The pipes, stretching in a web around the central city and further afield, are to be cleared of rust and rubble and used as ducts for a new network of fibre broadband cables.
The move would eliminate the need to dig up city streets and could eventually help provide ultra high-speed internet access to the majority of Dunedin homes and businesses.
Dunedin City Council water and waste services manager John Mackie told the Otago Daily Times the council had decided to sell the pipes to Aurora Energy Ltd, a council-controlled organisation, in the next few months.
Aurora planned to use the old cement and cast-iron pipes, which were no longer suitable for high-pressure water supplies, as ducts for the fibre network it was planning.
Aurora commercial manager Alec Findlater, of Dunedin, said using the old pipes could save up to 80% of the $100-per-metre cost of installing fibre cables.
Most of the cost of laying the cables was associated with digging up city streets, and could rise depending on trenching work required and the amount of other services already in the area, he said.
Instead, the cluster of fibre cables, protected by a new plastic duct, would be pushed through a small hole at one end of each section of pipe and squeezed down the lengths of pipe as far as possible.
The old pipes could be used even if in quite poor condition, as long as they had not collapsed completely, he said.
"It's really just a means of creating a hole through the ground," he said.
It was hoped the fibre would eventually be activated as part of a network serving businesses and homes across the city.
The company was developing its plans while waiting for the Government to reveal a list of preferred partners to supply fibre broadband across the country, as part of a push to get high-speed internet to most New Zealand households.
Mr Findlater said he hoped an announcement would be made before the end of this year.
The company already had a 3km trial fibre network operating in the central city, trading as the Flute Network, but hoped to expand that with the help of government funding and the city's old water pipes, he said.
"These pipes are scattered throughout the urban area and we will be looking to maximise the use of those," he said.
Mr Mackie said council staff were still working to identify all available "retired pipes" and come up with a valuation for the network, before agreeing on a sale price.
So far, "tens of kilometres" of pipes had been identified as suitable, some dating as far back as the 1860s and, in some cases, approaching their 150th birthday.
