BAY OF PLENTY COUNCILS BROADBAND BUSINESS CASE STUDY SUMMARY REPORT. May 2007

Transcription

1 BAY OF PLENTY COUNCILS BROADBAND BUSINESS CASE STUDY SUMMARY REPORT May 2007 GDI Ground Floor, 201 Wickham Terrace PO Box 782 Spring Hill, Qld Telephone: +61(7) Facsimile: +61(7)

2 Bay of Plenty Broadband Business Case Study Summary Report Contents 1 EXECUTIVE SUMMARY BACKGROUND CURRENT SITUATION NEXT STEPS CURRENT SITUATION... 5 APPENDIX 1 KEY RECOMMENDATIONS FROM PROJECT... 6 DISCLAIMER This document has been prepared by Gibsons Digital Innovation (GDI) from information provided by the client and from other sources. Our procedures do not necessarily include confirmation of validation procedures of that information and this document is provided to the client for its exclusive use and benefit only. No other party should rely on it for inferences or forecasts made therein. GDI accepts no responsibility to such parties. In addition, certain inferences and forecasts have been drawn and made on the above basis although every effort has been made to ensure that such inferences and forecasts are reasonable, no responsibility can be accepted by GDI for eventual outcomes. Page ii

3 1 Executive Summary This report summarises the conclusions and recommendations from the final report on the Bay of Plenty Councils Broadband Business Case Study. This report outlines a number of operational steps that are to be actioned by the CEOs of each organisation. It is intended that these actions will be reported back to councils for information or decisions as necessary. In addition, funding has been sought for phase II of this project with several councils indicating further funding will be made available. This phase will carry out a more detailed evaluation of the requirements for setting up an entity to deliver and manage the core network, further discussion with the telecommunications industry on issues and options as well as continuing engagement with central government on funding and policy issues. 2 Background Broadband services are the new platform for the delivery of all telecommunications services into homes and businesses in the future. These services range from fast internet and , low cost telephony (Voice over Internet Protocol), business data services (Virtual Private Networks) to video services including pay TV. The advent of broadband technologies and rapid convergence of many previously separate services onto a single delivery platform offers lower costs and access to many new services that raise the competitive advantage of businesses. However, broadband services are not easily delivered to customers over the traditional copper telephone lines that have typically delivered telecommunications services for the last 100 years. Essentially, new age fibre optic cables are needed closer to the customer premises to deliver the vastly greater capacity required by broadband. In regional areas like the Bay of Plenty, the cost of this new fibre optic technology is not justified with current economic models, and extensive interviews with all national and a number of local broadband providers indicate little or no intention to invest in the region. The lack of broadband based infrastructure is widely considered an economic disabler where businesses will pay more for their telecommunications services than their large city competitors where greater economies of scale support broadband infrastructure investment. In addition to lowering telecommunications costs, broadband also offers a wide range of innovative ways to better business outcomes, from low cost corporate wide area networks (WANs) that allow application sharing and remote site backup, to flexibility as to the location of staff and options for better customer service. In regional and rural areas that have traditionally been poorly served with all forms of public service and infrastructure, broadband services offer new opportunities for enhanced education, health care and social and cultural outcomes. We note many regional communities and governmental agencies are well aware of these advantages and believe they will apply considerable energy to achieving these outcomes if they can access high quality broadband services. The need to reinvest in aging telecommunications infrastructure in New Zealand is undisputed, however because Telecom New Zealand is in private ownership, the greater good of regional infrastructure investment cannot be a driver unless there is also a clear business return. Page 3

4 Any investment made by most telecommunications carriers will have a better return in a large metro area like Auckland or Wellington, and so the Bay of Plenty must consider these more densely populated areas as competitors for broadband investment. 3 Current Situation This project has considered the barriers to infrastructure investment for the Bay of Plenty, and what can be done to reduce them. There are three significant matters that make the region expensive to service compared to large metro areas: i) Access to wholesale prices for broadband from Auckland and Wellington is relatively poor, leading to higher operational costs for service providers in the region. ii) iii) Within the Bay of Plenty there is little open access infrastructure that allows fibre optic cables to be readily installed, limiting the areas that can be served. Wireless technologies are essential for the final delivery of broadband services to business premises and homes where traditional copper cable technologies are ineffective. There is currently no licensed wireless spectrum available to the region in the favoured 2.3 Ghz band because this has been allocated to service providers who have elected not to deliver broadband services to the Bay of Plenty. The Ministry of Economic Development (MED) is planning another spectrum auction this year for this band, and we are concerned the problem of spectrum allocation could result in the same problem for the region the vital spectrum will be sold to successful bidders who will focus on cities where financial returns are higher. Submissions from interested parties (including one from this project) to the MED have resulted in this auction being postponed whilst government considers their options. The final report for this project reviews these matters in detail, and suggests a number of initiatives that will reduce the cost of access to the region and increase the opportunities for service providers. These initiatives are broadly divided into four areas: i) Align council processes across the region to achieve consistency for infrastructure installation and so reduce the costs of planning and compliance for broadband providers. ii) iii) iv) Aggregate telecommunications demand among councils, and with central government agencies in the region, to tender for the construction of new broadband infrastructure to benefit the whole region. Use council road and footway construction works to install ducts suitable for fibre optic cables along a core network route connecting Tauranga, Rotorua, Kawerau and Whakatane. This network would reduce the cost of providing services within the region considerably and would remain in regional ownership in the same way as other essential assets such as roads, water and drainage infrastructure. Seek central government funding for the project to add to the financial leverage created by items i) to iii). The Ministry of Economic Development has recently announced that it will move towards an operational separation of Telecom, meaning that much of the current Telecom network will be moved to separate management, and potentially to separate ownership. This will eventually mean that all service providers will have access to the network and be more able to compete in the telecommunications market. This process may take some years and in the interim, is likely to mean Page 4

5 that further investment in Telecom infrastructure in regional areas will slow. For the Bay of Plenty, the medium term result may be that the current lack of broadband capable infrastructure will also not improve due to the uncertainty regarding the detail of operational separation. We believe councils do have the ability to significantly influence the investment climate for broadband infrastructure in the Bay of Plenty, without moving into unfamiliar territory, and the most important of these actions are summarised in the following section, Next Steps. 4 Next Steps The Final Report contains 11 initiatives in detail that councils can take, some individually and others collectively, to change the investment environment in the Bay of Plenty for broadband infrastructure. However, while these initiatives have been described in some detail, and considerable support has been gained from the Ministry of Economic Development for the work carried out to date, it is now necessary to develop the business case in detail for the development of the core network of ducts. The next steps to build a business case include, subject at each step to councils consultation and approval: i) Development of a common set of resource consent processes for broadband infrastructure and engineering design processes for telecommunications ducts for the core regional network and in new subdivisions. ii) iii) iv) Detailed assessment of the value of broadband demand in the region from councils and central government agencies, and achievement of commitment to use this demand to broker new infrastructure funding for the region. Design of the core network in detail, with costing and specific local projects that bring immediate benefits to communities. Seek funding assistance from central government for the project. v) Tender for providers to help build the core network in return for the aggregated demand and additional funding described in items ii) to iv). vi) Form a suitable regional entity to own and operate the core network. 3 Current Situation This project has formed the following conclusions: 1 The Bay of Plenty region is poorly served with broadband infrastructure 2 The current telecommunications environment will not encourage significant investment in broadband infrastructure in the Bay of Plenty 3 Councils can take action to improve the availability of broadband services in the region. 4 Further work is required to develop a detailed broadband model for the region. Councils are asked to support this work and the other recommendations that follow. Page 5

6 Appendix 1 Key Recommendations from Project This section summarises the recommendations. The key recommendations are grouped into three categories, for individual councils, the district council and the project working party: Recommendations for Actions by Individual Councils 1 Endorse phase 2 of this project, described in appendix 2 of the final report, and subject to the successful delivery of each milestone in this extension of the project; 2 The policy statement and definition of broadband services for the Bay of Plenty summarised in section 3.2 of the final report be endorsed, 3 Assist service providers with low cost or no cost access to mapping information to assist with planning of infrastructure as described in section of the final report. 4 Agree to aggregate council telecommunications demand, subject to suitable guarantees of cost and service quality, for tender to attract new infrastructure investors to the region as described in section of the final report. 5 Agree to the installation of telecommunications ducts (100mm PVC pipes) as a part of all relevant road and footway works planned over the next five years. This will build a valuable broadband core network in the region suitable for the installation of fibre optic cables quickly and cheaply. The core network will at least connect Tauranga, Whakatane, Kawerau and Rotorua together, and will expand into the metro areas of these locations, and provide closer access to the rest of the Bay of Plenty via specific cable and wireless technologies. The cost of this coincident work when associated with scheduled road works is very low compared to new duct installations. Any gaps in the network will be funded by the demand aggregation tender (recommendations ii) and iii) above, and funding sought from central government. This is described in section of the final report. 6 Actively explore cooperation opportunities with other stakeholders needing high speed communications in the region such as power transmission companies Horizon Energy, Unison Network and Powerco. This is outlined in sections and of the final report. 7 Develop policies that require developers of new subdivisions to install complete duct systems that will allow the delivery of fibre optic cable based broadband services direct to homes and businesses in the subdivision. This is outlined in section of the final report. 8 Review and align the RMA requirements for telecommunications infrastructure across the region to ensure service providers have one consistent set of requirements when seeking resource consent, thereby lowering their costs and speeding installation time. This is outlined in sections and of the final report. These recommendations will require alignment between councils of: District Plans Page 6

7 Codes of Practice for design and installation of conduit into any road or footway opening Ownership and operation policies for core network ducts Annual capital funding allocation in ten year plans for fringe fibre optic cable installation Annual capital funding allocation in ten year plans for core network duct installations in brown fields sites Subdivision consent conditions for provision of network duct installations Recommendations for Actions for the Regional Council 9 Support the aggregation of central government telecommunications demand through the State Services Commission for the extension of the Wellington Hamilton Auckland Government Shared Network (GSN) into the Bay of Plenty. This is outlined in section of the final report. 10 Develop a commercial entity, wholly owned by the Bay of Plenty community that will own and operate the core network for the benefit of the whole community. This entity will operate as a profitable business, responsible for the low cost access of broadband services throughout the region, and ensuring community and commercial goals are met at all times. This entity will provide open access wholesale services to telecommunications service providers and councils through the use of the ducts to carry fibre optic cables. This entity will allow commercial activities to be carried out professionally and at arms length from all stakeholders. This is outlined in section 5 of the final report. These recommendations will require the following activities to be carried out on behalf of all councils: The development of an education program for the Bay of Plenty public on broadband use and capabilities Identify where the shared service infrastructure group could work with the proposed publicly owned commercial entity who will own and operate the core network on behalf of the Bay of Plenty Attract a broadband wholesale partner/provider to the Bay of Plenty Promote and coordinate demand aggregation of COBOP members and other aggregation partners Identify donation ( greater good ) and commercial funding partners and options Recommendations for the Working Party 11 Approve the Working Party continue with phase 2 of this investigation. Page 7

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