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STRATEGY AND POLICY
COMMITTEE
12 JUNE 2008
REPORT 5
(1215/52/IM)
WELLINGTON BROADBAND PROJECT
1. Purpose of Report
To outline recommended next steps to achieve Council’s broadband vision,
following the Budget 2008 announcement of significant government funding for
this area.
2. Executive Summary
On 10 April 2008 the Strategy and Policy Committee agreed to policy changes
designed to facilitate investment in telecommunications infrastructure:
i) Making council assets available for nil or nominal charge, and conducting
a shallow trenching trial (both subject to open access provisions)
ii) Progressive establishment of a Council-owned duct network (subject to
approval of full costings)
iii) Advocacy to government for funding support, and for any new trans-
Tasman fibre optic cable to land in Wellington
iv) Continued development of a business model for possible direct Council
investment in an urban fibre network.
These reflected the Council’s commitment to a vision for high speed, affordable
and ubiquitous broadband – implemented within the context of current
financial constraints.
Since then the Government has announced, in Budget 2008, a $500m funding
package for broadband investment. In particular there will be Broadband
Investment Fund with $250m for urban broadband projects, and up to $15m for
a new trans-Tasman fibre optic cable (see Appendix 1).
This is entirely consistent with the case for additional government funding to
recognise significant public good that would flow from an accelerated
investment programme. The objective is to leverage greater private sector
investment than would otherwise occur, and stimulate more competition at the
services level.
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All indications are that criteria for the Broadband Investment Fund are strongly
aligned with the Council’s position, such as a requirement for open access, a
strong focus on MUSH
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entities, and a role for the public sector in base layer
infrastructure only (see Appendix 2).
Accordingly the recommendation in this paper is to proceed with an application
for funding, in conjunction with other councils in the region, and to make a
provision of $200,000 in the 2008-09 financial year for the planning and
feasibility work needed. The application is expected to be for an urban fibre
network at the duct or duct/fibre level, that is consistent with Council polices
and the Broadband Vision.
3. Recommendations
It is recommended that the Committee:
1.
Receive the information.
2.
Note the previous work in the broadband area that has set a policy
framework for future Council involvement.
3.
Agree that officers submit an application to the Broadband Investment
Fund, in conjunction with other councils in the region, with signoff
authority delegated to the Chief Executive, subject to:
a.
Consistency with the policy framework noted above and set out on
papers dated 1 March 2007 and 10 April 2008;
b.
A further report on governance and ownership implications, risk
and financial issues, and any other significant matters.
4.
Agree to a provision of $200,000, subject to Annual Plan deliberations, in
the 2008-09 financial year to fund the planning and feasibility work
needed.
5.
Note the likely timeframes for this process which are Expressions of
Interest by 30 August 2008, and final bids by March 2009.
4. Background
4.1 Strategic context
The development of a Broadband Vision for Wellington City in March 2007 was
linked to the 2006 Information and Communications Technology (ICT) Policy
and the 2007 Wellington Regional Strategy, both of which identified broadband
as a key enabler of economic, social and environmental benefits. The Vision
states:
"That, by 2012, all of Wellington City will have affordable access to an interactive
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Municipalities, Universities, Schools and Hospitals.
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and open broadband network capable of supporting applications and services using
integrated layers of voice, video and data, with sufficient two-way capacity in the
city, and out to the world, to meet the ongoing information and communications
needs of the city's residents, businesses, investors and institutions."
It also includes an expectation of a key Council role in developing and owning
an implementation plan for the community to achieve the Vision.
A number of base assumptions underpin this Vision and role:
further investment from existing companies will occur, but not fast
enough to advance Wellington’s competitive position
fibre-optic should be the base technology – mobile and wireless will be
complementary
fibre to the home is the end goal we are seeking, and next steps should be
consistent with that vision
open access to base level (passive) infrastructure should be a bottom line.
4.2 Recent policy decisions
On 10 April 2008 the Strategy and Policy Committee considered a range of
policy changes to facilitate more investment in broadband infrastructure. Based
on information gathered in a Request for Concept process in mid-2007, and
further policy analysis, a set of parameters for the Council’s role were
recommended and agreed:
intervening to the least extent necessary
promoting shared open access infrastructure to encourage electronics
and services competition rather than infrastructure competition
prioritising social and community benefits, followed by “transformative”
economic development benefits
leveraging ownership and management of Council assets in a way that
balances these and other Council objectives
leveraging Council’s existing expertise and experience in management of
Rights of Way (RoW) and infrastructure networks.
The 10 April meeting also agreed to a number of specific changes to advance
achievement of the Council’s broadband Vision by facilitating investment in
telecommunications infrastructure. These were:
i) making council assets available for nil or nominal charge, and conducting
a shallow trenching trial (both subject to open access provisions)
ii) progressive establishment of a Council-owned duct network (subject to
approval of full costings)
iii) advocacy to government for funding support, and for any new trans-
Tasman fibre optic cable to land in Wellington
iv) continued development of a business model for possible direct Council
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investment in an urban fibre network.
This meant that a key next step was to report back on duct network costings.
That work is underway, but has been overshadowed by significant
announcements by the Government. The work to date on a business model and
technical specifications could now be applied to developing a major project
which accesses this funding source.
5. Discussion
5.1 Budget announcement
On 22 May 2008 the Government announced a $500m package for broadband
over the next five years, including:
A $340m Broadband Investment Fund for fibre build proposals in urban
and rural areas ($250m for urban, $75m for rural, $15m for a trans-
Tasman cable)
$163m for health and education initiatives ($8m for the KAREN research
network, $60m for health, $45.5m for education, and $50m for the
Government Shared Network). See Appendix 1)
In addition, $65.3 m for ICT was included in an earlier announcement of
funding for schools.
Draft application criteria for the Broadband Investment Fund have been
published with an opportunity for comment by 30 June 2008 (see Appendix
2). Following that a first round of preliminary bids will be accepted by 30
August 2008 and full bids by March next year, with an expected start date for
projects of 1 July 2009.
The objectives of the package and draft criteria for the Broadband Investment
Fund are closely aligned with the Council’s planning in this area. There will be
an opportunity to comment on the criteria for funding and this is planned as an
Officer submission.
5.2 Broadband Investment Fund application
An application to the Broadband Investment Fund from Wellington City Council
is recommended for the reasons above. To allow for the technical planning
necessary for ducting or fibre as a new infrastructure type, and the financial and
feasibility planning needed for an application, a provision of $200,000 is
recommended for the 2008—09 financial year. Significant work has already
been done on a financial model that can feed into this process.
The application is expected to be for an urban fibre network at the duct or
duct/fibre level, that is consistent with Council polices and the Broadband
Vision, in particular:
a role in base layer or passive infrastructure;
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a focus on MUSH entities; and
engagement with potential private sector partners.
Other aspects of the Council’s broadband planning, such as the Wellington Loop
project connecting six inner-city schools; mobile and wireless options; use of
videoconferencing and telepresence; the connection to transport and urban
development planning; and national initiatives to train the technical people
needed, would be referenced in the application.
It would significantly strengthen the bid if it was a regional application in
conjunction with the other councils in the region, as this would present a
comprehensive proposal that was in keeping with the Wellington Regional
strategy, and would be significantly more attractive to potential private sector
partners.
To facilitate this, a specific group of officers from the councils, plus
representatives from other agencies such as the Ministry of Economic
Development (MED), is planned, with their tasks being to:
develop a regional broadband plan
prepare a regional funding application
achieve consistent approaches to telecommunications infrastructure
policy (such as policies on shallow trenching) across the region.
Some work on best practice guides across all of local government is being
funded by the Ministry of Economic Development, and Wellington City Council
has engaged with this process to benefit from thinking across the sector.
The Wellington Regional Strategy identifies broadband as a top priority, and
this has flowed through to the Grow Wellington Statement of Intent. Broadly
this means that Grow Wellington will focus on “demand” aspects, such as
ensuring Wellington businesses realise the potential for broadband to enhance
their businesses. Councils themselves will address the “supply” side, i.e. the
infrastructure planning and possible provision of some aspects like urban fibre
networks.
As this work is developed, a reportback to this Committee is planned which will
address governance and ownership implications, risk and financial issues, and
any other significant matters.
5.2 Trans-Tasman cable
The performance and pricing of broadband in New Zealand are highly
dependent on international connections. The Southern Cross fibre-optic cable is
the only trans-Pacific network operating from Auckland to both Australia and
the USA, and international connectivity charges represent a significant
proportion of overall costs.
A new trans-Tasman cable would provide increased competition and greater
resilience for New Zealand’s international connections. Potential investors have
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been looking at this opportunity and the possibility of linking it to new cables
planned for construction from Australia to other parts of the world.
Kordia (a state owned enterprise) has recently signed a memorandum of
understanding with the Australian cable operator Pipe Networks to develop a
business case for a second fibre cable linking Australia and New Zealand. The
expectation is that this would run from Sydney to Auckland as this is likely to be
the best investment option in terms of build costs and customer location.
As noted above the Government has announced a fund of up to $15m to
improve the economics of a new cable build. The Wellington City Council
position that a new cable should land in Wellington is based on the greater
resilience to national connections that this would deliver.
Although a second cable would in itself provide a backup, having all
communications routed through Auckland is a significant risk. Should a power
failure or natural disaster befall Auckland, New Zealand’s communications
could be severely disrupted. The extra cost of a cable to Wellington (3% more
distance) would be a small price to pay to reduce this risk.
The Council’s position is that the Government should consider these resilience
and risk factors in deciding the criteria for funding, and if necessary adjust the
funding to recognise the national benefits of an option other than Auckland.
Preliminary discussions have been held with Kordia and government
departments, who have acknowledged the reasoning behind this position.
6. Conclusion
This report discusses progress in achievement of the Council’s Broadband
Vision and a major new opportunity to access funding. It recommends an
application to the Government’s Broadband Investment Fund, co-ordinated on
a regional basis.
Contact Officer:
Paul Desborough , Manager Strategy Unit
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Supporting Information
1) Strategic Fit / Strategic Outcome
The recommendations in the paper support Council’s overall vision of
Creative Wellington – Innovation Capital, and are a strong fit with the
economic development strategy .
2) LTCCP/Annual Plan reference and long term financial impact
A provision of $200,000 in the 2008-09 financial year has been
recommended for planning and feasibility work related to Council ducting
and an application to the Government’s broadband Investment Fund.
3) Treaty of Waitangi considerations
No direct implications for Treaty of Waitangi considerations.
4) Decision-Making
This is not a significant decision in terms of the Local Government Act 2002.
5) Consultation
a)General Consultation
None required at this stage. Earlier, non specific consultation indicated
general support for a more active Council role in this area. Future
involvement may require a new entity and any proposals would be assessed
for the need to run a consultation process.
b) Consultation with Maori
No specific consultation with Maori.
6) Legal Implications
Specific legal advice will be sought on some aspects related to the
recommendations.
7) Consistency with existing policy
The recommendations in the report are consistent with existing policy.
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APPENDIX 1
Broadband Investment Fund Q&A (supplied by MED)
New Zealand’s Digital Pathway: A Fast Broadband Future
More details are available at: www.med.govt.nz/broadbandinvestment
Broadband Investment Fund
1. What is the government funding?
The Government is funding a $500 million plus investment as a first five year down
payment on fast broadband to the home. Of this, the newly established Broadband
Investment Fund has $325 million operating and $15 million capital funding available
over a maximum of five years. Of this funding:
•
up to $250 million operating over 5 years has been set aside for the purposes of
supporting the delivery of high-bandwidth services to businesses and key users
in the health and education sectors (health organisations, tertiary institutions,
schools and municipal entities);
•
up to $75 million operating over 5 years has been set aside to extend the reach
of broadband into under-served regions; and
•
up to $15 million capital funding in 2008/09 has been set aside to support the
deployment of another international cable.
The government has agreed these priority areas and indicative funding levels. The
phasing of the funding is flexible so as to allow government to re-evaluate funding
priorities as investment occurs.
The Broadband Investment Fund is the key initiative in a wider Digital Strategy
package of over $500 million.
2. What are the key design features?
Leveraged
Using the maximum private funds available along with a highly contestable fund
(grants-based) to generate a higher leverage than a single capital tender.
Open Access
The BIF guarantees access to third parties at the passive information level (e.g.
ducts, dark fibre) as well as active networks (see 6. below).
Technology neutral
Uses the best available technology allowing the best fit between the needs of
users in the regions concerned. This is more appropriate that taking an overly-
prescriptive approach in such a dynamic sector.
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Integrated
This Broadband Investment Fund is well supported by other Digital Strategy
initiatives focused on improving user capability and outcomes for businesses
and communities, such as demand aggregation initiatives, the Community
Partnership Fund (additional $6 million allocated in 2008/09) and the Nextspace
3D cluster.
Credible
This package complements the robust, pro-competitive framework which has
been the hallmark of this government’s stewardship of ICT. Without the current
regulatory framework, access would be constrained to core networks. New
Zealand’s regulatory framework is now at international best practice standards
and we are already starting to see the results in the OECD rankings released
this week.
3. How does this relate to the Draft Digital Strategy 2.0?
The Draft Digital Strategy 2.0 identifies “connection” – in terms of the widespread
availability of fast and affordable broadband meeting the needs of New Zealanders –
as a critical enabler of New Zealand’s digital future. As such, the strategy sets a long-
term vision for deploying fibre-to-the-home. Over the next five years it is proposed that
the government pursue an ambitious down payment on fibre, or equivalent high
bandwidth technologies, as part of a ten year plan for fibre-to-the-home. This builds on
the revolutionary regulatory changes already made, and will ensure major additional
investment and competition by the private sector over this period.
The Digital Strategy 1.0 and 2.0 complement connection with user capability and digital
content enhancement.
4. Why is the government committing to this package?
Although recent telecommunications regulatory changes have set the foundation for
greater competition and investment in the telecommunications sector, more targeted
policies are necessary to build on these gains. It is apparent that the most effective
means of leveraging substantial private sector investment in key aspects of broadband
infrastructure is through the provision of public seed funding.
This package has been carefully designed to facilitate high speed broadband
connections to businesses in urban centres and key users in the health and education
sectors, to extend the reach of broadband into underserved regions, to improve the
resilience of New Zealand’s international connections, and to utilise the scale of the
government’s purchasing of broadband services to promote competition and
investment. This $500 million plus package represents a first five year ‘down payment’
on our vision of having fast broadband to New Zealand homes.
5. Why fund broadband?
Infrastructure that supports advanced broadband services enables high-value,
weightless products created in New Zealand, such as research, design, digital media,
branding and marketing, to be provided to customers anywhere in the world. This is
vital for New Zealand because of our small size and distance from our markets, and it
is essential if New Zealand is to be successful in positioning itself as an attractive
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location for investment and skills, and for those parts of international supply chains that
relate to high-value products and activities.
In addition, greater utilisation of advanced broadband services by firms and households
is likely to lift New Zealand’s productivity and will help meet other government goals
related to improving our connectivity to the rest of the world and environmental
sustainability.
6. What projects are eligible for funding?
The Broadband Investment Fund is new funding, which will operate under a new set of
criteria that are significantly enhanced from previous funding programmes, but are
based on experience to date. The design and operation of the fund builds on the
lessons learned from the Broadband Challenge Fund.
An important aspect of the eligibility criteria for urban projects is that government
funding will be conditional on recipients providing, as a minimum, wholesale access to
the underlying passive infrastructure – ducting and dark fibre – to any third party. The
eligibility criteria will not preclude applications from entities wishing to also provide
services to end-users, but have been designed to attract a wide range of potential
investors and to prevent the emergence of vertically integrated monopolies.
This new open access requirement will not only promote competition at the deepest
level of the network, but will improve the investment incentives for all network operators
by providing a ‘base component’ from which they can install their own infrastructure.
Many utility-type investors (including electricity companies and local councils) may also
be interested in applying for funding under the Broadband Investment Fund to deploy
duct-only networks (such applicants will still need to demonstrate a sustainable
business case, which may require partnerships with a range of telecommunications
operators).
With respect to rural funding, the draft criteria are aimed at addressing broadband
infrastructure gaps in more remote areas, while recognising that effective solutions
need to take into account local circumstances and needs. The draft criteria will also
support extensions of existing networks – particularly in facilitating the deployment of
broadband capable backhaul infrastructure, a key limitation to effective services in
remote locations.
7. Who will receive the funding?
It is anticipated that any legal entity (including network operators, local authorities and
community-based organisations) will be able to apply to access funding.
Strong partnerships and collaboration between central and local government, the
private sector and communities will be critical to achieving New Zealand’s broadband
aspirations – so sector input is critical.
8. What is the definition of urban and rural?
Rural areas, for the purposes of the Rural Fund, are any communities that can
demonstrate that they do not have fixed or wireless broadband infrastructure capable
of providing speeds of greater than 1Mbps.
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Urban communities are those in more densely populated regions, who may have
existing broadband services but who are able to satisfy the conditions set out in the
Urban Fund for investing, as a minimum, in new passive broadband infrastructure.
9. How does this impact existing broadband investment plans?
The funding criteria have been designed to complement existing broadband investment
plans. The proposed eligibility criteria will build upon recent investment
announcements such as Telecom’s $1.4 billion investment in cabinetisation or Vector’s
recent announcement to lay fibre and compete in Auckland.
The criteria that have been released specify how the provision of public funding will
leverage significant additional private sector investment from applicants and their
partners. This is intended to help promote collaboration between the private sector and
local and regional government. It is also critical that any supported projects do not
crowd out private sector investment, do not unnecessarily duplicate similar
infrastructure, and that the Fund achieves the maximum leverage from partner
investment.
For example, the focus of the urban eligibility criteria is on providing high-speed
connections to businesses and key public users (particularly schools and health
organisations). Those network operators that have outlined investment plans will be
eligible to receive government funding if the additional funding is necessary to connect
those targeted users and if the operator commits to operating their network in a manner
that meets the open access requirements that the government has set.
10. What do you mean when you say that the Broadband Investment Fund is
technology neutral?
Allowing innovation and not designing solutions that benefit a particular operator are
key reasons for not prescribing the types of technological solutions that may deliver
fast broadband to New Zealanders.
While it is generally recognised that fibre will provide the highest bandwidth to high
density urban areas, the Urban Fund criteria seek to maximise the degree to which the
network is able to support a number of access technologies (whether fibre, wireless or
DSL connections). The Rural Fund criteria have also been drafted to ensure that all
technologies are eligible for funding.
11. How will this provide a stepping stone to high speed services at home for
residential users?
By co-funding broadband connections to schools and health organisations in a region
the government will be supporting the deployment of ducting and dark fibre throughout
urban centres and into surrounding suburbs (where many schools and health
organisations are located). A condition of funding is that applicants must make these
passive assets available to all operators to install their own infrastructure, which will
assist in lowering the costs for the subsequent deployment of fibre to residential users.
In addition, applicants have to demonstrate the potential for the passive infrastructure
to be extended to provide fibre to the home in the long term.
12. Is the size of the funding enough to make a material difference?
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The allocated funding is sufficient to fund broadband networks right across urban
centres in New Zealand, as well as to materially improve the current state of broadband
infrastructure in rural New Zealand.
A critical aspect of this package is that the funding provided will leverage significant
additional private sector and community funding. The Broadband Investment Fund will
provide operating grants, which means the government is recognising the wider
benefits of broadband and does not expect to make a financial return on the
expenditure. Operating grants are also the most flexible of financing instruments so as
to allow the government to invest in high quality local solutions, within a national
framework, without having to take an ongoing ownership interest in different joint
venture arrangements.
This Fund will operate in addition to the $1.4 billion investment commitment already
made by Telecom NZ under its operational separation undertakings. It is also
important to note that the government will not need to make any regulatory
concessions (for example on access pricing) in order to improve the business case for
operators to invest in uneconomic projects.
13. Is the government intending to have copper removed if it is to be overlaid by
fibre?
The government expects that as fast broadband fibre is rolled out that the use of
copper may be reduced or removed in some areas. However, the government is not
mandating copper removal but rather the best fit between the best available technology
and the needs of users in the regions concerned.
The government will fund projects that facilitate high-speed broadband connections
and is neutral on the issue of whether such projects overbuild or replace existing
copper assets.
14. Will those who were previously working towards a Broadband Challenge
Fund application have a head start?
All applications will be assessed against new criteria but clearly those who have
already done a lot of work will be in a good position to apply immediately.
15. What is proposed for New Zealand’s international connections?
The priority for government is to see the deployment of a second trans-Tasman cable
to improve the resilience of New Zealand’s international communication links and to
improve competition to exert downward pressure on the price of international
bandwidth. The government considers there is merit in acting as an anchor tenant for
the deployment of a second trans-Tasman cable by purchasing sufficient international
bandwidth to meet the future needs of the research and education sectors. The
government notes that private sector activity is occurring and it intends to monitor these
developments. A process for implementation will be developed in parallel with the
Broadband Investment Fund.
16. What is the government doing to leverage public spending on broadband?
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In addition to providing seed funding to target specific infrastructure gaps, a
complementary initiative is underway to better leverage public spending on broadband.
There are opportunities for greater co-ordination in the purchasing decisions of public
entities (particularly in the health and education sectors) to further stimulate investment
and achieve better value from advanced broadband services.
The government has directed the State Services Commission to look for opportunities
within the health and education sectors to better coordinate expenditure on
connectivity. In addition, the government will consider the merits of aggregating
demand through a joint procurement function. This work is being developed in parallel
to the Broadband Investment Fund.
17. What happens next?
The government is seeking feedback on the draft funding criteria and the proposed
application process for the Broadband Investment Fund by 30 June 2008. Once this
feedback, from both written submissions and stakeholder meetings, has been received
and analysed, the government will release the final criteria and Expressions of Interest
will be called for the first funding round.
It is expected that the first allocation of funding for new projects under the Broadband
Investment Fund should occur in the 2008/09 financial year.
More details are available at: www.med.govt.nz/broadbandinvestment
Other Digital Initiatives
18. What is the Digital Development Council and Forum?
The establishment of the Digital Development Forum and associated Council is
progressing with urgency. Government will look for the Digital Development Forum to
provide leadership and develop strategic priorities to achieve our digital potential. The
Council will respond to the issues and priorities set by the Forum, by developing a
detailed work programme. The government is providing $2.9 million over 5 years as
seed funding for this important work. The government will be announcing the
establishment of the Forum and Council within the next two weeks, and at that time will
provide further detail on their functions and design.
19. How does the Rural Fund relate to the TSO Review?
The government is also undertaking a review of the Local Service Telecommunications
Service Obligations (TSO).
A key component of the Local Service TSO is the provision of telephone services to
those users who otherwise would not be offered a service at an affordable price. The
supply of uneconomic TSO local service is currently subsidised partly by Telecom
revenues for profitable telephone services and partly by a levy on the
telecommunications industry.
The Local TSO review is:
• Considering the case for introducing contestability into the supply of Local TSO
service and the way subsidy funding for the service is disbursed; and
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• Assessing the need for additional requirements to ensure that TSO service
providers deploy rural telecommunications infrastructure to standards
consistent with international best practice (the vast majority of uneconomic
customers are in the rural areas of New Zealand).
The criteria for the first round of the Rural Fund have been configured in such a way as
not to pre-empt or impact unduly upon the finalisation of the TSO review. On
completion of the first funding round an evaluation will be undertaken to consider if
criteria changes will be required to accommodate any changes arising from the TSO
review. Therefore funding arrangements for rural broadband projects in future
years may differ from the current criteria.
20. What is the status of the Digital Strategy’s Community Partnership Fund?
Since 2005, as a part of the Digital Strategy, the Community Partnership Fund (CPF)
has provided $17.4 million to over 100 community-driven ICT projects across the
country.
The CPF is an excellent example of communities, government and business working
together to achieve practical results.
Budget 2008 allocates a further $6 million for a 2008/09 funding round of the CPF.
21. What sorts of projects will be funded under the CPF?
Priorities for funding are currently being developed.
The Community Partnership Fund supports projects that focus on:
• building ICT skills and capability in regions and communities;
• mapping communities’ ICT assets and identifying priority gaps;
• strengthening community projects through the use of ICT;
• connecting communities of interest online;
• addressing issues of confidence, such as safety and security, in using ICT;
and
• smart ways to digitise and link content and use technology applications in our
communities around New Zealand.
It is proposed to develop a strategic approach to facilitating rollout of the highest
impact projects.
Consultation on the Digital Strategy 2.0 concludes on 23 May 2008. This process is
New Zealand’s opportunity to take part in the national conversation about our digital
future and how ‘being digital’ can contribute to improving productivity, enriching our
communities and ensuring a sustainable future.
This vital input will help determine the types of projects that will be funded through
the Community Partnership Fund.
22. When will CPF funding be available?
Timing of the funding round will be established following the conclusion of the Digital
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Strategy 2.0 consultation process.
23. What else is funded in the Budget 2008 package?
Component
Item
Estimated
spend
over next 5 years
($ m)
Accelerating Broadband Investment
(operating)
325.000
New Funding for
Budget 2008
Accelerating Broadband Investment (capital)
15.000
Community Partnership Fund
6.000
New Budget for
Other Digital
Strategy Initiatives
Support Digital Strategy 2.0
0.500
Health Connectivity Spending
60.000
Education Connectivity Spending
45.500
REANNZ – KAREN (Advanced Research
Network)
7.800
Existing Public
Sector
Connectivity
Spend
Government Shared Network - The
Government Shared Network (GSN) is a
new network that enables government
agencies to securely share information at
higher speeds and more cost effectively.
The shared network improves the delivery of
information and services to the New
Zealand public.
50.000
Digital Development Council and Forum –
formal establishment to be announced in the
next two weeks.
2.850
Ongoing monitoring and implementation of
the telecommunications regulatory
framework including: Commerce
Commission enforcement; Telecom
operational separation undertakings;
Telecommunications Service Obligations
(TSO) review; and ongoing policy advice to
the government on the sector.
22.650
Nextspace graphics cluster – to create a 3D
digital graphics cluster around Right
Hemisphere’s technology platform, to
develop world class research and
commercial projects.
4.000
Delivering Digital NZ – enabling
communities to connect with, access, use
and create digital content reflecting their rich
histories and stories.
4.200
Digital Strategy
Refresh New
Initiatives
Aotearoa People’s Network – providing free
internet access via libraries, including
hardware, onsite support and digital creation
5.750
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tools.
Anti-Spam Regulation – enabling the
Department of Internal Affairs to enforce the
anti-spam regulation.
4.500
TOTAL
553.750
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APPENDIX 2
Broadband Investment Fund – Draft Urban Criteria
Outcome Sought
The deployment of high speed broadband connections to key businesses and users in
the health and education sectors (tertiary institutions, schools and health organisations)
in urban centres and their surrounds, with all operators having the opportunity to
access the underlying passive infrastructure.
Objectives in Providing Seed Funding
The eligibility criteria will achieve the following:
o enabling the provision of rich media applications through the deployment of
high-speed broadband connections to businesses and users in the health and
education sectors;
o promoting competition at the deepest level of the network through the
deployment and wholesaling of passive infrastructure (ducting and dark fibre)
on an open access basis;
o building the competition and infrastructure necessary at a local level to provide
the telecommunications sector with a stepping stone for future network
expansions (fixed and wireless), including achieving the high-level goal of
widespread fibre-to-the-home within a decade; and
o ensuring that local traffic on supported networks can remain local by providing
for peering points and points of interconnection, operating on a non-
discriminatory basis.
Process
There is a two-staged process for applying for funding:
o Stage One: Expressions of Interest: the purpose of which is to satisfy the
decision-maker that the proposal is sufficiently robust to merit consideration of a
full application; and
o Stage Two: Full Application: those applications that were successful at the
Expression of Interest stage will subsequently be considered against:
o Eligibility Criteria: these conditions are required to be met in order for the
project to be assessed for funding; and
o Assessment Criteria: these are weighted considerations against which
the decision-maker will exercise its discretion on whether to allocate
funding.
Expressions of Interest
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Expressions of Interest will be assessed on the nature of the project, the expected
outcomes, and the likelihood that applicants will meet the Eligibility Criteria by the time
that full applications are to be submitted.
Applicants at the Expression of Interest stage are required to submit a proposal
(suggestion of 10-20 pages) that demonstrates, amongst other aspects:
(a) likely levels of co-investment and support from local authorities and/or local
providers (in-kind or otherwise);
(b) the extent to which the Network will be new infrastructure, an extension of
existing infrastructure or a combination of both;
(c) the likely number of Key Public Users and businesses that will be targeted to
receive connections;
(d) projected demand scenarios and anticipated levels of usage (these are
projections only and do not need to be finalised);
(e) the proposed business model of the applicant, including reference to open
access principles, wholesale and retail services, if applicable;
(f) the nature and experience of proposed business partners and their potential
role in this proposal; and
(g) an estimate of the likely total project cost, contribution from the applicant and
partners, and the likely level of funding needed from central government to
complete the project.
Applicants must also complete an Expression of Interest application form, which will
require:
(a) applicant comment on each of the Eligibility Criteria (Section A) of the full
application (note: eligibility criteria do not need to be met at this stage); and
(b) confirmation that the applicant has taken the Assessment Criteria (Section
B) into account and that they consider they have a reasonable chance of
being successful
at the full application stage.
Full Application
The key terms used in this application can be found in Section C: Index of Terms.
Section A: Eligibility Criteria
An application is required to meet each of the following criteria before the application
will be considered for funding under the Assessment Criteria in Section B. The
decision-maker retains full discretion in determining whether an application is deemed
to meet these criteria.
1. Nature of the Applicant
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1.1 The Applicant will be a legal entity applying in its own right or on behalf of a
formally defined Partnership (the Applicant).
2. Nature of the Project
2.1 The application will relate to a Project that will invest in new and/or upgraded
broadband access capability (the Network).
2.2 The application will specify the geographic area that the Network will cover (the
coverage area).
2.3 The decision-maker may determine that a part of an application that does not
involve direct connection to End-Users (and therefore does not meet the definition of a
Network in clause 2.1) is nevertheless eligible for funding if the decision-maker is
satisfied that:
(a) The part of the application is for broadband capability that links the Network
with another network or networks; and
(b) The application demonstrates a particular need for investment in such
capability.
3. Wholesale and Open Access Requirements
3.1 The application will demonstrate that the Network Entity will, as a minimum offering,
make Infrastructure Services available to all Third Party Service Providers on a
fair and non-discriminatory basis.
3.2 The application will demonstrate that where the Network Entity chooses to offer
Bearer Services and/or Application Services to any End-User or Third Party
Provider, the Network Entity will make access to Bearer Services available to all
Third Party Service Providers on a fair and non-discriminatory basis.
3.3 The application will demonstrate that the Network Entity will comply with the
following features:
(a) Where the Network Entity provides Infrastructure Services, Bearer
Services and/or Application Services, it will do so in an unbundled
manner, so that an End-User who purchases only one of these services
from the Network Entity can do so on the same terms and conditions as
an End-User who purchases more than one of the above services from the
Network Entity;
(b) Any End-User will be able to purchase any permutation of Infrastructure
Services, Bearer Services, and Application Services from any
combination of the Network Entity, and any number of Third Party
Service Providers;
3.4 The application will demonstrate that the physical and logical design of the
Network, and any technologies used as part of the Network, will support the
requirements in clauses 3.1, 3.2 and 3.3.
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3.5 The application will demonstrate that the Network Entity will facilitate
interconnection services that enable Third Party Service Providers to be connected to
the Network in a manner that supports the requirements in clauses 3.1, 3.2 and 3.3,
and meets the requirements set out in Appendix 1: Interconnection Requirements.
3.6 The application will demonstrate that the ownership and governance arrangements
of the Network Entity, and the operational and commercial strategies and processes of
the Network Entity, support the open access features stated in clauses 3.1, 3.2 and
3.3.
3.7 Should the application be successful, the Applicant will consent to taking sufficient
safeguards to maintain the open access features stated in clauses 3.1, 3.2 and 3.3
over the long-term.
4. Fit for Purpose Requirements
4.1 The application will demonstrate that the applicant has made all reasonable
endeavours to provide, as a minimum, Passive Infrastructure to all relevant Key Public
Users in the coverage area.
[Note to Applicants: the number of these entities that will receive a connection is a
primary consideration for assessing whether projects will be allocated funding under
Section B].
5. Government Funding
5.1 The application will demonstrate that funding allocated from the Broadband
Investment Fund will not account for more than 50 percent of the total cost of
the Project.
5.2 The Applicant’s contribution towards the total cost of the Project will be clearly
outlined as specified in Appendix 2: Valuation Methodology.
[Note to Applicants: the relative proportion of the total Project cost that is sought
from the Broadband Investment Fund will be a key consideration for assessing
whether projects will be allocated funding under Section B].
Section B: Assessment Criteria
The following assessment criteria will be used by the decision-maker when considering
applications that are deemed eligible under Section A. The decision-maker retains full
discretion in whether or not to approve funding under these criteria and reserves the
right to approve funding for a lesser amount than that sought by the applicant.
The assessment criteria will be accorded the following indicative weightings by the
decision-maker (with specific weightings outlined in the text below):
• 30% - Demonstration of the Project’s Benefits
• 30% - Commitment of the Applicant, including any partners
• 25% - The Capability of the Applicant
• 15% - The Network Entity’s Sustainability and Potential for Expansion
6. Demonstration of the Project’s Benefits (30%)
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6.1 Applications will be assessed on the provision of documentation that supports the
likelihood of the Project achieving the following objectives:
(a) provision of significant community benefits; and
(b) satisfaction of a community demand that has not been met by existing
commercial providers.
6.2 The following matters may be relevant in relation to clause 6.1:
(a) the extent of the Network’s coverage, including the number of Key Public
Users that are provided with Passive Infrastructure connections;
(b) the network capability to service the broader community, including business
users;
(c) the nature of unmet community demand that is likely to be satisfied by the
Project;
(d) the degree to which the Network does not unnecessarily duplicate similar
infrastructure;
(e) the degree to which the Network is able to support a number of access
technologies (i.e. as a ‘last mile’ and/or backhaul solution for other ‘local
loop’ technologies within an urban location);
(f) the degree of alignment and integration of the Project with other community,
regional, and national Information and Communication Technology
initiatives (including where relevant any Digital Strategy 2.0 initiatives
and the One Plan for Auckland); and
(g) any other information or factors the decision-maker considers, in its sole
discretion, to be relevant.
7. The Commitment of the Applicant, including any partners (30%)
7.1 Applications will be assessed on the level of ongoing commitment from the
Applicant, including financial and/or in-kind contributions. Applications will be assessed
on the likelihood that:
(a) the Applicant will bring a significant level of financial and in-kind
contributions to the project (which must be at least 1:1 and for which
higher levels of private co-investment will be preferred); and
(b) the Applicant will have sufficient and evidenced aggregated demand to
ensure the viability of the capital expenditure needed to complete the
Project (and confirmed through the Business Plan).
7.2 The following matters may be relevant in relation to clause 7.1:
(a) the relative proportion of the total Project cost that is sought from the
Broadband Investment Fund as compared to other Projects;
(b) the proportion of financial or in-kind contributions from non-government
sources, including monetary, infrastructural or other in-kind assets;
(c) the extent of involvement and support (not required to be financial) from
local authorities and/or regional economic development agencies;
(d) the relativity between the level of funding sought from government and the
number of Passive Infrastructure connections provided to Key Public
Users and businesses;
(e) the extent to which government funding is needed to ensure the viability of
the Project;
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(f) the level of indicated aggregated demand, including commitments from
current or potential broadband users in a given sector or geographical
region; and
(g) any other information or factors the decision-maker considers, in its sole
discretion, to be relevant.
8. The Capability of the Applicant (25%)
8.1 Applications will be assessed on the likelihood that the Project is capable of being
successfully delivered. Applications will be assessed on whether the capability
of the Applicant:
(a) is sufficient to ensure the Project meets the requirements set out in the
eligibility criteria; and
(b) is sufficient to ensure the timely achievement of the Project.
8.2 The following matters may be relevant in relation to clause 8.1:
(a) the level of relevant expertise available to the Applicant;
(b) the experience and track-record of the proposed implementers of the
Project;
(c) the robustness of the proposed governance and ownership arrangements
and the extent to which they support the requirements set out in the
eligibility criteria;
(d) the financial viability and management capability of the Applicant and the
extent to which they support the requirements set out in the eligibility
criteria;
(e) where a Partnership is involved, the steps the parties in the Partnership will
take to ensure there is no opportunity for conflicts of interest when
dealing with any potential customer;
(f) evidence of effective project planning for all stages of the Project;
(g) the Applicant’s assessment of risks and ability to mitigate risks; and
(h) any other information or factors the decision-maker considers, in its sole
discretion, to be relevant.
9. The Network Entity’s Sustainability and Potential for Expansion (15%)
9.1 Applications will be assessed on the likelihood that they will deliver a long-term,
scalable broadband solution, including the likelihood that:
(a) the Network Entity is sustainable beyond the term of any government grant
(as evidenced in the Business Plan); and
(b) the Network Entity has the capacity and potential to expand in the future.
9.2 The following matters may be relevant in relation to clause 9.1:
(a) the likelihood of the Network Entity attaining a positive cash-flow within its
first four years of operation;
(b) the extent to which the Network Entity will be able to attract non-government
equity investment to fund any expansion;
(c) the extent of market opportunities that are feasibly available to the Network
Entity as potential avenues for any expansion;
(d) the level of scalability or excess capacity in the infrastructure aspects of the
Project;
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(e) the Network Entity’s proposed wholesale services and pricing
methodologies;
(f) the extent to which the Network is designed so that the Passive
Infrastructure can potentially be extended to provide fibre-to-the-home
services in the future (implementation not required);
(g) the capability of the Network Entity to maintain the Open Access features
stated in clause 3 of the eligibility criteria over the long-term;
(h) where relevant, the extent of the Network Entity’s commitment to open and
transparent reporting of performance (financial and build-out), including
reporting on the use of public funds; and
(i) any other information or factors the decision-maker considers, in its sole
discretion, to be relevant.
Section C: Index of Key Terms
‘Applicant’ means the entity who is applying for funding under this programme.
‘Application Service’ means a service carried by a Bearer Service over the Network
(e.g. email, ISP services).
‘Bearer Service’ means provision of an active transmission service over the Network
to an End-User or Third Party Service Provider.
‘End-User’ means a user of any of the Bearer or Application Services provided over
the Network.
‘Infrastructure Service’ means access to Passive Infrastructure.
‘Key Public Users’ means including, but not limited to, health organisations, tertiary
institutions, schools and municipal entities.
‘The Network’ means any combination of capability, including Infrastructure, Bearer or
Application Services that allow an End-User, within a defined coverage area, to be
connected with any other End-User connected to the same capability within the
coverage area and/or to any Third Party Service Provider interconnected to the
capability.
‘Network Entity’ means the legal entity that is the final owner and/or controller of the
Network.
‘Partnership’ means the group of organisations, persons, and customers acting
collaboratively on the Project, including but not limited to a partnership under the
Partnership Act 1908.
‘Passive Infrastructure’ includes, where available, one or more of passive duct and/or
micro-duct services, the supply of aerial pole access way services, or the supply of
passive dark fibre optic services.
‘The Project’ means the proposed set of actions that will result in the creation of an
operational Network.
‘Third Party Service Provider’ means any other service provider which offers a type
of telecommunications service independent of the Network Entity, including, but not
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limited to Infrastructure Service Providers, Bearer Service Providers and Application
Service Providers.