On Thursday Vocus and Vodafone used a virtual reality set-up in a Parnell home to demonstrate what an unbundled fibre connection might look like. They showed a 10Gbps down, 5Gbps up service running over a Chorus 'dark fibre' connection.

Last year the two telcos started a joint programme that aims to offer customers unbundled fibre services early next year. That's when legislation says Chorus, Enable, UFF and Northpower have to offer unbundled fibre services. 

It's potentially a big project. Between them, Vocus and Vodafone account for about 40 percent of New Zealand's non-mobile broadband. Vodafone is New Zealand's second largest internet service provider behind Spark. Vocus is number three. 

Vodafone CEO Jason Paris says: "The cool thing about the unbundling that Vocus and Vodafone are investing in is that it will speed up innovation, quality of service and the ability for us to customise the services we provide for New Zealand businesses and homes. This is based on what they (the customers) want as opposed to what a technology company forces on them."

Paris says the two companies are looking for 'certainty' from the fibre companies on unbundled pricing. He says: "We want to scale from January 2020. We're investing tens of millions of dollars. A big part of how quickly we can scale and what the commercial model looks like depends on the price the LFCs give us".

Mark Callander, Vocus' New Zealand chief executive says unbundling means innovation. It will make it easier for his company to control and tag traffic. He says customers will see better gaming experiences. 

He says; "If you go back to copper, we could see noise or attenuation on the line. There are lots of things we can do to fundamentally change the customer experience and that has driven innovation."

Callander says it's about removing all the bottlenecks, tagging and controlling the traffic. He says; "Once it goes upstream we look after national networks and international networks but it all starts at the innovation layer in the last mile access".

"At the moment we just get a dumb pipe. The traffic gets handed over to us, but we don't know what happens between the physical point at the house and where it gets handed over to our network". 

For all the talk about innovation, price is the most important aspect of unbundling. Unbundled access prices are not being regulated at this stage, retail telcos are left to negotiate prices with fibre companies. However, the regulator may step in later if this doesn't work out.

Vocus and Vodafone are looking for a substantial discount from today's UFB prices. Those prices are contracts between the fibre companies and the crown. If everything goes to schedule, from 2022 prices will be based on the Commerce Commission's valuation of regulated assets. 

Which means the negotiations are likely to come down to arguments about the gap between the cost of regulated assets needed to run a layer two network, the current arrangement, and a layer one network, in effect, unbundled fibre.