Publication Overview
This annual report provides the very latest update on all the developments surrounding the NBN.
It offers a wealth of information on infrastructure rollouts; contracts; wholesale and retail arrangements; legislative and regulatory issues; an overview of key players and stakeholders; the e-government, e-health and e-education sectors.
The report analyses the issues surrounding the growth of such services and includes global and regional information. Comprehensive information is provided on the exciting developments taking place at a regional level.
Subjects covered include:
- Key developments for 2012
- Government and opposition policies and regulations
- Wholesale, competition, pricing and products
- NBN Co, infrastructure rollouts and contracts
- Fixed wireless and satellite and FttH Greenfield networks
- Industry in transition – Telstra, Optus, RSPs
- Municipal and community networks
- Market forecasts 2015, 2020
- Digital economy and the trans-sector concept
- Cost benefit issues
- Investment opportunities
Researcher:- Paul Budde
Current publication date:- February 2012 (5th Edition)
Executive Summary
2012 – make-or-break time for the NBN
It is important to revisit the reasons for Australia building its national broadband network (NBN).
Several things became clear during the privatisation process of Telstra in the 00s – broadband quality was below the international benchmark, end-user and wholesale prices were above that mark, and there was no economically viable business case for high-speed broadband infrastructure for regional and rural Australia.
Coinciding with the debate around these issues was the arrival of the GFC and the government’s decision to change its broadband infrastructure plan from a regional to a national one. It also linked that to the development of the digital economy and launched supporting policies in e-commerce, e-health, e-education and smart grid, all aimed at utilising the NBN for those purposes.
Under the national plan NBN Co will connect 93% of homes, schools and workplaces to an optical fibre network (fibre-to-the-premises – FttP), providing high-speed broadband services to Australians in urban and regional towns. The remaining 7% of premises will be connected to an LTE-based fixed wireless network, and those in extremely remote areas will be linked to a satellite network.
The $36 billion plan includes a government investment of $27 billion, this investment also needs to be viewed in the context of the $60 billion raised by the privatisation of Telstra.
Enormous progress has taken place during 2011 and all the major elements are now in place – the NBN legislation; the regulatory framework; the agreements with Telstra and Optus; and the business plan of NBN Co. There are a few outstanding issues but these are minor in comparison with the achievements to date, and all signs indicate that the issues in relation to the structural separation undertakings of Telstra, plus the transitional regulations for ADSL wholesale, will be resolved in early 2012.
Obviously new issues will arise and solutions to existing problems will need to be finetuned, but there is consensus that, with the assistance of the ACCC, this will be possible within the current framework.
The effects of the structural separation of Telstra
The structural separation between infrastructure and services is going to change the telecoms industry beyond recognition. The days of gaming the regulatory system will be over. A completely new industry structure will require collaboration and cooperation, rather than the destructive adversarial environment of the past.
Nevertheless there are still some serious issues that need to be resolved. Are the current government policies conducive to achieving the affordable outcome that is necessary? The first signs are promising. The other question is whether the design of the NBN will lead to true wholesale competition – or whether it will restrict competition to a handful of players who can afford to build their presence in the 121 points of interconnect.
During 2011 an increasing number of retail service providers (RSPs) were accredited by NBN Co to take part in the various pilots, as well as in the official rollout program. As NBN Co is a pure wholesale operator the end-users will depend upon the RSPs for innovative products and affordable pricing.
Market forecasts
Affordable price is the key to a successful uptake of NBN services. Early indications are that a 12Mb/s entry level service will be priced at around $39 and for an extra $10 a telephone service will be added. IPTV add-ons are also priced at $10. Compared with similar services available over the current telecoms networks these offerings are most competitive. According to BuddeComm, over the longer term this should easily lead to a 70%+ commercial uptake.
The Australian telecommunications market will change dramatically over the next ten years. Accelerated by government policies these changes will be driven by a total overhaul of the industry.
Telcos will have to decide where they want to play. Infrastructure will largely move to NBN Co, its contractors (eg, Telstra) and a few backhaul providers. Companies also have the opportunity to become the ICT providers to healthcare, education, energy utilities, etc. The larger sectors in particular will create a sizeable demand for value-added infrastructure services. The first of such contracts signed in the healthcare industry offers glimpses of such a future.
All of this will help the industry double its size to around $80 billion by 2020.
The digital economy
Parallel to its plans to build the NBN the government also launched its National Digital Economy Strategy.
Based on the trans-sector model, the NBN will become the shared infrastructure for a range of sectors such as e-health, e-education, smart grids, e-government, digital economy, digital media, etc. The first release sites are playing a key role in testing this concept, while at the same time allowing organisations to obtain first-hand experience in building the digital economy.
Such an approach will most likely result in economic and social benefits worth many billions of dollars and, as is already becoming evident, it will create significant new business opportunities for Australian companies. In healthcare alone there is talk of savings worth more than $10 billion, and $2 billion in smart grid.
However at present the funding arrangements for these sectors are silo-based, and trans-sector policies need to be developed to maximise the transformational opportunities of the NBN.
To build a sound business model for the NBN the abovementioned sectors need to be taken into account as key areas in the delivery of social and economic benefits to the country. The government designates the NBN as a nation-building project, with a clear national purpose – it will become a social highway.
But in the legislation, and in the NBN Co business plan, the NBN is largely positioned as a telecoms network, with no clear reference being made to those social and economic benefits. Its revenue structure is based purely on telecoms income. This leads to ambiguity – for example, in relation to whether NBN Co should design the NBN as a telecoms network, or whether it should ensure that the specific requirements of these other sectors are taken into account in the design and construction.
These issues are not going to go away and the government should therefore address them as a matter of urgency. If this is not done, and if the next election were to result in a change of government, the NBN could encounter serious delays, since the opposition has indicated that it would first want to investigate these cost benefits before going ahead with any broadband plan it might develop.
