Abstract:
The government of New Zealand is currently building a nation-wide fibre-optics network, a project known as the Ultra-Fast Broadband (UFB) initiative that will lay out an entirely new infrastructure with the capacity to fast track innovation in network-based business models and new applications. Ultra-fast broadband access is defined as a minimum 100 Mbps downlink and 50 Mbps uplink; the UFB network will cover 75 percent of New Zealanders over ten years. Crown Holdings Fibre (CFH), the government agency in charge of UFB deployment, has invested NZD $1.5 billion (or about USD $1.1 billion) and a similar investment is expected from invited private partners with whom CFH has established regional network operators also known as Local Fibre Companies (LFCs). In the broadband ecosystem facilitated by the UFB initiative, market creation does not follow evolution patterns which are typical of other markets; conditions will be created faster than in any other market that has spawned out of commercial utilization of technological innovations. Thus, not only is the fibre project aimed to reach all New Zealanders with broadband access but it also seeks to stimulate the provision of services by entrepreneurs other than the LFCs. UFB will be an open-access infrastructure with LFCs providing wholesale Layer-2 services – a denomination that basically follows the Metro Ethernet Forum standards – to Retail Service Providers (RSPs) who will, in turn, either sell them to resellers or provide communication services and applications to end-users. In this paper we analyze the institutional arrangements in place for the development of the New Zealand’s broadband ecosystem, with a focus on elements of the regulatory scheme that starts being delineated by CFH’s decisions and negotiated agreements. We also investigate the possible effects on service competition of proposed wholesale (Layer 2) service pricing schemes as access is open and purchased by service providers on a wholesale basis. Underlying the open-access condition is the government’s vision to create conditions for new, innovative services provided by new entrepreneurs - diminishing the incentives for vertical integration by current telecommunication operators, especially the dominant firm Telecom.