The National Broadband Network announcement is as much driven by the immense regulatory problems that have emerged in the ICT sector and the economic crisis as by the Government’s need to get out of the hole it dug for itself with its broadband election commitment.

The original commitment related to a Fibre To The Node network, which automatically generated huge access problems for anyone other than Telstra, which has fought tooth and nail for its right to gouge all users of its infrastructure. The roots of this lie not merely in the Howard Government’s privatisation of Telstra as a combined infrastructure owner and retailer, but in the Hawke-era reforms that established Telstra as an 800lb gorilla in the first place.

The Government’s original Fibre To The Node model promised to be a lawyer-fest as retailers, the ACCC and Telstra slugged it out in court over the last mile into households. That’s now been short-circuited. The fibre of the new NBN company will reach all the way into homes — Fibre To The Node becomes Fibre To The Nerd. Telstra won’t get a look-in unless it buys into the company.

And like other telco retailers, Telstra will be subject to a cap on its participation in the venture. The level of that cap will be determined as part of the arrangements for the new company. Nevertheless, even with a capped involvement, Telstra is now back in a game it was excluded from until 8.20 this morning.

The Government is also adamant that given the current economic circumstances, a private consortium was not going to provide value for money, and that was the strong conclusion of the tender panel for the NBN process. The cost and availability of funding was clearly an issue for the bidders — as was, presumably, the demand from some of them that Telstra not be permitted to compete with the NBN. Telstra can compete with this network as much as it wants.

The announcement also solves the hitherto-insoluble problem created by the Government’s original NBN commitment. Stephen Conroy was given an underfunded and overly-ambitious tender process to deliver and predictably struggled to do so, with repeated delays culminating in Telstra’s exclusion from the process late last year. By terminating the process and revamping the model, the Government in effect shelves its original promise and replaces it with a far bigger commitment. It also partly makes up for the OPEL fiasco that promised to keep regional communities deprived of broadband services for years immediately directing $250m into regional backhaul blackspots to boost competition and capacity in regional areas.

This is also the biggest media policy shake-up since the introduction of subscription television and maybe longer. Every home in the country will get a high-speed, high-capacity content delivery channel. This will enable a fourth, fifth, sixth, 100th, whatever you like, commercial television channel, unconstrained by the spectrum scarcities that will in many areas continue to dog television even after analog switch-off.

This is the biggest reason why the new network won’t be a white elephant — it will provide a national platform that subscription and free-to-air TV providers will need to be on simply to prevent competitors from exploiting a new source of content for households. Federal, State and even local governments will also exploit it both for national broadcasting purposes — ABC, SBS, community TV and indigenous TV will use it — and for real-time service provision with customers.

There will be regulatory problems. Although it won’t have the retail incentive to behave anti-competitively, the new company will be a monopoly provider in many areas and will have to be carefully regulated and monitored. There is a big risk of creating another Telstra here — bureaucratic, internally-focussed, uninterested in its customers — which the Government, in designing the new company’s DNA over the next few months, must avoid.

Inviting companies that are otherwise profoundly hostile competitors to jointly participate up to 49% together in the company may not be a recipe for harmonious board relations. But compared to the legal nightmare that would have been accessing Telstra’s infrastructure, those problems look relatively manageable — primarily because the Government will be the majority owner.

That’s the biggest change of all. Governments are back in telecoms, in a big way, and for a long time to come.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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