Infrastructure Broadband and telecommunications


Budget Review 2009-10 Index

Budget 2009 10: Infrastructure

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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