Australia - broadband

Broadband on the never-never

LABOR'S election pledge to appoint a national broadband network builder by the end of the year is in tatters because of another extension of the bid deadline and a trebling of the expected construction costs.

Proposals to build a broadband network to 98% of the population were initially due on July 25 but the deadline was extended last month after complaints from potential bidders.

The new deadline was to be 12 weeks after Telstra handed over detailed network information to its rivals, still allowing the Government to meet its end-of-year target.

But BusinessDay believes bidders have now been told that proposals will likely not be due until November, which could push back the awarding of the tender to mid-2009.

Labor's estimate that it would cost $8 billion to build a fibre-to-the-node network to 98% of the population, made a month before its November election victory, has also been disputed. Telstra chairman Donald McGauchie says the telco expects the network will cost up to $25 billion.

Mr McGauchie said that while Telstra had not fully costed its FTTN bid - if it decided to make one - the $15 billion to $25 billion estimate was "probably not a bad number".

Mr McGauchie said the Government's intention that FTTN reach 98% of the population would be a lot more expensive than relying on wireless broadband for outlying, sparsely populated areas.

"The first 50% is pretty economical," he said. "Every 10% beyond there the price goes up dramatically, and once you go past 90%, it goes up exponentially for every 1%."

The chairman hinted that a way to reduce the overall cost of building the network, as well as reducing the fibre footprint, would be to remove the Government's guarantee of minimum network connection speeds of 12 megabits per second. "Is 12 enough? I don't know, I think the market should decide that, not a bloody regulator," he said.

Other telcos, led by Optus, have been arguing that the FTTN construction is an opportunity for the Government to split Telstra's wholesale and network divisions from its retail division, as a means of ensuring equal access for all telcos.

Mr McGauchie again fiercely rejected the idea of structural or operational separation but conceded he was increasingly concerned the Government was contemplating stricter regulation of Telstra. "We've had all sorts of mixed signals from around the place," he said. "Various people, we'll just say 'close' to Government, (have told us) these issues are there."

Mr McGauchie also said Telstra would not comply with any FTTN proposal that involved the imposition of more regulation, and was miffed as to why there was not a push to reduce regulatory intervention from the Government and the Australian Competition and Consumer Commission.

Macquarie Group last week pulled out of the running to build the FTTN network to advise Telstra instead.

The Optus-led Terria consortium still says it will bid for the project, despite its lack of external funding. But Mr McGauchie increased doubt about the viability of a rival bid by suggesting Telstra would shift its customers to its cable and wireless networks, rather than use the new network.