The New National Broadband Network

The Commonwealth Government has announced that it will establish a company that will invest up to $43 billion over the next eight years to build and operate a wholesale-only, open access National Broadband Network (NBN).  The new network will provide fibre optic to the home and workplace (fibre optic to the premises or “FTTP”), supplemented with next generation wireless and satellite technologies to deliver superfast broadband services.  This represents an historic investment in Australia’s infrastructure which will have significant implications for a wide-range of industries including through:

  • the regulatory and financing of the network;
  • the design, construction, maintenance and operation of the network; and
  • the provision of an expanded range of information and entertainment services using the network.

Industries that will benefit include:

  • Telecommunications and broadcasting
  • Information technology and government service delivery
  • Construction and engineering
  • Finance and financial services
  • Advertising and marketing
  • Legal
  • Retail services
  • Education
  • e-Health
  • Climate change and environmental management
  • Energy and water efficiency
  • Local government and planning

“This new super-fast National Broadband Network is the single largest nation-building infrastructure project in Australia’s history.  It is the most ambitious far reaching and long term nation-building infrastructure project ever undertaken by an Australian Government.  Like the building of the Snowy-Hydro, like the building of the Sydney Harbour Bridge, this is an historic act of nation building” 1

There are countless ways that businesses can engage with the Government and the new Government-owned National Broadband company to take advantage of the many opportunities this new initiative will present.

Hawker Britton is able to assist clients in developing these important relationships and providing strategic advice.

Details about the New NBN

The New NBN aims to connect 90% of all Australian homes, schools and workplaces with optical Fibre To The Premises (FTTP)broadband services with speeds up to 100 megabits per second (as a reference, this is 100 times faster than those currently used by many households and businesses).  Furthermore, it will connect the remaining 10% of all other premises in Australia (including those in remote areas) with next generation wireless and satellite technologies that will deliver broadband speeds of 12 megabits per second.

Details about the New NBN Company

  • Unlike other companies in the telecommunications sector, the new company will only be allowed to offer wholesale services.  This means it will not offer retail services to consumers and businesses.  It will be required to treat all its customers equally, not favouring one over another.
  • The company will be jointly owned by the Government and the private sector and will invest up to $43 billion over 8 years to build the New NBN.
  • The Government will be the majority shareholder of the company and will make an initial investment of $4.7 billion in the company.   Significant private sector investment in the company is anticipated but will be capped at 49%. Ownership restrictions will be established to ensure the network remains a wholesale open access network.
  • The Government’s investment in the company will be funded through the Building Australia Fund and the issuance of Aussie Infrastructure Bonds, which will provide households and institutions the opportunity to invest in the New NBN.
  • The Government intends to sell down its interest in the company within 5 years after the network is built and fully operational, consistent with market conditions, and national security considerations.

How it will benefit Australia

The New NBN arrangement makes a fundamental reform to telecommunications in Australia in by separating network infrastructure provision from retail service provision.  This will transform the dynamics of the Australian telecommunications sector as competition amongst retailers will thrive and consumers will benefit from greater choice, more attractive services and lower prices.  The new arrangement will also ensure better and fairer infrastructure access for service providers.

Implementation

The Government is keen to begin work on implementing the NBN as soon as possible.  There are a number of parts to the project that will begin immediately

Investment

The Government will make the initial investment in the National Broadband Network company of $4.7 billion.

Implementation Study

The Government will immediately commence an implementation study to determine the operating arrangements (such as caps on private sector investment), detailed network design, ways to attract private sector investment and ways to provide procurement opportunities for local businesses.  The implementation study will run from approximately April to December 2009 for roll-out early in 2010,

Tasmania First

The Government will fast track negotiations with the Tasmanian Government to build upon its NBN proposal to begin the rollout of a FTTP network and next generation wireless services in Tasmania as early as July 2009.  The Tasmanian Government submitted a proposal as part of the NBN RFP process and although it did not deliver a national solution, it fitted well with the Government’s new approach.  Tasmania is well advanced in its planning and is ready to commence.

Addressing Backhaul Blackspots

Backhaul networks consist of high capacity optical fibre transmission links that connect telephone exchanges located in cities, major regional centres and rural towns across Australia.  In regional areas where competing backhaul networks do not exist, there is very little pressure on providers to offer lower prices, which means companies cannot make new services available to consumers in these areas at affordable prices.  The Government will invest up to $250 million to immediately address these backhaul ‘black spots’ through the timely rollout of fibre optic transmission links to places like Geraldton (WA), Mount Gambia (SA), Broken Hill (NSW), Mildura (VIC), Mount Isa (QLD) and Darwin (NT).

Legislation

The Government will immediately progress legislative changes that will govern the NBN company and facilitate the rollout of fibre networks.
The Government will introduce legislation that establishes:

  • governance, ownership and operating arrangements for the wholesale-only National Broadband Network company (the legislation will ensure that at no stage can a customer of the network control the new network company); and
  • the access regime to facilitate open access to the National Broadband Network for retail level telecommunications service providers (the ACCC will be given an independent oversight role in ensuring the access terms offered by the company are fair).

Furthermore, the Government will introduce legislation to expedite the deployment of fibre optic networks to the home and workplace, including;

  • requiring that greenfield estates that receive planning approval from 1 July 2010 include fibre optic networks to the home and workplace;
  • simplifying and expediting land access arrangements for fibre optic roll-outs to the home and workplace; and
  • improving access to poles, ducts and other essential infrastructure for fibre optic roll-outs to the home and workplace.

Regulation in the Transition Period

The Government is committed to reforming the current telecommunications regulatory regime in the lead up to the rollout of the new NBN.  The Government is seeking public comments on a range of options to improve the regime, and has released a discussion paper,National Broadband Network: Regulatory Reform for 21st Century Broadband, outlining some of the options.
Key options for reform include:

  • streamlining access regulation processes by allowing the ACCC to set up-front access terms for companies wanting access to Telstra and other networks;
  • strengthening the powers of the ACCC to tackle anti-competitive conduct by allowing it to impose binding rule of conduct when issuing competition notices;
  • promoting greater competition across the industry, including measures to better address Telstra’s vertical integration, such as functional separation;
  • addressing competition and investment issues arising from horizontal integration of fixed-line and cable networks, and telecommunications and media assets;
  • improving universal access arrangements for telephony and payphones; and
  • introducing more effective rules requiring telephone companies to make connections and repairs within set time frames.

Submissions to the Department are due at 5pm, 3 June 2009.

The termination of the NBN Request for Proposals Process

On 7 December 2007, the Minister for Broadband, Communications and the Digital Economy, Senator the Hon. Stephen Conroy announced that the Commonwealth Government, consistent with Labor’s election commitments, was committed to building a national high-speed broadband fibre-to-the-node (FTTN) network, and that it would run an open and transparent process to determine who would build the network.

The Commonwealth released a request for proposals (RFP) on 11 April 2008, seeking proposals to roll-out and operate a NBN in a single stage process.  To facilitate the roll out, the Commonwealth indicated it would offer up to $4.7 billion as equity to the successful proponent(s), and consider making necessary regulatory and legislative reforms.

On 26 November 2008 the Commonwealth received proposals from six pre-qualified proponents:

  1. Acacia Australia Pty Ltd
  2. Axia Netmedia Corporation
  3. Optus Network Investments Pty Ltd
  4. the Crown in the Right of Tasmania
  5. Telstra Corporation Ltd
  6. TransACT Capital Communications Pty Ltd

On 13 December 2008 the Panel concluded that Telstra had failed to submit a Small and Medium Enterprise Plan as required under the RFP, and on this basis concluded that the Telstra Proposal had not met the conditions of participation for the RFP.  Telstra’s proposal was excluded from further consideration in the RFP Process.

On 7 April 2009, the Government announced its decision to terminate the NBN RFP process on the basis that none of the national proposals offered value for money, noting that the deterioration in capital markets had severely restricted access to debt and equity funding.

“Right now under market conditions it is not possible to deliver this through pure market mechanisms, so either you sit back and wait and hope that something happens or you get on and do it. We are going to do it.” 2

– Prime Minister Rudd

Further details about the NBN RFP process are available in an extract from the Evaluation Report for the Request for Proposals to Roll-out and operate a National Broadband Network for Australia.

Conclusion

The National Broadband Network is a significant initiative that the Government is undertaking in partnership with the private sector.  It will fundamentally change many aspects of telecommunications governance, as well as improving the way we use the internet and technology in Australia.  Further, it will increase productivity for business and access and affordability for consumers. There will be opportunity for consultation and participation in a many different aspects of the NBN.

1 Prime Minister Rudd, Transcript of Joint Press Conference with Treasurer Wayne Swan, Minister for Finance Lindsay Tanner and Minister for Broadband, Communications and the Digital Economy, Stephen Conroy, Parliament House, Canberra,
7 April 2009.

2ibid.