In an earlier report (September 2007), the benefits from increased productivity and growth (through telepresence) were calculated: 2.7-4.4bn NZD/year. Also, there is a cost to waiting. The institute proposed a 10 year roll out of FTTP for a 75% coverage.
In the meantime, Telecom New Zealand (TNZ) progressed on issues such as additional fibre (to cabinets, FTTC), LLU and separation (the government is to decide on the latest proposals by March 31).
Now, the Institute says these efforts are insufficient; the 75% coverage ratio would only be reached by 2040. Just a third of the benefits would be captured.
Approaching the FTTH issue from the financing side, they hit the nail on the head and come to some remarkable conclusions. Here are some (non-literal) quotes:
- Summary: Progress is too slow, the dominant investor has weak incentives to invest, a new regulatory and funding model for rapid roll out of fibre infrastructure is recommended.
- More specifically: TNZ needs higher returns than those provided by infrastructure assets like fibre. Besides, the company perceives a regulatory risk, demand is uncertain and there is capital market resistance to increased investment.
- Even more to the point: the cost of inaction is greater than the cost of action, even though both are value negative.
- A natural monopoly is much more difficult to regulate once multiple investors have invested in fibre and xDSL. ISPs/telcos will have increased investment in xDSL and will require a return before changing platform.
- The Institute recommends accelerated, efficient roll out of fibre infrastructure. This will require a new regulatory approach and investment vehicle. Investment in fibre infrastructure made by a third party that treats the investment as an infrastructure asset. Government intervention is the only viable option to accelerate roll out through a privately funded vehicle.
- The last question remains: What investment vehicle needs to be built?