Aust govt rejects NBN bids, to fund project itself

07 Apr 2009

The Australian government has rejected every bid for Australia's National Broadband Network (NBN) project, instead deciding to set up a company to fund the increasingly expensive project.

A panel rejected all of the bids because “none of the national proposals offered value for money,” the government said in a statement. The rapid deterioration of the global economy was a factor in the underwhelming bids, it said.

Instead the government will create a company jointly owned by the government and the private sector. The company will invest up to A$43 billion ($30.5 billion) on building the network over the next eight years in what the government calls “the single largest infrastructure building project in Australia's history.”

The government had originally intended to invest A$4.7 billion in the project, with the winning bidder investing the remainder. The most likely contenders for the project at the time estimated the cost to winning bidders to be around A$10 billion.

The A$4.7 billion investment will instead be put into the new company as an initial investment, with the government soliciting significant private sector investment. The government will be the primary shareholder, but intends to sell its stake within five years of the network going online if market conditions are favorable.

The NBN will be a wholesale-only network that connects 90% of Australia homes with fiber broadband services with speeds of up to 100 Mbps. All other premises in Australia will be connected with wireless and satellite technologies, which will deliver speeds of up to 12 Mbps.

By making the service wholesale-only the government may be looking to remove any grounds Telstra may have to mount legal challenges to the project, in a bid to maintain its virtual monopoly over fixed-line services in Australia.

The rollout will begin in the state of Tasmania as early as July, and in mainland Australia by July 2010. The rollout will occur simultaneously in metropolitan, regional and rural areas.

The project will support up to 25,000 local jobs per year during the eight-year project lifecycle, and 37,000 at its peak, the government said.

The rejected bidders include SingTel subsidiary Optus, the Acacia group and Axia. Incumbent. Telstra was excluded from the bidding process in December after submitting an incomplete bid.

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