Australia: National Broadband Network

The Federal Government has recently announced that the National Broadband Network (NBN) will have a far reaching impact on the Australian regulatory landscape for many years to come. Most businesses and government departments have come to rely on Internet services and the NBN will effect each organisation differently.


Currently, fibre optic technology is used to connect Internet service providers (ISPs) around the world because of its capacity to rapidly move large amounts of data. The NBN proposes that this technology be extended to also connect homes and businesses.

As in most other markets, Internet services are provided to consumers via a combination of wholesale and retail bodies. The Federal Government's proposal is to create a new company with funding from public and private sources to provide a national wholesale provider of fibre optic infrastructure to homes and businesses. Consumers would still purchase their internet services from retail companies, who in turn would have purchased wholesale access from the NBN.

The Federal Government have already taken steps to roll out a 1 year implementation study which is due for completion in early 2010. The study will determine the operating arrangements, detailed network design, and ways to attract private sector investment and provide procurement opportunities for local businesses.

What legal impacts will this have on businesses and government departments?


Government contracts, be ready to get a piece of the action

The most direct impact of this proposal will be on those entities engaged to build the new network. The build phase of the new network will require the expenditure of $43 billion over 8 years and will be the single largest nation building infrastructure project in Australia's history. It will involve many entities working for the government or quasi-government corporations, and a requirement to meet the strict specifications of government work.

Any entity contemplating performing work for the NBN will need to ensure they fully understand their obligations and expect that, before tendering for work, they will need to be accredited and willing to accept the government's contracting framework should they be successful.


Competition issues, more than just a board game namesake

With a proposed NBN it is even more likely that the Australian Competition and Consumer Commission (ACCC) will continue to police wholesale network access pricing, as well as monitoring new situations of potential market power abuse in relation to NBN access.

With a single national wholesale network, ISPs and other Internet service based businesses will need to keep an eye on competition issues at all times, for fear of falling foul of the ACCC.

Like other corporations, ISPs are also subject to the Trade Practices Act 1974 (Cth) (TPA). This means they must comply with the rules relating to monopolies, market competition and market power in regards to the provision of internet services.

Traditionally few ISPs, except the very large, have been 'vertically integrated'. Generally speaking, this refers to operating within both the wholesale and retail space. This may change if retail ISPs invest in and became part of the NBN. Vertically integrated ISPs must be careful to not make agreements that use their newly acquired wholesale status to lessen competition in the retail market or vice versa.

Entities other than ISPs must also be on guard if, by investing in the NBN, they are vertically integrating themselves and their current business across multiple sectors of an industry. This might include any businesses that currently use the internet to sell services to consumers, for example, telephony providers, medical diagnostic imaging service providers and multimedia content providers.

Whether these issues become a common concern in Australia, and whether the ACCC becomes an active participant in this arena, is in part dependant on how the Federal Government allows investment in the NBN.

Watch this space.

Big brother turns up... with expensive tastes

Cyber security is a growing concern for law makers. It is likely a government owned NBN transmitting the vast majority of online banking, national defence research and other confidential information, will be the subject of increased regulation. Complying with this type of regulation is likely to have a direct impact on companies and government departments alike.

As anyone dealing with money found with the introduction of the Anti-Money Laundering & Counter Terrorism Financing Act 2006 (Cth), national security regulations can have a real and expensive impact on businesses.

If a similar act were passed in relation to Internet services, companies and government departments may need to spend significantly on reporting suspicious Internet activities and collecting copious information about end users and suppliers.

Prioritising traffic, who gets to wear the white gloves?

New technologies have a voracious appetite for bandwidth. Whether you are sending high resolution medical imagery from the back of Bourke or streaming blu-ray content to living rooms in Toorak, it all requires bandwidth.

There is no doubt that the proposed network will increase the available bandwidth dramatically but as history shows, new applications will demand even more. For example, if Australia wins the bid to build the internationally backed Square Kilometre Array radio-telescope then this one project alone will need to communicate petabytes of data across the network. Add this to new eHealth applications, new online television broadcasters and other requirements not even thought of, and the picture is clear that there is unlikely to ever be enough bandwidth for everyone's needs, all the time.

This is the reality of the Internet. Decisions will have to be made on how to approach this challenge and surmount the obstacles.

A nation-wide, dominant bandwidth wholesaler, as proposed in the form of the NBN will have considerable power in directing the approach taken.

Will the NBN prioritise medical data over streaming movies? Will streaming television be prioritised over computer game data? And who will decide this?

At this stage it is not clear who will be making these decisions or whether a disaffected party has a right of appeal against the decision. It is likely that we will see courts asked to decide on the fairness of these decisions.

Any agreements entered into for access to the NBN or any agreements relying on NBN access will need to address these specific concerns or run the risk of being caught between a rock and bandwidth-less space.


Taxation... new stones, new blood from them

Whilst predicting the disruptive technologies of the future is difficult, it is not difficult to predict that the governments of the day will be interested in identifying new possible sources of taxation revenue. Any business plan should not overlook this risk.

If the promises of exciting new technology come to fruition on the back of fast internet services, especially Internet services that the government has built, any business wishing to exploit new technology should plan for new taxes and levies. Often a small amount of preparation can avoid issues altogether or at least minimise the impact.

Given the specific challenges associated with the commercialisation of new technology, such as intellectual property ownership and appropriate corporate structuring, specific legal advice should be sought.

Phillips Fox has changed its name to DLA Phillips Fox because the firm entered into an exclusive alliance with DLA Piper, one of the largest legal services organisations in the world. We will retain our offices in every major commercial centre in Australia and New Zealand, with no operational change to your relationship with the firm. DLA Phillips Fox can now take your business one step further − by connecting you to a global network of legal experience, talent and knowledge.

This publication is intended as a first point of reference and should not be relied on as a substitute for professional advice. Specialist legal advice should always be sought in relation to any particular circumstances and no liability will be accepted for any losses incurred by those relying solely on this publication.

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Michael Grosser
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