Aust govt rolls the dice with $31b NBN plan

Dylan Bushell-Embling & Robert Clark
14 May 2009

Australian Prime Minister Kevin Rudd has rolled the dice on next-gen broadband, unveiling a A$43 billion ($31 billion) plan that he says is Australia's biggest ever infrastructure program.

He and Communications Minister Stephen Conroy scrapped the tender they had called for an estimated A$10 billion NBN rollout, claiming none of them "offered value for money."

None of them also came from Telstra, the belligerent national incumbent which has been scrapping with governments for years over what it sees as unfair regulations.

Conroy had rejected Telstra's submission because it did not meet the tender guidelines, leaving second stringers such as Optus and iiNet to compete for the tender prize, in which the government had promised to tip A$4.7 billion.

Faced with what was derided as a failed tender, Rudd and Conroy upped the ante tenfold with their dramatic announcement on April 7. A week later Telstra said it would consider separating its wholesale and retail divisions as part of a deal to re-enter the NBN bidding.

Negotiations are still underway on the terms of Telstra's participation. Details on how the huge project is to be funded are also unclear.

The government has said it will establish a dedicated NBN vehicle in which it will hold a majority stake, with private-sector investments contributing the remainder. It hopes to sell its stake in the company within five years of the network's launch.

The NBN is intended to bring fiber access to 90% of Australia's population, with the remainder to be served by wireless or satellite technologies.

Speaking at the National Press Club, Conroy said the project was a vital step toward improving Australia's broadband position.

"Australia is in the bottom half of the OECD for broadband take-up. Australians pay more for broadband than most OECD countries. We need to be moving quickly to progress this project - Australia should not be left to fall behind the world," he said.

"Investing in broadband at this time makes good sense. It means jobs today [and] vital infrastructure to support our growth and prosperity in the future."

While the grand broadband plan gestates, Conroy announced in late April a much more modest rural communications program.

With a A$250 million sweetener in public funds, the government hopes to induce competition in remote areas of the country where there is just one backhaul supplier, he said.

Conroy proposed that individual companies build the links and transfer ownership to the government. In exchange, they will have indefensible rights of use (IRUs) for a number of the optical fibers. After a set period, ownership will be transferred to the NBN vehicle.

The government expects to launch a tender in May and will award contracts in July, with construction to start in September.

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