Any country wanting to embark on a National Broadband Network (NBN) project would be well advised to take a close look at the Australian experience – and learn from it. Even though the story is not complete the book should be a best-seller.
Governments have traditionally had to front the large capital projects to build roads, railways, dams, power stations, pipelines and power grids and in the past they did the same for telecommunications networks. It has become quite a trend over the last forty years or so to ‘privatize’ these national resources.
It would be fair to say that deregulation of the communications sector and the subsequent explosion of mobile networks, even in places where nothing existed before has been a success story. However, when it comes to rolling out NBNs it seems that governments have gone ‘back to the future’ and they want to do it themselves.
Rolling out an NBN is not just about providing citizens with access to Internet, even though this is now a prerequisite for any country wishing to advance technologically, culturally and knowledgeably, it’s also becoming a prestige thing, sometimes disguised as a matter of national security.
But what happens when it becomes a political tool as well? There is no doubt the current Labor government in power in Australia boosted its chance of electoral victory by promising an NBN to voters. The previous government had poorly handled the partial privatization of the national PTT, Telstra and appeared to be favoring it against some pretty serious competitors. Telstra did rollout a world leading 3G mobile networks as did SingTel Optus, Vodafone and 3, but shareholders did not appear to have an appetite for rolling out a national FTTH network when it already had an ageing copper network pushing ADSL to the home.
Upon winning the election, new Communications Minister, Michael Conroy started the ball rolling by announcing that the government itself would ‘invest’ in its own NBN, estimated to cost A$43 billion (US$39 billion). The objective being to rollout fibre to 90% of Australian premises, no mean feat in a country a massive country with a relatively small and disparate population.
The announcement was received withs howls of derision by the opposition and Telstra, which had the most to lose by such a project. The government, keen to reduce the hefty investment bill suggested that it may be best for Telstra to agree, voluntarily, to some form of structural separation and opened a dialogue whilst wielding the axe of potential legislation forcing Telstra to agree. Those negotiations are still ongoing.
Today was a milestone in the whole project and a turning point for the government’s plans. Eager to placate criticism of its plans it commissioned McKinsey and KPMG to complete a A$25 million implementation study, primarily to answer the concerns of those opposing the NBN plans.
The McKinsey and KPMG report recommended the fibre network and its parent company, the NBN Co, be implemented as a public utility instead of a commercial concern. This would see it stay in public hands for eight years after its completion, which is expected to take seven years. It also reduced the estimated cost of the network from A$43 billion to A$26 billion. Better still, it showed that over fifteen years the NBN could return 6 to 7 per cent on the investment, well in line with other utilities.
The best news of all was for consumers who could expect to pay A$50 to A$60 per month for a 100 megabits per second link, dramatically lower in price than current capped plans. and the reach would extend to 93 per cent of the population.
The news could not be more timely for the government. With an election looming, the opposition sensing elector reticence to the previous NBN cost and threatened breakup of Telstra, promised to scrap the NBN plans. Today the opposition leader may ruing that rash promise. Now Australians will have the NBN of their dreams, it will cost 40 pre cent less than they thought and will deliver them ‘state of the art’ internet access at a fraction of what they are paying now.
Future governments determining NBN feasibility may well find the success of their NBN policy determining whether they stay in power, or not.