After the election: What next for the NBN?

A new FTTN network will have significant implications for Telstra's copper network, requiring new negotiations between the telco and the government over a key $11 billion agreement between the two

The National Broadband Network, Australia's largest infrastructure project, is set for a shake-up as Tony Abbott slots into the top job.

The Coalition’s approach to the NBN, begun under Labor, has gone from promising to dismantle the NBN to saying in August 2010 it would spend up to $6.25 billion of public and private funding on an alternate broadband policy.

In April this year the Coalition finally announced its broadband policy, with 71 per cent of Australia to get fibre-to-the-node (FFTN); 22 per cent to get fibre-to-the-premise (FTTP); 4 per cent to get fixed wireless; and 3 per cent to get satellite.

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Rolling out a FTTN network will have significant implications for Telstra's copper network, requiring new negotiations between the telco and the federal government over a key $11 billion agreement between the two.

Malcolm Turnbull has said new negotiations with Telstra could be achieved “speedily” and that his experience with Telstra deals would help.

David Thodey, CEO at Telstra, is also eager to strike a new deal with the Coalition for the NBN, asking the Coalition to renegotiate a new deal “quickly”, according to the Australian Financial Review.

Geoff Johnson, research vice-president at Gartner, says he has concerns around the open access model of the NBN under the Coalition, with indications that informal discussions have already taken place between the Coalition and Telstra.

“My concern is that the open access model … needs essentially to be respected. Or are we going to step back from that and not have [the] structural separation of Telstra? Are we going to lose the benefits of competition and the economy that’s been worked out in the last three to six years?” he says.

Johnson says the telco industry is likely to be worried about any advantages for Telstra under the Coalition’s NBN.

“An open access network … [doesn’t have] the vertical integration benefits that Telstra has and you haven’t got the dominance that incumbents like Telstra have had in the past,” he says.

“[The] NBN has the potential to be a bigger and uglier monopoly than Telstra ever was, even back in its days [when] it used to be called 'Public Money Grabber'.

“The carriers just want to see that the structural separation arrangements that were put in place with Telstra are preserved. They’ll be worried about the scope creep around the margins and so will the regulator, the ACCC.”

Mark Gregory, senior lecturer at RMIT, says when it does come down to negotiations, it’s likely Telstra will “play hardball” like it did in the early days of negotiations for the $11 billion agreement with the Labor government.

He believes the structural separation of Telstra is in danger under the Coalition and the Competitive Carriers Coalition, an association whose members include Telstra competitors such as Vodafone and Optus, could take the government to court.

“[If] the Competitive Carriers Coalition feel in any way that Telstra’s going to get an advantage out of all of this, they’re going to go to court and this could go all of the way to the High Court, which means it could take years,” Gregory says.

“If they’re smart and they seek an injunction against the government and against Telstra in changing to fibre-to-the-node, then Turnbull’s plan is sunk.”

The Coalition previously announced it would carry out three inquiries: a commercial review to be completed in 60 days looking at how quickly the NBN could meet objectives; an audit on Labor’s NBN and an independent study that would assess Australia’s telco and broadband needs for the future, alongside a cost benefit analysis.

Johnson says the new prime minister is likely to give free reign to Turnbull to get on with the job of moving ahead with its alternative FTTN plan and between now and Christmas the Coalition will carry out the reviews and a proper costing of its version of the NBN now it has access to Treasury data.

“The bodies that are going to be tasked to do it already know what the task is. I would think they’ve got the bulk of their preparation done but the question is, what’s the brief and the scope that they get [and when will they] produce it?" he says.

In the short-term, Gregory says advisors to the new communications minister will probably be in discussion with Alcatel Lucent, an equipment provider to the NBN, and Huawei, which helped to roll out a FTTN network in the UK.

However, on the ground, Gregory believes the rollout will continue as usual, with Turnbull previously stating the Coalition would honour existing contracts for the NBN.

Within NBN Co, changes will be made, including appointing a new CEO for the company following the resignation of Mike Quigley in July this year. Gregory believes this could happen by the end of October.

“Within NBN Co itself there would be instructions made to start planning for an overlay of fibre-to-the-node because the way fibre is rolled out for [FTTN] is completely to how fibre is rolled out for [FTTP]. It would mean that the entire design of the network would have to start again,” Gregory says.

Meanwhile, Suzanne Campbell, CEO, of the Australian Information Industry Association, congratulated the Coalition on winning the election and urged the government to move quickly on key digital initiatives.

“Given the breadth of digital economy commitments outlined during the election campaign, we strongly encourage the new government to move quickly to make appropriate machinery of government changes to ensure the effective execution of these key policies; particularly in the areas of cloud computing, e-government and the NBN,” she said.

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Tags Malcolm TurnbullNational Broadband Network (NBN)Coalition

More about Australian Competition and Consumer CommissionAustralian Financial ReviewAustralian Financial ReviewAustralian Information Industry AssociationGartnerHuaweiLucentOptusQuigleyRMITTelstra CorporationVodafone

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