Australian Budget 2019: NBN regional subsidy charge reduced

The subsidy charge to help fund the NBN’s loss-making satellite and fixed-wireless regional networks has been reduced from AU$10 to AU$7.10 a month.
Written by Corinne Reichert, Contributor

The cap on Australia's Regional Broadband Scheme (RBS) charge has been reduced from AU$10 down to AU$7.10 per month under the 2019-20 Federal Budget.

The RBS, which provides funding for the National Broadband Network (NBN)'s loss-making satellite and fixed-wireless services, will be indexed yearly to the CPI.

It will also have a new five-year exemption for the first 55,000 greenfield premises activated on "certain carriers' networks".

"Under this measure, the government will also place an obligation on NBN Co to provide public mapping data to be made available on the Government's NationalMap," the Budget documents added.

Across telecommunications initiatives under the Budget, AU$7.2 million has also been invested to improve complaints handling, with the Australian Communications and Media Authority (ACMA) to take oversight of the Telecommunications Industry Ombudsman (TIO) scheme -- including benchmarking and monitoring the scheme's performance -- and to introduce "enhanced public reporting" on telco complaints.

"The changes will increase transparency about complaint handling and help to ensure consumers get the level of service they expect from their provider," a release from Communications Minister Mitch Fifield said on Tuesday night.

The government also used the Budget to provide more details on the expansion of its AU$20 billion loan to the NBN by another three years, out to June 30, 2024, as well as allowing NBN to procure up to AU$2 billion in private sector debt.

The expected drawdown by the NBN on the government loan is AU$5.7 billion for 2019-20.

"In December 2016, the Australian government provided a loan to NBN Co on commercial terms of up to AU$19.5 billion for the period from 1 July 2017 to 30 June 2021, with drawings available on a monthly basis. The loan has a fixed interest rate of 3.96 percent per annum, with interest calculated daily and payable monthly over the life of the facility," the government explained in the Budget.

"In August 2018, the Australian government agreed to extend the term of this loan by three years (to 30 June 2024). The decision will be implemented by agreement, which will be subject to the approval of the Government.

"A government loan on commercial terms continues to represent the most cost-effective way to raise necessary debt and secure funding to complete the rollout of this important national infrastructure project. A Government loan assists in ensuring NBN Co can focus on the remaining rollout as it significantly scales up toward completion in 2020."

The NBN had in February reported a year-on-year 46 percent rise in revenue to AU$1.3 billion for the first half of FY19, also announcing a 65 percent improvement in earnings before interest, tax, depreciation, and amortisation (EBITDA), up from the negative AU$1.4 billion reported this time last year to negative AU$477 million.

Speaking to ZDNet during the financial results call, CEO Stephen Rue said the calls for a write down of the NBN were really just calls for lower pricing, arguing that the NBN needs to be cash-flow positive in order to continue making technological improvements to its network and ensure it continues providing social benefits.

"I'm satisfied that both the replacement costs of our assets and the future economic value of the company is such that we are satisfied with the accounting ... it is really important that NBN has a very strong business model; it's important that NBN has cash flows to enable us to continue to invest in the network, to continue to meet consumer demands, to continue to adjust as technology requirements adjust," Rue said.

"There's no doubt that the primary purpose of NBN was to create economic and social benefits to all Australians, and that's what the conversation needs to move to.

"How can NBN as an organisation contribute enormously to people's lives? Contribute to the economy? Contribute to regional Australia? Contribute to the way that kids can get educated? To improvements in our healthcare services? To ensure that entrepreneurs can stay in Australia, that people can build their small businesses? To ensure that women are able to become more involved in the economy, that women are able to set up businesses and be successful? That's what NBN is about, and for that we need strong cash flows."

Providing assurances that the NBN remains on track to become cash-flow positive in FY22, Rue added that one way in which the NBN is looking to improve speeds and capacity is via 5G on its fixed-wireless network.

Regional Wi-Fi and mobile connectivity

Also under the 2019-20 Budget, the Australian government announced that it would provide AU$51.2 million to help grow tourism across Kakadu, part of which will improve mobile and Wi-Fi networks in the area.

A National Partnership Payment has also been continued with the New South Wales government to provide a program for Wi-Fi and mobile coverage on the rail corridor between Sydney and the Central Coast, with another AU$8 million in 2018-19 and AU$2 million in 2019-20 being provided to improve mobile and internet connectivity along the train line between Wyong and Hornsby.

Ahead of the Budget, the government last month announced that it would invest an additional AU$220 million to improve regional telecommunications.

Of this package, AU$160 million will go towards funding two more rounds of the mobile blackspots program; and AU$60 million to develop a Regional Connectivity Program. The government will also found a "digital tech hub to improve digital literacy".

The announcement came in response to the Regional Telecommunications Review published in December.

The government added that it is working with the NBN on the review's NBN-specific recommendations, including working together on developing criteria for how and where future upgrades could be implemented once the rollout is complete.

The government also acknowledged the recommendation that there be greater focus on landline phone reliability in regional areas, pointing to Telstra's own regional upgrade announced last week, as well as the government's audit into Telstra's Copper Continuity Obligation compliance and Customer Service Guarantee performance under the Universal Service Obligation (USO).

Telstra's program of work to upgrade and maintain its services in regional Australia will see it repair or replace 1,000 cable joints and some cabling on the worst-performing cables; migrate 350 customers off its old high-capacity radio concentrator (HCRC) network onto NextG Wireless Local Loop (NGWL) telephone services; and replace around 200 batteries in exchanges and roadside cabinets where mains power failures occur frequently.

"We are also improving stock levels of equipment so our field teams can respond faster when something goes wrong," Telstra CEO Andy Penn added last month.

The government added that it is already working with agricultural sectors on Internet of Things (IoT) education, and will develop an Indigenous Digital Inclusion Plan.

How much of the Budget becomes enacted remains to be seen, as the government is expected to call a May election this weekend.

Australian Budget 2019 Coverage

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