The day after the Rural Broadband Initiative got underway in Auckland, the balance of the Ultra Fast Broadband funding was announced in Wellington.

There was no surprise as the news broke Tuesday morning that Telecom had won the bulk of the $1.5Bn Ultra Fast Broadband funding.

The intensity of those negotiations was evident in the time taken to reach a deal.  And the changes to the regulatory holiday provisions signalled that the government had screwed Telecom right down for price. 

There is no doubt that the urban program is a great deal for the taxpayer. But the broadband user will in the end pay dearly for this lost opportunity for real competition and innovation.

And so it is for the rural user too.

Mr Joyce's announcement this morning about the change to the regulatory holiday provisions is a fair compromise.

His press release confirms that the regulatory holiday was about maintaining a higher wholesale price.  It also confirms that it was about ensuring CFH and the UFB winners having a guaranteed return on investment.  The new provisions now build that guarantee in to the contractual arrangements with CFH.

If ComCom believes that prices should go lower, and regulates for that, then as Mr Joyce says, "the government wears the risk, not consumers".  Which means that the government will pay to maintain the investors' return on investment.  That may be okay because the alternative was that the government pay this upfront through a higher UFB subsidy.  The money would come from the $1.35Bn UFB budget.

If Telecom win the UFB bid, then that guarantee will likely be triggered because the artificially high wholesale price opens a door to competition.

If the lines companies win the UFB bid, then the guarantee is irrelevant because the wholesale price will have to drop to match Telecom's certain competition via their FttN plus DSL service.

The Minister's change overcomes the investment uncertainty aspect introduced by Labour's announcement that it would repeal the legislation. In lending more support to Telecom, Mr Joyce has therefore signaled that Telecom has already won the bidding.

Crown Fibre Holdings is the government's vehicle for partnering with fibre cable companies including Telecom Chorus and lines companies like North Power and WEL Networks.  See their video promoting the benefits of the UFB.  RBI not included though!