National Broadband Network

Emma Knezevic, Science, Technology, Environment and Resources

Key Issue
The rollout of the National Broadband Network (NBN) will continue using a mix of technologies. While technology choices, cost and pace of the rollout attract the most attention, decisions about an important NBN policy setting are still to be made.
The policy of uniform wholesale prices is under review by the Government. The outcome of these considerations could lead to differences in retail prices between metropolitan, regional and remote locations.

Australia’s National Broadband Network (NBN) was announced in 2009 by the Labor Government. The policy aimed to address Australia’s broadband availability and performance and to facilitate the structural separation of Telstra by providing an optic fibre alternative to its copper access network.

The original NBN plan was to reach 93 per cent of premises with an optic fibre connection. The remaining 7 per cent of premises would be served by either a new satellite service or terrestrial fixed wireless service (that is, a service to a fixed location, like a home, rather than a mobile service).

The Coalition won Government in 2013 with a policy it said would provide sufficient speeds for most users, be less costly and faster to build, and have lower prices for customers.

The Coalition’s plan retains the same solution for the 7 per cent but uses a mix of technologies for the other 93 per cent of premises.

Important policy settings

Structural separation of Telstra

Before the NBN (and in areas where the fixed line NBN has not yet reached) internet access was provided mainly over Telstra’s copper lines. Telstra’s competitors provide retail services by gaining access to services provided by Telstra over those lines. Telstra provides retail services in competition with those other providers and so has the incentive and ability to favour its own retail arm over its competitors.

Structural separation is considered the best solution to this policy problem and is the policy of all major parties.

The original plan was that, as the fibre network was rolled out, customers would be migrated onto the fibre connection and Telstra would cease to provide services over the copper access network, consistent with the statutory formulation of structural separation—that Telstra not provide retail services over an access network that it controls. Telstra would then stand on the same footing as other retail providers. Under the new NBN model, the process is similar.

NBN is wholesale only

The NBN is being built and run by a government-owned enterprise, NBN Co (now known as nbn^TM). A fundamental policy setting is that nbn^TM provides only wholesale services to retail service providers (RSPs), and does not serve end-users. This policy is set out in legislation so any proposed change would need to be brought before parliament.

Uniform wholesale prices

A cornerstone of the original NBN policy was that nbn^TM would charge uniform wholesale prices to RSPs. That meant wholesale prices would be uniform for a given service within a technology footprint (for example, all 25 megabit per second services within a fixed wireless area would have the same wholesale price). Further, for at least the basic service, the wholesale price would be identical across all technology footprints.

The policy recognised the historical disparities in broadband availability and price between commercially attractive metropolitan areas and often commercially unviable regional and remote areas. Uniform wholesale prices were intended to promote uniform retail prices across the country.

In 2013, the Abbott Government initiated several reviews of the NBN, including three by Dr Michael Vertigan. The Market and Regulation Report recommended that the system of uniform wholesale pricing be replaced with a pricing structure involving price caps on all NBN-type services. It stated that the caps need not necessarily be uniform across the country and that an industry levy could be used to subsidise the cost of the provision of services to less profitable areas.

The Government’s response in December 2014 stated:

The Bureau of Communications Research will undertake an assessment of the costs of NBN Co’s fixed wireless and satellite services, which serve many non‐commercial parts of Australia, and provide options to Government for replacing the current opaque NBN Co cross‐subsidy embedded in its wholesale access prices with more transparent funding arrangements.

This assessment is ongoing. During the course of the new Parliament, the Government will decide how to implement the Vertigan recommendation about uniform wholesale prices.

The original uniform wholesale price policy was not established in legislation, but in a Statement of Expectations, a non-legislative direction given by shareholder Ministers to NBN Coin 2010. It is likely that the government would give effect to any changes in this policy area in the same manner.

Australia’s broadband performance

The Australian Bureau of Statistics’ (ABS) website states that the number of households with access to the internet at home increased to 7.7 million in 2014–15, representing 86 per cent of all households (up from 83 per cent in 2012–13).

According to the authoritative Akamai report State of the Internet: 1^st Quarter 2016, Australia’s average peak connection speed is 43.8 Mbps, with a global ranking of 56^th (down from a global ranking of 30^th in the 3^rd quarter of 2013).