Broadband and telecommunications
Jonathan
Chowns
There were no new high value initiatives announced in the
2009–10 Budget for broadband and telecommunications. Whilst
there are a few new low value initiatives, the Budget is mainly
concerned with adjustments to the funding of existing programs. The
most significant initiative—taking cost as a measure of
significance—the fibre to the home (FTTH) national broadband
network (NBN), was announced prior to the Budget on 7 April
2009.
This Budget Review brief focuses on the Government’s new
proposal to build a national broadband network. Some notable lower
value initiatives are mentioned briefly at the end.
National Broadband Network
The first national broadband network – fibre to the
node
The early history of the Government’s first proposal to
build a fibre to the node (FTTN) National Broadband Network was
described briefly in last year’s
Budget Review.[1]
To continue that chronology, the deadline for requests for
proposals was extended from 25 July 2008 to
26 November 2008. Six proposals were received including
one from Telstra. On 15 December 2008, Telstra’s
proposal was determined to be non-compliant and ineligible for
further consideration.[2] In early to mid January 2009, the Australian Competition
& Consumer Commission (ACCC) gave its report on the remaining
proposals to the expert panel.[3] Around 20 January 2009, the expert panel
gave its report to the Government.[4] On the morning of 7 April 2009, the
Government announced that the request for proposals (RFP) process
had been terminated as no proposal met the Government’s
requirement for value for money.
The second national broadband network – fibre to the
home
Later on 7 April 2009, the Government announced a new
proposal for the establishment of a new company to build and
operate national fibre-to-the-home network. The main elements of
the proposal as originally announced are: [5]
- The new network will reach 90 per cent of homes, schools
and workplaces with fibre to premises and will provide speeds of up
to 100 megabits per second. It will reach the remaining premises
using wireless technologies with speeds of 12 megabits per second.
It will be a wholesale only open-access network
- The proposal also involves the provision of transmission links
(‘backbones’) to major regional centres and rural towns
which are inadequately served by commercially viable transmission
services
- The Government will commence an implementation study to
determine the operating arrangements and network design for the
upgraded network
- The Government’s plan is to begin to upgrade the network
in Tasmania first and to begin negotiations with the Tasmanian
Government immediately
- The network will take eight years to build and will
‘support’ 25 000 jobs on average for the length of
the project, peaking at 37 000
- The Government estimates that the network will cost up to
$43 billion.
With regard to the broadband network company proposed in the 7
April 2009 announcement:
- The Commonwealth will have the majority ownership in the
company. The government intends to sell down the
Commonwealth’s interest in the company within five years
after the network is built and fully operational, ‘consistent
with market conditions and national and identity security
considerations’
- Private sector involvement is expected by, for instance, direct
investment in the company or by the contribution of network
assets
- The Government will make an initial investment in the network
of $4.7 billion, this being the amount previously intended for
the earlier FTTN proposal and will come ‘primarily from the
Building Australia Fund’
- In addition to its initial $4.7 billion investment in the
network, the government will probably issue bonds (‘Aussie infrastructure
bonds’) to pay for at least part of its 51% interest in
the company.[6] The
mix of debt and equity in the Government’s investment in the
company will be worked out over time
- It is expected that the company itself will be able to borrow
in its own right.
On 7 April 2009, the Government also released a discussion paper
entitled
National Broadband Network: Regulatory Reform for 21st Century
Broadband.[7] This raises the possibility of
changes to the structure of Telstra and wide ranging reforms to the
regulation of telecommunications in Australia.
The NBN company (ACN 136533741) was established under the
Corporations Act on 9 April 2009.
Also on 9 April 2009, the Government released a
Request for Expression of Interest number DCON/09/23 for
Provision of Lead Advisory Services relating to the Implementation
Study for the National Broadband Network.[8]
On the 23 April 2009 the Government released the
Regional Backbone Blackspots Program Stakeholder Consultation
Paper with submissions due by 12 May 2009.[9]
NBN related matters in the Budget
Where is the money going?
The Government says it will make an initial investment of
$4.7 billion towards an enhanced NBN. In addition to this, the
Budget makes provision for new funding of $54 million to
develop an implementation plan for the NBN.[10]
Of the $4.7 billion, $250 million is new funding for the
previously announced regional backbone blackspots program.[11] The other
$4.45 billion will be divided in an unspecified manner between
the contribution of equity in the NBN company and direct investment
in the upgrade of the network in Tasmania.[12] The Budget papers indicate that the
expenditures for these two purposes are expected to be
$30 million in 2008–09, $750 million in
2009–10 and $3670 million in 2010–2011.[13] The Budget Papers do
not state how much represents initial equity in the company and how
much represents direct investments in the Tasmanian network
(although it is likely that the assets that result from those
direct investments will be acquired by the company at a later
stage).
Where is the money coming from?
The 4.7 billion initially pledged by the Government to this new
proposal is the same as the maximum amount that it committed to its
first broadband network proposal in 2007. Those funds were to come
from the Building Australia Fund (BAF) which was set up by the
Nation Building Funds Act 2008.[14] The
Explanatory Memorandum to the National Building Funds Bill
2008, at page 60, says:[15]
The Government has committed an amount of up to $4.7 billion for
proposals relating to the NBN. Such proposals will be disbursed
solely through the appropriation made by the BAF Special
Account.
Although the amounts of the old and the new NBN proposals are
the same, the source of funding is not. First, the
$4.7 billion includes new funding of $250 million as
mentioned. Second, only about $3.1 billion is coming from the
BAF: at 30 March 2009, the BAF had $2.49 billion.[16] Before 30 June 2009, the BAF
will receive $1.5 billion from the Telstra Sale Special Account and
$7.5 billion from the 2007–08 Budget surplus giving a total
of about $11.5 billion.[17] A total of $10.7 billion will be drawn from
the BAF for ‘nation-building investments’.[18] Of this,
$7.6 billion will fund the roads, rail and ports
infrastructure projects listed on page 1-20 of Budget Paper No.
1 (excluding the Bruce Highway, O–Bahn track extension,
the Brisbane inner city rail feasibility study and Northbridge rail
link).[19] About
$3.1 billion will fund the Commonwealth’s initial
investment in the NBN.[20] This figure is not expressly mentioned in the
Budget papers.
The Budget papers also do not expressly state where the balance
of the committed funds—$1.35 billion—will come
from (that is, the difference between $4.45 billion and the
$3.1 billion from the BAF). However, the Budget papers do
raise the possibility that the difference will be funded
by a bond issue or from the contingency reserve:
The Contingency Reserve also includes provisions for future
equity investments in the National Broadband Network. This is
subject to the outcome of the implementation plan and subsequent
commercial negotiations and, accordingly, is not disclosed.[21]
The Government's investment in the National Broadband Network
company will, in part, be funded through the issuance of Aussie
Infrastructure Bonds (AIBs). AIBs will provide an opportunity for
households and institutions to invest in the National Broadband
Network.[22]
Australian Broadband Guarantee
Funding for the
Australian Broadband Guarantee (ABG) will be reduced over the
next three financial years.[23] The ABG is a program which provides subsidies to
enable the provision of broadband services to those who do not
otherwise have access to broadband of an equivalent standard to
metropolitan areas.
Funding over the next three years will be reduced by about
$11 million in 2009–10, $9 million in 2010–11
and $3 million in 2012–13.[24] However, funding over the next four
years, including 2008–09, still amounts to
$250.8 million.[25] The funding reductions are due to the expansion of
metropolitan–equivalent services and the resultant decline in
eligibility and demand.
ABC, SBS, Digital television and broadcasting generally
These are dealt with in the
Public broadcasting section of this Budget Review. [26]
[1].
J.Chowns, ‘Budget 2008–09: economic issues’,
Budget review 2008–09, Parliamentary Library,
Canberra, 2008, viewed 21 May 2009,
http://www.aph.gov.au/library/pubs/rp/BudgetReview/Economic_Issues.htm
[2]. F Layden, ‘Conroy cuts
Trujillo out of broadband tender; Telstra dives’, Herald
sun, 16 December 2008, p. 49,
http://parlinfo.aph.gov.au/parlInfo/search/display/
display.w3p;query=Id%3A%22media%2Fpressclp%2FNXDS6%22
[3]. M Bingemann, ‘ACCC
lodges broadband report’, Australian, 14 January
2009, p. 19.
[4].
S Conroy, (Minister for Broadband, Communications and the Digital
Economy), Expert panel submits report on National Broadband
Network submissions, media release, 22 January 2009, viewed 21
May 2009, http://www.minister.dbcde.gov.au/media/media_releases/2009/001
[5].
K Rudd, (Prime Minister), W Swan (Treasurer), L Tanner (Minister
for Finance and Deregulation), S Conroy (Minister for Broadband,
Communications and the Digital Economy), New National Broadband
Network, media release, 7 April 2009, viewed 21 May 2009,
http://www.minister.dbcde.gov.au/media/media_releases/2009/022;
and, K Rudd (Prime Minister), W Swan (Treasurer), L Tanner
(Minister for Finance and Deregulation), S Conroy (Minister for
Broadband, Communications and the Digital Economy), Prime
Minister press conference about the National Broadband
Network, transcript of press conference, 7 April 2009, viewed
21 May 2009,
http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22emms%2Femms%2F133523%22
[6].
‘Aussie bonds commercial [1980s]’, YouTube website,
viewed 21 May 2009,
http://www.youtube.com/watch?v=93q5_8olpPs
[7].
Department of Broadband, Communications and the Digital Economy,
National Broadband Network: Regulatory reform for 21st Century
broadband - discussion paper, Commonwealth of Australia,
Canberra, April 2009, viewed 21 May 2009,
http://www.dbcde.gov.au/__data/assets/pdf_file/0006/
110013/NBN_Regulatory_Reform_for_the_21st_Century_Broadband_low_res_web.pdf
[8]. Department of Broadband,
Communication and the Digital Economy, Request for expression
of interest number DCON/09/23 for provision of lead advisory
services relating to the implementation study for the National
Broadband Network, Canberra, April 2009, viewed 21 May
2009,
http://parlinfo.aph.gov.au/parlInfo/search/display/
display.w3p;query=Id%3A%22library%2Fjrnart%2F2LMT6%22
[9].
Department of Broadband, Communication and the Digital Economy,
Backhaul blackspots initiative: stakeholder consultation
paper, Canberra, April 2009, viewed 21 May 2009
http://parlinfo.aph.gov.au/parlInfo/search/display/
display.w3p;query=Id%3A%22library%2Fjrnart%2F6KMT6%22
[10]. Australian
Government, ‘Part 2: expense measures’, Budget
measures: budget paper no. 2: 2009–10, Commonwealth of
Australia, Canberra, 2009, p. 118, viewed 21 May 2009,
http://www.budget.gov.au/2009-10/content/bp2/html/bp2_expense-07.htm
[11]. Australian
Government, ‘Part 3: capital measures’, Budget
measures: budget paper no. 2: 2009–10, Commonwealth of
Australia, Canberra, 2009, p. 410, viewed 21 May 2009,
http://www.budget.gov.au/2009-10/content/bp2/html/bp2_capital-04.htm
[12].
‘Part 3: capital measures’, Budget measures: budget
paper no. 2: 2009–10, p. 409.
[13].
‘Part 3: capital measures’, Budget measures: budget
paper no. 2: 2009–10, p. 409.
[14]. Nation
Building Funds Act 2008 (Cth), viewed 21 May 2009,
http://www.comlaw.gov.au/ComLaw/Legislation/Act1.nsf/0/
BDB9356B2BB3A6C6CA2575260076DEB9/$file/1542008.pdf
[15].
Explanatory Memorandum, Nation-Building Funds Bill 2008, viewed 21
May 2009,
http://parlinfo.aph.gov.au/parlInfo/download/legislation/ems/r3099_ems_10c2d65d-497d-40a3-aea6-8bd2540b0b72/upload_pdf/321025.pdf;fileType=application/pdf
[16]. Australian
Government, ‘futurefund’, viewed 21 May 2009, www.futurefund.gov.au
[17]. Australian
Government, Budget measures: budget paper no. 1:
2009–10, Commonwealth of Australia, Canberra, 2009, p.
7-5, viewed 21 May 2009,
http://www.budget.gov.au/2009-10/content/bp1/html/bp1_bst7-01.htm
[18]. Budget
measures: budget paper no. 1: 2009–10, p. 7-5.
[19]. Personal
communications with officer from Department of Finance, 21 May
2009.
[20]. Personal
communications with officer from Department of Finance, 21 May
2009.
[21]. Budget
measures: budget paper no. 1: 2009–10, Appendix B, p.
6-53,
[22]. Budget
measures: budget paper no. 1: 2009–10, p. 7-8.
[23]. Australian
Government, ‘Australian Broadband Guarantee’,
Department of Broadband, Communications, and the Digital Economy
website, viewed 21 May 2009,
http://www.dbcde.gov.au/communications_for_business/
news_and_events/australian_broadband_guarantee
[24]. Australian
Government, Portfolio budget statements 2009–10: budget
related paper no. 1.3: Broadband, Communications and Digital
Economy portfolio, Commonwealth of Australia, Canberra, 2009,
p. 26,
http://www.dbcde.gov.au/__data/assets/pdf_file/0019/112258/2009-2010_DBCDE_PBS_02_The_Department_of_Broadband_Communications_
and_the_Digital_Economy_Section_1.pdf
[25].
Portfolio budget statements 2009–10: budget related paper
no. 1.3, p. 22.
[26]. R Jolly,
‘Budget 2009–10: broadcasting and the arts’,
Budget review 2009–10, Parliamentary Library,
Canberra, 2009, viewed 21 May 2009,
http://www.aph.gov.au/library/pubs/RP/BudgetReview2009-10/Broadcasting.htm
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