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Australia's NBN Fibre network facing uncertain future

06 Mar 2013

The future of Australia's nationwide fibre to the home network is looking increasingly uncertain with the Labor Government that initiated it expected to lose the upcoming Federal Election to be held on September 14 - and the main Opposition party vowing to do its best to scrap the project if elected.

According to Shadow Communications Minister, Malcolm Turnbull "A key element in our approach is that areas with poor broadband services should be prioritised. Targeting these places is faster and easier with our mixed-technology National Broadband Network (NBN) than Labor's religious determination that only fibre to the premises will be used.

"Our alternative is to complete the NBN in less time, for less money and as a consequence more affordably for taxpayers and consumers."

However it is far from clear just how much scope a new Government would have to change plans for the network. Details of key contracts for the project have not been made public but there is widespread belief that NBN Co, the Government owned company set up to build and operate the network, will have done its best to lock down those contracts.

The Labor Government announced in April 2009 plans to run fibre to 93 percent of homes and to serve the remaining seven percent in rural and remote areas with either fixed broadband wireless or satellite.

The Federal Opposition, a coalition of the Liberal and National Parties, has been critical of the FTTH component of the project from the outset, claiming it is far too costly, will take too long to build and that the bandwidth it will offer, 100Mbps downstream, is not needed.

Instead it proposes that existing hybrid fibre coax networks used by the two major carriers, Telstra and Optus, to deliver pay TV and broadband services should continue to be used and fibre to the node (ie the street corner cabinet) should be rolled out instead of fibre to the home.

However NBN Co has already signed a multi-year agreement with Telstra worth an estimated $A11b to Telstra under which its copper telephone network will be shut down as the NBN FTTH network is rolled out and its HFC network will be used only to carry the pay TV service of Foxtel, 50 percent owned by Telstra. The agreement also enables NBN Co to use Telstra exchange buildings, cable ducts and other facilities to roll out the NBN fibre network.

NBN Co also has an agreement with Optus, worth $A800m to Optus, under which its HFC network will be progressively shut down as the NBN fibre is rolled out. Contracts potentially worth many million dollars have also been let to several companies for the rollout of the FTTH network.

The Coalition has called on NBN Co to be clearly articulate the benefits of changing contract terms in the lead up to the September 14 election and to be mindful of the possibility of a change of Government and the need to alter contracts down the track.

Telstra CEO David Thodey told the Australian newspaper last week that the value of its contract was not negotiable, but that the technology of choice for the NBN was. "In terms of the value of our shareholders agreed to receive from the government and NBN Co, the deal has not changed," he was quoted as saying.

However if a fibre to the node network were to be rolled out, Telstra copper that is to be decommissioned under the current contract and replaced with fibre would still be needed to connect customers to the nodes. So it is possible that Telstra could try and squeeze more money out of the Government.

There is broad support for the NBN from the telecommunications industry, but Turnbull claims that they want to see Telstra's HFC network shut down so they can compete on a more level playing field via the NBN fibre, which will provide standardised access to customers for all service providers.

He points out that although in an NBN world Telstra will have to compete on a "level playing field" it will do so "fortified by the many billions of taxpayers' dollars it has received as the price for it agreeing to Labor's NBN."