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Council should not get into the internet business

Council should not get into the internet business

Council should not invest $75,000 for a 10% share in a new internet company, said Porirua City Councillor Robert Shaw.

For the first time ever the Porirua City Council will invest in a company and appoint a company director.

This is a significant new policy direction for the Council.

The Porirua City Council will not be able to decide how its $75,000 is spent or the objectives of the company.

Section 131 (1) of the Companies Act says the directors must act in the best interests of the company.

A director cannot act in the best interests of Porirua City ratepayers or businesses.

Council is naive when it comes to business and thinks it can influence the company because it has appointed a director and invested money.

Council will participate in any dividends issued from profits.

But, it is more likely the company will come back to the council for more capital.

The paid up capital is believed to be $675,000.

The Company is Smarlinx3 which is based in the Hutt Valley and hopes to provide internet network services in competition with NZ Wireless, Telstra and Telecom.

The Upper Hutt City Council and the Hutt City Council will also be shareholders and it is expected the focus of the work will be in the Hutt Valley.

Cr Shaw said "the ratepayers' money should not be used to compete with the private sector in the internet business which is already highly competitive".

"The goal of subsidizing broadband throughout Porirua City is worthwhile, but establishing a company is not the way to proceed".

"I understand the company intends to help a small number of existing businesses that want greater broadband capacity at cheaper rates" Cr Shaw said.

He said Porirua City would be better served by a scheme to subsidize broadband throughout our City using wireless technology.

According to the Ministry of Education, all Porirua schools have broadband access already.

"I would support the $75,000 going to Business Porirua, so they could improve the situation for all businesses and households."

The way to do this is through wireless technology, and the ratepayers' money could be used to support the link between Porirua and Wellington, he suggested.

Since the company Sartlinx3 was brought to the attention of the Porirua City Council, wireless technology has been introduced to provide broadband to the whole of the Hutt Valley.

The cost of a similar facility in Porirua City has been estimated by industry sources to be much less than the $75,000 now being spent to establish a company. The main cost is the link back to Wellington.

"The ratepayers' money should be used for basic infrastructure not company overheads" Cr Shaw added.

ENDS

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