1 July 2010
Media Statement
UFB Model Amendments Announced
 
Communications and Information Technology Minister Steven Joyce today announced amendments to the model for the Ultra-Fast Broadband (UFB) Initiative.
 
“Following the extensive feedback that Crown Fibre Holdings (CFH) has received from the telecommunications industry and UFB Initiative respondents after receiving its first round of bids in the UFB tender process, certain revisions to the UFB model have been agreed by Cabinet this week,” says Mr Joyce.
 
“These amendments will further improve the business model for local fibre companies and facilitate additional co-investment from the private sector”.
 
A number of respondents to the Crown’s initial Invitation to Participate (ITP) advised they support a move to offering open access at Layer 2 of the ultra-fast broadband network as well as Layer 1.  This feedback has been echoed across the industry.  In particular, the service providers who will be purchasing ultra-fast broadband services and in turn selling them to consumers have said they support such a move.
 
“We are talking about a long-lasting investment that will fundamentally shape the future of the New Zealand telecommunications industry,” said Mr Joyce. 
 
“Careful consideration has been given to the issue of open access.  It is important that the open access model supports competitive outcomes, and that it is both suitable and attractive to the industry and private-sector investors.”
 
The ITP has been revised to ensure that ultra-fast broadband will be provided at both Layers 1 and 2 on an open access basis.
 
In addition, the Government is changing the ITP model to avoid burdening infant businesses investing in emerging technologies with inappropriate regulation. Prices will be set by CFH through negotiations following the tender process, and there will be limited scope for regulatory intervention to alter those prices while the industry is still immature. However, there will be safeguards in place to ensure that effective competition will develop.
 
“Based on today’s announcement, respondents to the original ITP will be invited to provide revised proposals based on the modified UFB model and regulatory regime to CFH.  CFH will contact bidders about the process directly,” said Mr Joyce.
 
CFH is also approaching the industry on UFB architectural options and UFB product specifications to obtain views on these matters.  These discussions will occur during July and August 2010.
 
CFH will be making recommendations on preferred investment partners to Ministers by October 2010. 
 
Media contact: Anita Ferguson 021 243 1623
 
www.med.govt.nz/ultra-fast-broadband.
 
 
Questions and answers:
 
1.    What is meant by open access?
Open access is a key principle underlying the UFB Initiative, and means that ultra-fast broadband must be made available to any service provider that seeks access to it on equal terms.  This will in turn enable a vibrant and competitive service provider market.  It is critical that the networks built provide the highest levels of interoperability with other networks and are future proofed.  Local Fibre Companies (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.  Specifically, LFCs will be required to sell services to a “non-discrimination” standard.
 
2.    What are Layer 1 services?
Services that operate at Layer 1 of the Open Systems Interconnection Model of network architecture.  Layer 1 is normally associated with passive fibre optic network infrastructure.
 
3.    What are Layer 2 services?
Services that operate at Layer 2 of the Open Systems Interconnection Model of network architecture.  Layer 2 is normally associated with active fibre optic network infrastructure (the electronics that light fibre).