Turnbull turns to NZ for broadband policy

Speaking at the National Press Club today, Malcolm Turnbull has outlined details of the Coalition's broadband policy to combat Labor's National Broadband Network (NBN) policy, with a separated Telstra set to take pole position in the plan.
Written by Suzanne Tindal, Contributor on

Speaking at the National Press Club today, Malcolm Turnbull has outlined details of the Coalition's broadband policy to combat Labor's National Broadband Network (NBN) policy, with a separated Telstra set to take pole position in the plan.

Turnbull held up New Zealand's ultra-fast broadband (UFB) network as a poster child for how things should be done, saying that although we might manage to beat the country in the upcoming Rugby World Cup, we are already beat on broadband.

Australia would, at 2021, have invested $5900 for each of the households forecast to have a service on the NBN, and $3800 for those to be physically connected, Turnbull said.

He compared this to NZ$1.5 billion New Zealand network, which will see a Fibre to the Home (FttH) network rolled out to 75 per cent of the country's population, with another 18 per cent to receive Fibre to the Node (FttN) and the remaining 7 per cent to receive satellite and wireless broadband. This amounted to $500 per FTTH household, and $800 per head for the rest.

NZ's fibre would be rolled out by the private sector, consisting of electricity distribution companies and Telecom New Zealand's structurally separated network arm, Chorus. Telecom New Zealand split Chorus so that it could be eligible to receive government funding to roll out New Zealand's network.

It is this private sector-led model that Turnbull wants to follow in Australia.

Turnbull reiterated previous comments that the first step for a new Coalition government would be to seek advice from the Productivity Commission on how to achieve fast broadband quickly and in the most cost-efficient manner. He said that the details of the Coalition's plan would depend heavily on where the NBN was when the Coalition won power, as well as contractual and legal constraints that had been put in place.

However, with broad brush strokes he was able to outline the Coalition's strategic direction for broadband.

In urban areas, the Coalition would seek to have Telstra and Optus' hybrid-fibre coaxial networks upgraded, pointing to NBN Co's corporate plan, which he said acknowledged that HFC node splitting would increase speeds on the network to 240Mbps downstream and 12Mbps upstream, and could be completed by 2013.

This would cut costs dramatically, as he said: "the melancholy truth is that more than 75 per cent of the cost of this network is civil works", so "plainly, if you can use some of the existing fixed-line local access network, you can reduce those civil works considerably".

The Australians that would have been covered by wireless or satellite would see very similar services, according to Turnbull, who said that the Coalition and Labor technology approaches were "very similar" for those people.

Infrastructure, which had already been deployed in regional and rural areas, would be made available to private sector wholesale network operators, which would complete and operate services using those assets, according to Turnbull.

For those not in reach of HFC, or not considered to be so regional as to be serviced by fixed wireless and satellite, the Coalition would invite private sector companies to deliver broadband, with non-economically viable areas to receive government support, in the form of co-investment, capital subsidy or capital and recurrent subsidies.

The Coalition would look to ensure that Australians in designated areas had at least 12Mbps within 12 months if possible, and 24Mbps within 48 months, not specifying how that would be achieved.

"The speed and extent of the upgrade would be a very material factor in determining the nature of the government's contribution," Turnbull said.

Greenfield sites would receive FttH, since this wouldn't cost much more than copper or HFC, he said. If the companies decided to roll out FttN, they would be encouraged to do it in a way that "facilitates a future upgrade to FttH", Turnbull said.

Turnbull acknowledged that Telstra would be the obvious front runner for much of the construction, but said that if it wanted the work, it would have to separate its customer access network from the part of the business doing the roll-out.

Turnbull said that the Coalition would prefer it if Telstra was split into separate companies as in New Zealand, but that "other models are possible", adding that "it is up to Telstra to make the case for why they better serve both the public interest and that of its shareholders".

Such a separated "Network Co" would have Telstra exchanges, its copper and its HFC, he said. NBN Co assets would also be transferred to the separated company, perhaps in return for NBN Co holding stock in the company.

Regulatory safeguards would be put into place to ensure that wholesale carriers would charge the prices required for a reasonable return on their asset base.

Turnbull believed that structural separation would be "value accretive" to Telstra shareholders, quoting the oft-used phrase that "the sum of the parts is more valuable than the whole", and pointing out that it would reduce the costs of dealing with regulators.

"The only people certain to lose from such a restructure would be the legal profession," he said.

This path would cost less, Turnbull said, adding that urban Australia could be completed via an FttN roll-out and HFC upgrade, which he estimated to cost $10 billion, although he didn't say the government would pay this, as much of it would be commercially viable. Turnbull pointed to Telecom NZ's FttN roll-out to 1.5 million New Zealanders, which he placed at $500 million.

When asked about further costing information, Turnbull said that it was impossible to provide it, given that he didn't know what the situation would be in 2013 when the next election is set to be held.

He said that it made sense, instead of speculating, to state the party's direction, principles and philosophy, which is to "recover as much value as possible; as many cents in the dollar for tax payers as [it] possibly can".

"Exactly how that plays out, we'll have to see exactly what the status is," he said.

He pooh poohed objections in advance that Telstra wouldn't play ball, saying that Telstra would recognise that the Coalition's plan would bring shareholders value. He also said that any company would be able to participate, which should force Telstra to act or risk losing out to competitors. He also scorned objections that such a plan wouldn't be future-proofing Australia's broadband future, saying that applications requiring 100Mbps didn't exist. To the objection that the Coalition's plan would spawn a patchwork network, he said that any network that involves more than one technology will be patchwork.

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