BREAKING NEWS: govt to build $43bn fibre-to-the-home network

Kevin Rudd and Senator Conroy said they had scrapped the request for proposals network for a national fibre-to-the-node network because none of the proposals represented good value for money.

Instead the government is forming its own company and will pump $43 billion into building what may well be the largest fibre-to-the-home network in the world in geographic terms.

The network will provide speeds of up to 100Mbit/s to 90% of premises in Australia and will be sold on a wholesale basis only allowing all ISPs (including Telstra) to compete on an even footing at retail.

Despite having axed the Howard government’s OPEL WiMax network the Government says it will roll out something very similar for the 10% of premises it won’t be able to reach with fibre-to-the-home offering speeds of 12Mbit/s.

And oddly despite scrapping its RFP process it has accepted one of the bids — from the Tasmanian Government — to build a fibre-to-the-node plus wireless network in Tasmania which may result in Tasmanians getting second-class broadband.

The government says the network will be the “single largest nation building infrastructure project in Australian history” employing 25000 people for up to eight years with a peak employment of 37000 people at once.

Although the Government says it will be the majority shareholder of the new company it says it expects significant private investment in the company too — and that it will sell the company off to private interests five years after the network is fully built — expected to be no earlier than 2022.

The massive cost of the network build will be financed through the existing Building Australia Fund and the issuance of Aussie Infrastructure Bonds (AIBs) which the Government says will provide an opportunity for households and institutions to invest in the national broadband network.

Network specifications

(As provided by the Government)

The new network will:

  • connect homes schools and workplaces with optical fibre (fibre to the premise or ‘FTTP’) providing broadband services to Australians in urban and regional towns with speeds of 100 megabits per second – 100 times faster than those currently used by most people – extending to towns with a population of around 1000 or more
  • use wireless and satellite technologies that will be able to deliver 12 megabits per second or more to people living in more remote parts of rural Australia
  • provide fibre optic transmission links connecting cities major regional centres and rural towns
  • be Australia’s first national wholesale-only open access broadband network
  • be built and operated on a commercial basis by a company established at arm’s length from Government and involve private sector investment
  • be expected to be rolled-out simultaneously in metropolitan regional and rural areas.
  • Every person and business in Australia no-matter where they are located will have access to affordable fast broadband at their fingertips.

Non-core promises

The Government’s press release includes a few “outs” to give it wriggle-room down the track:

“The preliminary estimate is that the enhanced NBN network will cost up to $43 billion which has been developed taking into account advice from specialist technical advisers.

“The Government’s objective is to achieve 90 per cent coverage of the FTTP network and remaining coverage to be delivered through wireless and satellite technologies within this funding envelope. Initial advice to the Government is that this objective is achievable but this estimate will be subject to an implementation study.

The Government’s to-do list

This is what the Government says it will do now to get the rollout rolling:

  • Commence an implementation study to determine the operating arrangements detailed network design ways to attract private sector investment – for roll-out early 2010 and ways to provide procurement opportunities for local businesses
  • Fast-track negotiations with the Tasmanian Government as recommended by the Panel of Experts to build upon its NBN proposal to begin the rollout a FTTP network and next generation wireless services in Tasmania as early as July – an immediate start on a nation-wide investment.
  • Implement measures to address ‘black spots’ through the timely rollout of fibre optic transmission links connecting cities major regional centres and rural towns – delivering improvements to telecommunication services in the short term.
  • Progress legislative changes that will govern the national broadband network company and facilitate the rollout of fibre networks including requiring greenfields developments to use FTTP technology from 1 July 2010.
  • Make an initial investment in the network of $4.7 billion.
  • Commence a consultative process on necessary changes to the existing telecommunications regulatory regime.

Impacts to consider

Although the announcement of a national fibre-to-the-home network with speeds of 100Mbit/s is undoubtedly very good news there are some negative impacts to consider:

  • Today is the day companies like Internode and iiNet learn that their investments in rolling out ADSL2+ networks will become worthless within five years (though the Government hasn’t said that the FTTH network will prevent copper from continuing to operate — and ADSL2+ ISPs may therefore be able to continue offering ADSL2+ at cheap prices to people who don’t see the need to upgrade to FTTH)
  • If you’re an investor in Telstra shares they may never recover from where they are now — Telstra’s primary power in the market its vice-like control of the copper phone line network will become completely irrelevant once the FTTH network is rolled out.
  • Modem/routers will become just routers in Australia as the Government will undoubtedly be using its own standardised fibre termination equipment in homes providing an Ethernet feed to the house.
  • Given the government will control the central network that everyone will be reselling from it will be much easier for them to implement a centralised internet filtering/censorship system.

You can read more about the network at the Government’s FTTH information website.