NBN announcement just the beginning of a long process
By Drew Cratchley06 Apr 2009 3:49 PM
SYDNEY, April 6 AAP - The federal government's long-awaited announcement on the future of its national high-speed broadband project this week is likely raise as many questions as it answers.
With Prime Minister Kevin Rudd back in the country after attending the G20 summit in London, the stage is set for the government to declare who will construct the project.
Bids were made by six potential builders, but Telstra, Australia's largest telco, was expelled from the tender process after it failed to meet government guidelines.
That leaves five parties vying for the government's $4.7 billion contribution to the national broadband network (NBN) cost, which is estimated to total $15 billion.
The Acacia consortium, comprising wealthy businessmen and telco veterans, is the favourite to be named the winner, over Optus and Canadian telco Axia NetMedia.
The ACT and Tasmanian governments have lodged bids to build regional segments of the NBN.
Acacia is headed by former Telstra executive Doug Campbell and backed by businessman Solomon Lew as well as Seek founders Paul Bassat, Andrew Bassat and Matthew Rockman, and Australian Broadcasting Corporation director Steven Skala.
Acacia's bid outlined a plan for a 100 per cent coverage of the Australian population through a combination of fibre to the premises, fibre to the home, wireless and satellite technology.
Industry analyst Paul Budde predicts Acacia will build the NBN, with Optus, Axia and the ACT and Tasmanian governments to contribute to the operation of services.
Such an outcome would lead to "very affordable" services for the public, Mr Budde said.
He said wireless technology would be used in the short-term while fibre to the home was being fully implemented.
But the long-term success of the NBN, and how quickly it can be built, relies heavily on the cooperation of Telstra.
Whether it grants access to its existing infrastructure, which will be vital for the project, remains a great unknown.
"The biggest uncertainty for me is Telstra's reaction," Mr Budde said.
"I sincerely hope that they will turn around and join this cooperative model."
Telstra says it has moved on from the NBN and has been promoting vigorously its efforts to provide alternative broadband services.
It recently began upgrading its capital city broadband networks.
"At Telstra, we are confident that we have a superior array of products and services which are better than anything that will be offered by the government's NBN," Telstra group managing director Kate McKenzie told an industry summit last week.
In a note to investors late last week, Citi analyst Christian Guerra said Telstra's cooperation was needed for the NBN to be viable.
"Without Telstra as the NBN anchor tenant, the NBN project's economics would be compromised to such an extent that it would be rendered uneconomic," he wrote.
Another major issue for the remaining NBN bidders is funding, which has been significantly affected by the global financial crisis.
Little is known about Acacia's funding model, while Optus' parent, Singapore Telecommunications (SingTel), raised more than $1 billion from Asian banks just a week ago.
SingTel said it had secured the three-year facility "to refinance existing facilities and for general working capital purposes".
Axia's Australian partners are not known, although one analyst has said construction giant Leighton Holdings could partner Axia.
The rapidly changing telecommunications landscape also threatens to derail the NBN, with telcos posting rapidly declining fixed-line revenues as consumers switch to wireless broadband technology.
Mr Guerra says the increasing popularity of wireless broadband is a threat to the NBN.
"In our view, the clear, sustained and accelerating shift to wireless poses significant risk to any future demand of NBN services," he said.
No matter what the outcome of Mr Rudd's announcement, broadband will remain an ongoing challenge for his government and the telecommunications industry.
