UFB: We have a winner

The long wait is over. We've finally had the announcement that Telecom has beaten a rival consortium of regional network operators for the contract to build and manage the bulk of the Government's Ultra-fast Broadband network.

Victory comes at a price, however. Telecom now faces major upheaval and huge costs as it sets about splitting itself into two companies to accommodate the conditions of winning approximately $1 billion worth of UFB business. The win is also likely to cost Telecom its CEO. It is widely predicted that the globally-employable Paul Reynolds won't be interested in sticking around to run a company that's half the size of the business he has been leading since 2007.

News that the remaining UFB contracts had been signed was pumped out along with a barrage of spin from the Government extolling the virtues of broadband in general, the positive effect the network would have on healthcare, and how it would assist Christchurch's recovery. (Canterbury was the only region Telecom didn't pick up this week.) The Government's PR onslaught was motivated by a desire to remind voters it is making good on its 2008 election promise to deliver fast, ubiquitous broadband.

The spin was also aimed at drowning out the inevitable complaints that the work has gone to the country's much maligned telecommunications incumbent. At the end of the day, the Government probably had no option but to give the job to Telecom rather than its competitor, the Regional Fibre Group.Crown Fibre Holdings, the agency responsible for managing the UFB process and cutting the deals to make it happen, admits price was the overriding factor when it came to deciding who to give the work to.

"Fundamentally, Telecom's bid was the most competitive," CFH chief executive Graham Mitchell said at the announcement press conference. So, in summary, we have a cash-strapped Government screwing a low-margin deal out of an unpopular provider that will also be forced into a disruptive and costly corporate split in order to accept the work. It's hardly a triumphant start for a project of such national significance.