FEATURE: Australia's broadband plan

An expensive folly or a visionary act of infrastructure investment?

That's the big question in Australia, after the government's surprise multi-billion dollar national broadband announcement.

If it happens, the government says it'll be the largest ever infrastructure project Australia's ever seen, but critics say it's a fiasco and the costly imagining of a self-aggrandising prime minister.

The Australian Government wants to build a new broadband super highway, with fibre cables to the doorsteps of homes. [www.sxc.hu: Rodolfo Clix]
PHOTO

The Australian Government wants to build a new broadband super highway, with fibre cables to the doorsteps of homes. [www.sxc.hu: Rodolfo Clix]

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Last Updated: Wed, 8 Apr 2009 11:39:00 +1000

Australia's Prime Minister, Kevin Rudd, estimates it will cost $A43 billion ($US30 billion) to build Australia's new national broadband network, through a 51 per cent public owned company.

The aim is to reach 90 per cent of Australian households and businesses using optical fibre all the way.

It'll take eight years to build the national broadband network, the government says, and it'll improve internet speeds in Australia by up to 100 times; vital since Australia is in the bottom half of OECD countries on broadband take-up, well behind major competitors like Japan, Singapore and South Korea.

It was a surprise announcement, and one which saw Australia's Prime Minister, Kevin Rudd, in full visionary flight.

"Just as railway tracks laid out the future of the nineteenth century, and electricity grids the future of the twentieth century, so broadband represents the core infrastructure of the twenty-first century," he said.

But the plan didn't impress Mr Rudd's opponent, the Liberal leader, Malcolm Turnbull.

"I think he has become intoxicated with his own magnificence," he said.

Beyond the imagery, Mr Turnbull - a highly successful barrister and merchant banker in a previous life - has more fundamental concerns.

"What we are talking about here is $43 billion of taxpayers' money," he said.

"All of which will be borrowed, all of which will be committed to a venture where the Prime Minister has been unable to provide one skerrick of financial information to justify a $43 billion investment."

What Mr Rudd had been expected to announce was the name of the winner of a $A10 billion ($US7.1 billion) private tender to build the network more quickly and cheaply using optical fibre only to a local box called the node, then carrying the signals to homes and businesses using old-fashioned copper wire - the so-called fibre-to-the-node.

But with the impact of the global financial crisis, no bidder could do even that much, and so 20 months on, the government has abandoned the plan.

Telecommunications analyst Paul Bude says it's turned out to be a rich opportunity.

"Forget about fibre to the node which is half way house, straight go into fibre to the home then you start future proofing the future of Australia and that it makes much more sense," he said.

And fellow analyst, David Kennedy agrees.

"This network will be in place for many, many years," he said.

"It will be the backbone of Australia's information economy for decades."

Another driver in the government's decision was the role of Australia's obstructive, privatised Telco, Telstra, which refused even to put a full bid in for the broadband tender.

"Telstra obstructed the whole situation, year after year after year," Paul Bude said.

"So in the end, Telstra manoeuvred itself totally out of the plans and that actually provided the government with a unique opportunity to start with a clean plate."

There are other questions, however: the Australian Financial Review newspaper has quoted a Goldman Sachs JB Were analysis as saying the clear, sustained and accelerating shift to wireless poses significant risk to any future demand for broadband services.

The analysts say customer growth in wireless is six times faster than for fixed line services, where retail prices are crucially also falling.

Industry analyst David Kennedy agrees there are risks but also vital opportunities for Australia's economy.

"Not so much technological risks but risks about where the revenue is going to come from," he said.

"By setting a fairly long time frame the government is actually giving the market time to develop new services that will generate new revenues off this network."

And at least one major player, SingTel Optus, the major competitor to Telstra, has signalled that it's likely to want a role in the new plan, bringing in particular its existing fibre optic network.

Telstra too is likely to be a player.

But in the meantime Telstra may well be facing major change, including the likely separation of its wholesale and retail arms, while the government also sets about reforming Australia's stultifying telecommunications regulatory environment.

Key Facts for the planned broadband network:


- National broadband "fibre-to-the-home" network now to be built over eight years by a company established by the government.
- Network will give 90 per cent of homes, schools and businesses a connection of 100 megabits a second, 100 times faster than now.
- Those remaining will get a service of 12 megabits a second through wireless technologies.
- Will support 25,000 jobs a year for each year of construction, with 37,000 jobs in the peak year of construction.
- Majority share of the company will be held by the government, with private sector investment capped at 49 per cent.
- Up to $A43 billion will be invested by the company in the project, including the $A4.7 billion already allocated by the government.
- Once the project has been up and running for five years, the government will begin selling its stake in the company.

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