Australia to invest $31 billion in broadband

[Shadows]

Tue Apr 7, 2009 9:51am EDT
By Rob Taylor

CANBERRA - Australia's government will build a A$43 billion ($31 billion) high-speed broadband network, leading a new private-public company, after rejecting bids by companies that it said failed to offer value for money.

In a surprise move, Prime Minister Kevin Rudd said on Tuesday the government would ask private companies to join the country's biggest infrastructure project to build a network that would be up to 100 times faster than the current network.

Australia has slower and more expensive Internet services than many developed countries, raising concerns about competitiveness, but the project will be made more difficult by the country's vast distances and inhospitable terrain.

"It's time for us to bite the bullet on this. The initiative announced today is a historic nation-building investment focused on Australia's long-term national interest," Rudd told reporters at parliament.

The center-left government would sell its majority stake five years after the network, which still requires parliamentary approval, was fully operational.

The fibre-optic network, central to Rudd's winning election campaign in late 2007, will be Australia's biggest reliance yet on public-private partnerships and underscores Rudd's preference for government intervention amid a bruising global financial crisis.

CONTENTIOUS TENDER

A consortium comprising wealthy Australian businessmen and telecoms industry veterans had been favorite to win the project ahead of Optus, which is owned by Singapore Telecommunications, and Canada's Axia NetMedia.

The tender process was enveloped in controversy after the country's largest phone company, Telstra Corp, was dumped from the running in December, after the government panel overseeing bids said its proposal did not fit requirements.

Rudd said the new network would be built with money from a A$20 billion national infrastructure fund and the sale of bonds, following an initial government investment of A$4.7 billion. Private sector investment would be capped at 49 percent.

It adds to A$78 billion in economic stimulus measures announced by the government since September to help shield the stalling economy.

Rudd estimated building the network would take 7-8 years, presenting a risk that voters could be alienated by the long delay as the government faces re-election late next year.

"We've delivered an enhanced election commitment. We're actually delivering faster speeds to more people," Communications Minister Stephen Conroy told Reuters, shaking off concerns that the scrapped tender could anger voters and big telcos.

"The global financial crisis impacted right in the middle of the process. The crisis landed right on top of (telcos), the money dried up for everyone," Conroy said, adding Telstra would now be invited back into the process.

The network would operate on a wholesale-only, open access basis, separating retail operations and allowing Optus, Telstra and other companies to build services into the system.

The fibre-to-the-home scheme would support up to 37,000 jobs, Rudd said, as the country teeters on the edge of a recession that could push the jobless rate above 7 percent next year.

Around 90 percent of homes would be connected to a network with speeds of up to 100 megabits per second. The network would add A$37 billion to the national economy through added productivity, analysts said.

TELSTRA UP, BUT OUTLOOK UNCERTAIN

Telstra shares closed up 4.4 percent, clawing back some of a 20 percent drop since mid-December, when the government bumped it from the initial network tender.

In a statement, Telstra said the new plan would have little short to-medium-term impact on its business as it would take years to build. Chairman Donald McGauchie said he looked forward to constructive talks with government.

Analysts said Telstra could work with the new plan, but the longer term outlook was cloudy as the former state monopoly would be up against a powerful new rival and would no longer enjoy lucrative control over lines to homes.

"It looks pretty clear that the government has been very persistent in getting a new network up and running, that will definitely be a competing network. It will be competing directly with the most profitable part of Telstra," said Theo Maas, an investment analyst at Fortis Investment Partners said.

The new network is aimed at reaching end users directly, without relying on Telstra's local copper cable network.

"This could mean Telstra's copper network would eventually become obsolete anyway," said Lucinda Chan, a division director with Macquarie Equities.

In Singapore, SingTel shares rose 1.2 percent, beating a more than 2 percent drop on the broader share market.

[tadz0rz]

as much as i love rudd because he gives me money. Hes talking shit about this in my oppinion. Im about 5 minutes from like the inner suburbs in a new estate, it took telsra 6 months to put in a phone line, let alone it to be compatible with internet.

For anyone in melbourne, the other end of plenty road in south morang, driving wise it aint far if your in the inner suburbs. Am i right? I mean, its at the other end of plenty road how hard could it be to put in a phone line

[dumb&]

That would be a TELSTRA issue not a Kevin Rudd issue.

And this is purely for the internet, not for phone lines (hell we're not even talking copper - its a FIBRE network).

[Shadows]

i know this topic had been discuss edge of years since the previous PM or even before and due to some company talk about $$$$ returned and some talk about thier maket shares barbarbarbar...... end up this is what you ppls are facing now.

[tadz0rz]

yeah but telstras excuse to us was the government hasnt provided the money to lay the inferstructer for the phone line network yet. Its a brand new estate ffs. And im stuck with ADSL1. Getting like 80gb of downloads so im not complaining

[Shadows]

what i know they are having some kind of shares and market shares issue about who and who should get more market etc, that whay coz this project to halt

[Dummer]

at least he's given up on Fiber To The Node (FTTN) and instead going for Fiber To The Home (FTTH) which will offer much greater speeds!! This project is of a huge magnitude, cables with have to be run from every home to roadside cabinets which I imagine they'd need every few blocks from where they'd multiplex the cables onto higher bandwidth cables back to the exchange. from here the data would require upgraded cables back to the nearest capital city. they'd need to upgrade bandwidth between the capitals aswell as run heaps of new cables overseas to be able to actually provide the faster speeds to people.

[dumb&]

yeah but telstras excuse to us was the government hasnt provided the money to lay the inferstructer for the phone line network yet. Its a brand new estate ffs. And im stuck with ADSL1. Getting like 80gb of downloads so im not complaining

Telstra owns the phone lines. Not the government. They have to lay the infrastructure. Your problem is nothing to do with the government and whoever got you to swallow that pill did a damn fine job.

[tadz0rz]

lol well we didnt swallow it, my mum was on this stupid satelite phone to telstra every day trying to get them to hurry up with it. i dont know the full story coz my mum delt with most of it but they also said they didnt have the lines in stock and they had to order them or sum bullshit

[dumb&]

So posting about something you don't really know much about?

[tadz0rz]

lol im just sharing my experience

[Shadows]

lol im just sharing my experience

great !!! i like you sharing

[tadz0rz]

lol glad to be apart