NewSat offers to buy NBN Co satellites

Satellite company NewSat has offered to buy NBN Co's two satellites, currently in construction, and lease capacity back to NBN Co for regional services.
Written by Josh Taylor, Contributor

As the Australian government remains focused on addressing capacity issues on its existing Interim Satellite Service, satellite company NewSat has offered to take NBN Co's own Ka-band satellites off the government-owned company's hands to operate the wholesale service.

The two NBN Co Ka-band satellites are currently under construction in the United States with Loral, and are due to be launched in 2015 to service 3 percent of premises in Australia that sit outside the fibre and fixed-wireless footprint. Under the Coalition's proposed alternative model detailed in the NBN Co strategic review, that 3 percent of premises will continue to receive broadband services via the satellites.

The offer to buy the two satellites before they are even launched was made by NewSat to the government in December, according to a submission (PDF) from NewSat to the government's broadband cost-benefit analysis panel.

"The NewSat proposal envisages the NBN Co paying a fee for the wholesale service for the life of the satellites, plus one renewal. The fee must be guaranteed and must enable the purchaser to service debt and return a profit on the service in order for the business case to be sustainable," NewSat founder Adrian Ballintine said in the company's submission.

NewSat, which missed out on the AU$620 million satellite construction contract in 2012, is preparing to launch its own Jabiru-1 satellite in 2015. NewSat has said that it would take on the risk by buying out NBN Co's satellites, and would allow NBN Co to reduce its subsidisation of the satellite service in the rest of its products on fibre and fixed wireless.

"Because the NBN Co is constrained to offer remotely disadvantaged NBN users a service at a comparable price to urban fibre users, the business case for providing the service is not sustainable based on the expectation of 3 percent of the user population. Therefore, with or without privatisation, the satellite service will have to be subsidised by NBN Co," Ballintine said.

"NewSat contends that privatisation will benefit the NBN Co by dramatically reducing debt and de-risking the provision of the service by introducing an experienced, efficient, quality service provider. It is anticipated that this would also result in a significant reduction in staffing required by NBN Co."

Ballintine said that if a company was allowed to purchase NBN Co's satellites, then that company should be able to use the capacity on the satellite for commercial enterprise services that NBN Co should be excluded from offering, but he said that NBN Co could take a percentage of the profit from those services.

The Communications Alliance made a similar point in a submission to the panel from its Satellite Services Working Group, which said that using an existing operator would allow a quick and smooth transition to the long-term satellite service.

"An existing fleet operator would also have the capability to service the Australian market more rapidly, through the use of a combination of the on-order satellites and the operator's existing satellite assets and orbital locations, thus providing a smoother and fully provisioned flow from the Interim Satellite Service to the anticipated full NBN satellite service. This would reduce the impact of any construction and/or launch delays, which are not uncommon," the alliance said.

The submissions come as NBN Co and Optus are believed to be close to a deal to improve the services for the 44,000 customers on NBN Co's interim satellite service, as NBN Co also looks to potentially add more users to the interim service before the launch of the satellites next year.

"We have now developed a set of options in consultation with satellite providers and [retail service providers] to see if we can increase the number of subscribers — although that is proving to be very difficult — improve the experience of existing subscribers and bridge the period between now and when new satellites are not only launched but usable," NBN Co executive chairman Dr Ziggy Switkowski told the Senate Select Committee for the NBN last week.

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