minimum regulatory intervention. In very simple terms, this is the most "raw" access to the underlying infrastructure, and provides the best competition outcomes because the wholesale customer has full control and flexibility and has the ability to innovate in downstream services.
4. What is meant by open access?
Open access is a key principle underlying the government's ultra-fast broadband initiative. It is critical that the networks built provide the highest levels of interoperability with other networks and are future proofed. LFCs will be required to deal with the market in a fair and equitable manner, providing for equality of access and allow consumers to switch easily between providers.
About the commercial model
1. What are the key features of the commercial model?
The commercial model is designed to address the key economic problem that is a barrier to private investment: the risk of uncertain uptake. The commercial model sees the Crown shoulder a significant portion of that risk, with the partner only required to invest in the network as customers connect.
In return, the private partner will meet the LFC's establishment costs and shoulder the majority of the deployment and execution risk - factors that the private sector is best placed to manage.
This arrangement will last for the first 10-years of an LFC's life, after which time the Crown and partner will revert to more conventional shareholding arrangements.
The commercial model provides strong incentives for the private partner to drive uptake, and provides a "capital recycling" mechanism that will allow the Crown's contribution to be invested more than once.
Further detail of the commercial model is contained in Appendix 2 of the ITP, with a high level description of the practical effects of the model described in paragraphs 100-115 of that Appendix.
2. What is the Local Fibre Company's role?
The LFC will:
- own, operate and maintain the open access dark fibre network in the LFC's coverage area
- sell access to Layer 1 services and, if the LFC chooses to do so, sell Layer 2 services over its network
- connect any and all customers in its agreed coverage area seeking access.
3. What is the ‘Government Share'?
Separately from any Crown Fibre Holdings shareholding, the LFC will issue the government with a single ‘Government Share', the purpose of which is to ensure that open access and other important requirements continue to apply after the Crown is no longer a shareholder.
About the Partner Selection Process
1. What is the process for partner selection?
The release of the ‘Invitation to Participate' (ITP) starts the process of partner selection. Crown Fibre Holdings will evaluate the proposals received and negotiate detailed agreements with shortlisted parties. CFH will then make final partner selections. Initial agreements are expected to be completed by mid-2010.
2. How do I notify the government of my intention to participate?
Persons interested in responding and submitting a proposal are required to submit a Notice of Intention to Participate in the partner selection process by 13 November 2009. Section 4.1 of the ITP document sets out the process for doing this. A form for making this notification is supplied in Appendix 1 of the ITP documentation.
3. What is the indicative timetable for the partner selection process?
| Milestone |
Date |
| ITP release |
21 October 2009 |
| Notices of Intention to Participate close |
13 November 2009 |
| Last date for participants to ask questions about the ITP |
11 December 2009 |
| Answers to all outstanding participant questions provided |
18 December 2009 |
| Closing date for submission of proposals |
29 January 2010 |
| Preliminary shortlist of proposals notified |
To be determined by Crown Fibre Holdings |
| Shortlisted proposals identified and respondents notified |
To be determined by CFH |
| Negotiation of terms of agreements with shortlisted respondents |
To be determined by CFH |
| Final binding offers received from shortlisted respondents |
To be determined by CFH |
| Formal agreements with successful shortlisted respondent(s) completed and signed |
To be determined by CFH |
4. Can I ask questions about the ITP?
Participants may ask questions on any matters relating to this ITP up to 5.00pm Friday 11 December 2009. Details on how to do this are provided in Section 3.4 of the ITP document. All questions (and answers) received from participants will be made available to other participants (anonymously) on this webpage.
5. Who will be eligible to submit a partnership proposal?
Any entity or consortium of entities, including local or regional government, iwi, trusts or equity funds will be eligible to submit proposals.
6. Will Crown Fibre Holdings accept non-compliant proposals?
Respondents are free to innovate and suggest alterative approaches which deliver better overall outcomes. However, in order to provide a meaningful comparison, all respondents must also lodge a proposal that is compliant with the ITP requirements. CFH will be free to consider any alternative proposals but it is not obliged to do so.
7. What are the criteria for partner selection?
The ITP documents detail the eligibility and evaluation criteria, which are directed at ensuring the policy objectives are met in the best possible way. The criteria include:
- credibility and financial strength of the partner
- proposed coverage and roll-out plan
- cost of the network build and the price of services
- meeting open access and technical requirements
- degree of duplication of existing networks
- competitive benefits.
8. How will Crown Fibre balance national and regional proposals?
The tender process allows for both. It allows for proposals focused on individual candidate regions, proposals focused on any combination or aggregation of candidate regions, and national proposals.
9. What if some regions are not ready yet?
It is expected that the CFH will hold future tenders in the event that the agreements arising from this investment round do not fully meet the UFB's coverage objectives.
10. What are the candidate regions? Are proposals limited to these regions?
The list of candidate regions has been expanded to 33 regions based on the most populous urban areas using 2021 population projections. Proposals can be for all or parts of these candidate regions and may also include other adjacent regions that are not listed where it is economically sensible to do so. CFH will have the flexibility to negotiate the boundaries of proposed coverage areas with prospective partners, with an overriding mandate of achieving the government's 75 percent coverage target.
11. Can a partner lodge a proposal that covers both urban and rural?
The rural broadband initiative is being progressed as a separate initiative. Prospective partners who have an interest in both initiatives should participate in both processes.
12. Does the government have a preferred partner in mind?
No - the process of partner selection will be a transparent competitive process. The government encourages credible candidate providers to participate in the process.
13. Are there any issues with Telecom participating in the competitive tender process?
The Government is very supportive of any potential partners who can meet the tender criteria. We have specifically stated that bids covering a combination of regions, including national bids, will be acceptable.
14. Will Telecom have to structurally separate its network business to participate?
Any decisions on company structure would be up to Telecom. The Government has made it clear that it will only invest money into fibre companies that are not controlled by shareholders who also operate retail telecommunication businesses. The Government is also clear that potential partners who already own fibre assets can also table options that involve those fibre assets being vended into any new fibre companies.
About Crown Fibre Holdings Limited
1. What will be the role of Crown Fibre Holdings?
The core role of CFH will be to operate the contestable partnership selection process and to manage the government's investment in fibre networks. It will be tasked with:
- assessing responses to the ITP
- investing the Government's $1.5 billion in fibre companies so as to achieve the Government's 75 percent ultra-fast broadband target as quickly and efficiently as possible
- appointing board members to government-funded networks
- monitoring the performance of the government's investment
- approving technical and operational standards to achieve national consistency across networks.
2. What is the timetable for establishment of Crown Fibre Holdings?
An announcement on the formation of Crown Fibre Holdings will be made in the next couple of weeks.
3. What is the Ministry of Economic Development's role?
The ITP will be managed by the Ministry of Economic Development until such time as the Crown-owned investment company Crown Fibre Holdings Limited is formed. MED will provide support and expertise to CFH for a transitional period, until staff to the CFH are appointed.
Questions submitted following public release of ITP document
1. The ITP document requires a “Notice of Intention to Participate” by 13 November 2009. Is it true that only those parties that have submitted such a notice will be eligible to submit a proposal for the partner selection process? In other words a party who has not submitted the notice by 13 November 2009 will not be eligible to submit a proposal? Does this also imply that a party who has submitted the required notice must submit a proposal?
The purpose of the Notice of Intention to Participate (a Notice) is to both provide MED/CFH with an indication of the likely number of Proposals to be recevied, and to provide contact details of interested parties for the purpose of provision of Participant Notices (see section 3.5 of the ITP). Persons who file a Notice will receive all Participant Notices that are sent by MED/CFH.
However, whether a Notice is filed or not will not have any effect on a Participant's ability to submit a Proposal. The Notice is not intended to be mandatory before a Proposal can be submitted, and is not intended to impose any obligation on someone who does complete a Notice to actually submit a Proposal.
2. Are LFCs expected to have only one “Central Office” per LFC, or a topology/architecture that has multiple “Central Offices” – which individually or collectively meet the requirements of “Central Office”?
A topology that has multiple COs is permitted, as is a single CO if the region’s economics encourage it (for example where there is a smallish geographic area to be covered).
In practical terms, the number of CO’s would be a function of the maximum allowed distance of fibres connected to a CO to cover a particular footprint, coupled with the geographic size of the total regional area to be covered. These standards-based limits may force multiple CO’s in a region. This number may be further influenced by the presence of existing LFC buildings that lend themselves as suitable for CO sites, plus considerations for architectural/solution redundancy requirements if the LFC has the funds to put some kind of redundancy in (these are just examples of practical business decisions for the LFC to make).
Note that we have covered the maximum lengths for fibres in the ITP with a reference to a specific section of the IEEE 802.3 standard in paragraph 5 of appendix 3.
As such, there is flexibility for the LFC – the major factor being the maximum lengths of the fibres and the consequential maximum footprint of a CO.
3. Will there be a single, or multiple rounds of partner selection?
The short answer is that whether there is one, or multiple, tranches of partner selection will depend on the results of the current ITP process. If the government's coverage goal (75%) is likely to be achievable as a result of a single partner selection round, then there are unlikely to be further rounds.
Section 1.2(c) of the ITP provides that, if the government does not enter into arrangements with any party, or the government does not enter into arrangements that it considers will achieve the UFB Objective in full, further invitations to submit proposals to co-invest with the government in the UFB Initiative may be issued.
However, to avoid doubt, if as a result of the selection process contemplated by this ITP, the government does enter into arrangements that it considers will collectively achieve the UFB Objective in full, the government will not issue further invitations to submit proposals for the UFB Initiative.
4. Can you please confirm that a person who does not submit a Notice of Intention to Participate will still be able to:
- View Participant Notices on the MED website (notwithstanding that Participant Notices will not be sent directly to persons who do not submit a Notice of Intention to Participate);
- Ask questions on any matter relating to the ITP (as contemplated by clause 3.4(a) of the ITP) and view the answers to those questions (and the answers to questions asked by other Participants) on the MED website;
- Request an extension of time for the submission of Proposals (as contemplated by clause 4.4 of the ITP) and receive the benefit of any extension of time granted by CFH (including the benefit of an extension requested by and granted to any another person in the manner contemplated by clause 4.4); and
- Submit a Proposal on or before the Closing Date and therefore become a Respondent as defined in clause 7.1 of the ITP;
- Have all other rights as a person who does submit a Notice of Intention to Participate except that MED will not send a Participant Notice that information has been updated on the ITP website.
The response to these points follows.
First, a person who does not submit a Notice of Intention to Participate (a Notice) by 13 November pursuant to the Ministry's Invitation to Participate (ITP) dated October 2009 will still be able to:
- view Participant Notices on the MED website (notwithstanding that Participant Notices will not be sent directly to persons who do not submit a Notice of Intention to Participate). Clause 3.5 of the main body of the ITP provides that all Participant Notices will be published on the ITP Website (as defined in the ITP); and
- submit a Proposal on or before the Closing Date and therefore become a Respondent as defined in clause 7.1 of the ITP.
However:
- a person who has not filed a Notice by 13 November will not have the right to ask questions on any matter relating to the ITP (after 13 November). Clause 3.4(a) of the ITP only provides such a right to "Participants". Under the definition of "Participant" in clause 7.1, in relation to the period after 13 November, "Participants" means "any person who has delivered a Notice of Intention to Participate". As such, only those persons who file the Notice by the due date will constitute "Participants" after that date. For completeness, it should be noted that all questions which are asked by Participants under clause 3.4(a), and answers to those questions, will be made public on the MED website (in an anonymous fashion); and
- similarly, while any person may request an extension of time for the submission of Proposals (pursuant to clause 4.4 of the ITP), Crown Fibre Holdings (CFH) is only required under that clause to grant the extension to all "Participants". As such, CFH will have discretion whether to grant an extension to persons other than "Participants".
Based on the above, we are unable to confirm that a person who does not submit a Notice by 13 November will have all other rights as a person who does submit a Notice (except that MED will not send a Participant Notice that information has been updated on the ITP website).
5. The ITP talks about one special share to be held by the Government (Appendix 2, Para 21-22). Is it intended/decided whether the CFH will hold this share or the Government through some other means please? If latter what is likely to be the means please?
Final decisions on this matter have not yet been made, however it is expected that the “government share” will not be held by Crown Fibre Holdings, but will rather be held directly by the Minister of Finance.
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