Federal Government will build national broadband network

The Federal Government has shocked the telecommunication and IT sector be announcing will partner with private companies to spend $43 billion to build the national broadband network.

After a 12-month bidding process aimed at finding a private company to build a fibre-to-the-node network, Prime Minister Kevin Rudd says the Government has decided to build a more advanced “fibre-to-the-home” network that will cover all of the population. Crucially, the Government has declared the network will be open access, giving all telecommunications providers the opportunity to get access to the network at the same price.

Rudd says the NBN, which will take seven to eight years to build, will create 37,000 jobs and economic activity worth $37 billion over the life of the project.

“It will deliver affordable broadband services with speeds of 100 megabits per second,” Prime Minister Kevin Rudd said this morning.

“High speed broadband will create jobs and it will spur innovation. This is good for jobs, good for the economy [and] good for the nation’s future.”

Rudd says small business will particularly benefit from the introduction of the NBN. “High speed broadband allows them to create a level playing field.”

The Government will create a new company to control the network. The entity, which Finance Minister Lindsay Tanner says will be run along the same lines as Australia Post, will be majority-owned by the Government, but private sector telecommunications organisations, including Telstra and Optus, will be invited to invest debt or equity in the company.

The Government will then sell down its stake in the company when the NBN has been operating for five years.

“We believe over time there will be significant private sector investment that can come in terms of debt or equity,” Treasurer Wayne Swan said.

The Government’s initial investment is $4.7 billion, although it will be required to raise additional funds via the sale of Government bonds.

Michael Malone, chief executive of internet service provider iiNet, is thrilled with the Government’s announcement.

“It’s fantastic news, no one expected this. A fully open access network, I can’t see any downsides to this…very high speed access, fully transparent access, separation from wholesale and retail…it’s like a Christmas list.

“I’m quite stunned, but it’s a marvelous announcement and Rudd describes it as visionary and nation building and he’s 100% right.”

Malone says that while iiNet is usually a network operator rather than an investor, he will closely examine any opportunity to invest in the new network. “Obviously we’ll take a close look at anything that comes out.”

Optus has also welcomed the deal, with its head of government and regulatory affairs, Maha Krishnapillai, telling The Age that the shock announcement was “absolutely the best case scenario on every level,” as it will allow the Government to completely bypass Telstra’s infrastructure and run fibre directly into buildings.

“It really picks up all the recommendations of the last decade and allows us, and others, to compete and invest on a level playing field, because the fundamental advantage Telstra had in the last mile of copper is gone.”

Telstra, which had been locked out of the bidding process, also welcomed the news. “We look forward to having constructive discussions with the Government at the earliest opportunity. There is a lot to absorb in the Government’s announcement and we will consider every aspect in detail,” chairman Donald McGauchie said.

Rudd dismissed criticisms that the Government wasted time by going through the tender process and says the Government has been forced to build the network itself because private companies have failed to act.

“That hasn’t occurred over the last decade, and it’s time we bit the bullet on this.”

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