Chorus has a $2.5 billion proposal for new Media and Communications Minister Paul Goldsmith, barely a fortnight into his new role.

A Ministry of Business, Innovation and Employment briefing paper in January for
then minister Melissa Lee said: “Despite substantial government investment [some $800 million], rural New Zealanders experience connectivity services that are slower, less reliable and more expensive than urban New Zealanders”.

Speaking at the Tuanz Rural Connectivity Symposium in Rotorua today, Chorus “fibre frontier” general manager Anna Mitchell proposed a public-private partnership that would expand ultrafast broadband fibre from the current 87 per cent to 95 per cent of the population.

Mitchell said the project would take about 10 years, at a cost of “about $2b to $2.5b or $200m to $250m per year”.

Speaking to the Herald ahead of her speech, Mitchell said Chorus saw the expanded fibre rollout being funded, in part, by an increase in the Telecommunications Development Levy, divvied up proportionately by each company’s share of total industry revenue. During the 2010s, the levy was set at $50m per year, with the funds earmarked for the Rural Broadband Initiative.

The levy was downsized to $10m per year in 2020. Mitchell saw it being bumped back up to $50m.

The balance of the $200m to $250m per year would come from an undefined mix of capital from Chorus, smaller UFB operators and the Crown. “There’s always the opportunity for additional private capital if the proposition is right,” Mitchell said.

For Chorus, part of the mix could be a “full exit” from operating copper lines by 2030. For now, Chorus faces the expense of operating both fibre and copper in many areas. (The gradual withdrawal of copper lines has recently been a pain-point between the Commerce Commission and One NZ over emergence calling.).

The $2b to 2.5b price tag is robust. The Crown chipped in about $1.8b in matching funds (in the form of buying equity in Chorus, and no and low-interest loans) for the urban-focused UFB, which saw fibre reach 87 per cent of the population in the decade from 2011 (Chorus reported a $5.7 billion regulated asset base for the end of 2022). The steep bill for reaching another 8 per cent reflects that fibre is more challenging to lay in rural areas.

The upside: Mitchell says an additional 400,000 people would get access to higher capacity, more disaster-resilient fibre – “closing the digital divide by two-thirds”.

Lee had not given any indication of her intentions on telecommunications policy before events on the media side of the portfolio saw her demoted last month. Chorus’ immediate expectations of her predecessor are modest. Mitchell said Chorus hoped for a rural broadband review by year’s end.

Why not Starlink?

Mitchell said that, in Chorus’s view, the fixed wireless technology used for much of the Rural Broadband Initiative was too capacity-contained, or too limited in the number of households that could connect at once, at least with decent data caps. Fibre would not face those limits.

Late last year, Telecommunications Commissioner Tristan Gilbertson told the Herald that Elon Musk’s broadband-via-satellite firm, Starlink, was the fastest-growing rural broadband provider.

The previous Government had a limited pilot to cover the cost of a DIY remote rural broadband install under the $15m Remote Users Scheme. Beyond that, tens of thousands have paid for a Starlink dish on their roof (and about $179 per month in broadband charges) out of their own pocket.

With the Commerce Commission saying Starlink is good enough for cloud computing and Netflix, why not just let Starlink cater to rural New Zealand, be it subsidised or not? (Starlink advertisers to Kiwis in all areas; Spark, One and 2degrees are resellers of its business-grade service, based around a larger dish).

“There’s no question that Starlink is a total game-changer,” Mitchell said.

“But we would have to have a conversation as a country about what it would mean to have 13 per cent of New Zealanders relying on Starlink.”

Musk’s firm is largely outside of New Zealand price and service regulation. And its founder has, at times, made decisions on the hoof about coverage in disaster-hit or war-torn areas.

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As things stand, Chorus is still arm-wrestling with the Commerce Commission over its regulated spending allowance for what’s known as the Second Regulatory Period (or “RP2″, covering 2025 to 2028), or the second time the regulator has set the market rules since the UFB rollout wrapped up – with the regulator wanting to crimp the firm’s RP2 spending by 16 per cent or $300m in its latest draft plan.

Hanging in the balance was a Chorus plan to spend $201m of its own funds to extend fibre to an additional 40,000 premises (the firm said Crown co-investment would be needed for any push beyond that). The only concrete proposal at present is a scaled-back Chorus plan to expand fibre coverage by 10,000 premises, at a cost of $40m, by 2025.

Wireless contenders will bend Goldsmith’s ear, too

Tuanz (the Technology Users Association of NZ) is a broad church. Its 2024 Rural Connectivity Symposium will also hear from Ian Hooker, chief executive of the Rural Connectivity Group – a Spark, One NZ and 2degrees joint venture under the Rural Broadband Initiative. The three mobile players have also committed to spending $24m each, beyond that already budgeted, as a quid pro quo for being directly allocated 5G spectrum.

And also in the speaking line-up is Wispa chairman Mike Smith. Wispa (the Wireless Internet Service Providers Association) is a coalition of small provincial and rural ISPs.

Smith also has a beef with Starlink, albeit from a different standpoint from Chorus. He told the Herald he wanted the Government to assess if Musk’s firm had predatory pricing. Smith said his members could provide near-fibre speeds at a fraction of the price.

Chorus shares were flat at $7.23 in late morning trading. The stock is down 15 per cent over the past 12 months.

Chris Keall is an Auckland-based member of the Herald’s business team. He joined the Herald in 2018 and is the technology editor and a senior business writer.