Will they fly?: Different Forms of Public-Private Partnerships (PPPs) in New Zealand's UFB Initiative

Abstract

Starting in October 2009 with a tender ("Invitation to Participate") procedure the Ultra Fast Broadband (UFB) initiative the government of New Zealand intends to deliver fiber connections (i.e. 100Mbps/50Mbps) to 75 percent of New Zealanders by 2019. Broadband penetration levels in New Zealand have slowly been catching up compared to other high-income OECD economies. However currently it seems that the contribution of the UFB initiative to broadband penetration in New Zealand is not as expected. The article discusses the industry structure in the broadband market and the effects of regulation in New Zealand and relates this discussion to developments in the broadband sector in Europe. In this context the paper examines the different forms of PPPs in New Zealand's UFB initiative with respect to their (expected) effects on roll out of broadband in New Zealand. The paper builds on the literature on the appropriate contract choice in regulated markets (Demsetz 1968; Williamson 1976). Similar to Bettignies & Ross (2004) it focuses on the extent to which the relationship-specific investment and the complexity (or uncertainty) of the exchange environment has an impact on the form of PPPs (Bettignies & Ross 2004; Crocker & Masten 1996). It examines in greater detail the task and risk allocation in the different PPPs whereby the contracts between LFCs and CFH can be considered as a joint venture and the agreements between Chorus and CFH as more contractual forms. We conclude that problems with the UFB initiative might emerge as the demand risks are not sufficiently specified which might slow broadband adoption in New Zealand.