Australia: Rudd Government Delivers A Fibre To The Home (FTTH) National Broadband Plan: A Commentary On The Future Of Telecommunications In Australia And Its Regulation

Last Updated: 1 June 2009
Article by Kathryn Edghill and Hamish Fraser

On 7 April 2009 the Government announced plans to build a fibre to the home (FTTH) broadband network which would operate as an open access network, offering download speeds of up to 100 Megabits per second to 90% of Australian homes and businesses (where the remaining 10% would be serviced by wireless and satellite technology with a minimum speed of 12 Megabits per second).

To put that speed into perspective, it is 50 to 100 times the average speed in Australia today, and would deliver a movie (compressed to 1GB) in approximately 1 minute 20 seconds. Fast enough to not only change the way we use the internet, but also the way we consume television.

Although delayed significantly from the original timeline, this proposal vastly exceeded the specifications required under the initial RFP. FTTH is a form of fibre optic communication delivery in which the optical signal reaches the users home or office space. It differs from the original fibre to the node (FTTN) proposal originally sought in that it runs directly to the premises, and does not rely on traditional last mile delivery methods such as existing coaxial/twisted pair infrastructure.

The initial investment of $43 billion, would make this the largest infrastructure investment in Australian history. It is proposed that this investment will be funded through the Building Australia Fund and the issuing of Aussie Infrastructure Bonds. The intention is for the NBN to be built as a public private partnership that will become progressively operational over the next eight years.

The Government intends to hold a 51% share and will operate the NBN for a period of five years before selling its stake. It is anticipated the NBN may create 47,000 new jobs and support 25,000 jobs every year until completion.

Perhaps the greatest concern for Australians in such a grand proposal is that it once again becomes a political football. Under the Howard Government, the Optus Elders consortium (known as OPEL) won the then government's Broadband Connect tender to deliver broadband technology to remote and regional Australia. The election of the Rudd Government saw that project cancelled in April 2008. Under the new NBN model, it seems that there will not be any firm projects underway until early 2010, just in time for the next election.

At the same time, and in response to ongoing industry frustration with the current regulatory regime, the Government has also released a regulatory reform discussion paper. Submissions under it are due by 3 June 2009 to identify options for reforming the existing regulatory regime to work more effectively during the transition to the NBN.

Industry frustration with the operation of the current regulatory environment is both understandable and justified. However, expansion of the ACCC's powers, while an appropriate, if not necessary response to the problems which currently exist should not be done without a careful eye to the future.

The structural changes to the industry which form the basis of the NBN proposal and, in particular, the wholesale-only, open access nature of the network will almost certainly demand a different regulatory scenario to that which has been required to address the legacy of a previously government owned incumbent monopolist. Getting this structure right, so that it allows market dynamics to determine competition, should be the first priority. It is against this background that the scope and extent of regulation necessary to ensure that the market remains free of anti-competitive conduct should be determined.

Very few could argue that proposals which facilitate streamlining of access and which allow the ACCC to investigate and promptly prevent or stop proven anti-competitive conduct should be the focus of reform of the regulatory system. So too should proposals which prevent "gaming" by participants who manipulate or obstruct the regulatory processes to delay outcomes.

However, proposals which increase the regulator's powers with relatively few fetters (such as those allowing it to impose binding rules of conduct) and those which allow it to act as a quasimarket participant (such as those which allow it to set terms of access), should be carefully scrutinised and should not be implemented without adequate checks and balances. As with any form of regulation, the devil will be in the detail and it is in the detail that the success and longevity of the new regulatory regime and with it, the new network, will be found.

The future of Broadband in Australia holds the promise of leading edge broadband speeds with the potential to revolutionise online business and media delivery. However there remains the risk that this project is too ambitious and runs the risk of becoming a political football before it ever becomes a reality.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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