The New Zealand Government has approved plans to sponsor and build a national rural broadband network to supply 5 Mbps connections to people and institutions in rural areas. The plan is to be carried out by Telecom New Zealand, and will be aimed at providing high-quality Internet access for schools, students and home users.

The approved plans under the new Telecommunications Service Obligations (TSO) will have to cover up to 97% of all rural New Zealand, and will provide a 100 Mbps connection for 97% of all schools and 5 Mbps bandwidth for home users, while the other 3% will have to be content with connections of 10 Mbps for schools and 1 Mbps for home users.

Previously, the same Government approved to deliver the Ultra-Fast Broadband plan, which intends to provide Internet access in all urban areas with speeds up to 100 Mbps in the next ten years.

As Steven Joyce, Communications and Information Technology Minister, points out for Scoop, the plan mainly targets schools and students, “The [G]overnment’s rural broadband initiative will help deliver fiber connections to 97% of schools across the country and 99.7% of students. The remaining most remote schools will achieve speeds of at least 10Mbps.”

To show the Government's commitment to home users as well, the Minister added that “Some submitters were concerned that too much emphasis was being placed on school connectivity relative to the rest of the community. We have changed that in the final plan to be clear that while the schools will be the original catalyst to get fiber to the community; achieving at least 5Mbps across the communities is the primary aim of the exercise.”

Immediately after the news broke, the company responsible with implementing the rural plan, Telecom New Zealand, announced that it might suffer losses in the next three years with up to $56 million per year.

Even so, it will surely not back down from its task, since it is still bidding to get an exclusive contract to also build the Ultra-Fast Broadband (UFB) urban network. Pulling out from the rural broadband plan will surely reduce its chances at winning the urban contract.

Telecom New Zealand may also be tempted to stick with the rural broadband plan after a NZ$48 million grant was awarded from the New Zealand Government as payments for delivery of TSO services and upgrades to the emergency calling services system. A NZ$252 million Telecommunications Development Levy was also set up.