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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