What happens next with the National Broadband Network? A SmartCompany Q&A

After what seems like an eternity, the Government is finally set to pass legislation needed to construct the National Broadband Network, and a long-awaited reform package will split telco behemoth Telstra into two separate entities.

But where do we go from here?

There are still plenty of unknowns. For one thing, the Government’s amended business plan isn’t much of a business plan at all, and there are still plenty of technical hurdles to jump before the network is up and running. In addition, we still don’t know key pieces of information about the NBN, such as the wholesale price of network access.

With so much up in the air, here’s a SmartCompany Q&A to keep you informed.

Why is everyone so excited about Steve Fielding?

Last night, Fielding pledged his support for the National Broadband Network legislation. His vote means the Government now has the numbers to pass the bill, along with the crucial telco separation package which will split Telstra into two networks, one wholesale and one retail.

And his announcement came just hours after independent senator Nick Xenophon pressured the Government into releasing an amended business plan in exchange for his vote as well.

But aren’t they already building the network?

Yes. The network has been constructed in Tasmania, and some construction has begun on the mainland, but the project has a long way to go and this legislation establishes some regulatory frameworks for the network’s roll-out. The sites that have been built already are simply test sites; the full network has yet to be built.

According to Conroy, the bill establishes the “governance, ownership and operating arrangements for NBN Co Limited, as well as rules for the supply of NBN Co Limited’s wholesale-only telecommunications service”.

“These rules include affording retail telecommunications providers access to the NBN on terms that are subject to strict non-discrimination and transparency obligations.”
Right, so how long I am actually going to have to wait?

The NBN isn’t actually going to be completely built and operational until 2018, so it’s going to be a while before you are video conferencing with the guy down the street.

In the amended business plan, the NBN Co. says we are now in a period of establishing key systems required to support the roll-out of the network. This period is expected to last two years.

This means that right now, the company is testing construction methods, and is building a network of support systems to accompany the NBN as it is constructed over the next decade.

During the current financial year, NBN Co. will be finalising the design of its wireless and satellite networks, and is currently negotiating for the use of wireless spectrum. The company outlines a timetable in its plan:

• December 2010 – Finalise agreements with Telstra on decommissioning of copper and hybrid fibre coaxial networks.
• April 2011 – Start customer trials with at least one mainland internet service provider.
• June 2011 – Telstra agreements completed, including enabling legislation, ACCC and Telstra shareholder approval.
• September 2011 – The first commercial services should start being rolled out with multiple ISPs and up to 6% of premises now passed.
• November 2011 – Commence the construction of wireless networks.
• December 2011 – The network should be ready for a “business as usual” roll-out. This means the capability to fulfil, activate and assure an increased number of products with multiple RSPs, and at this point 19% of premises should be passed.
• August 2012 – The NBN is now classified as “ready for market”, which means there are multiple ISPs certified and critical volume will be “available and predictable”. The network will start rolling out fully from here.

Sounds like a lot to do. Is there anything else?

Plenty. That timetable only determines what happens up until the point the network is ready to be rolled out – the real work begins after August 2012 when the network starts connecting people’s homes all across the country and not just in test areas.

The amended business plan also points out that the lag-time in satellite construction means satellites won’t be in orbit until 2015, which means those users in rural and remote areas won’t have access for another five years.

The construction of the network requires plenty of tenders, plenty of which are still yet to be fulfilled, and a big piece of the puzzle – the ACCC report on wholesale pricing and points-of-interconnect is still yet to be released.

Whoa, slow down – what’s the ACCC report got to do with this?

The ACCC is developing the wholesale price of the network. This is the price at which ISPs are charged when they connect their customers to the network, and subsequently affects how much everyday users are going to pay.

Points of interconnect are a different story. These are the points at which ISPs connect their customers to the network, and there’s a big debate about this going on. The problem is that if you have too many points of interconnect, ISPs find it hard to gain access across the entire country, but if you have too few, then smaller ISPs are locked out.

The NBN Co. has proposed having 14 POIs, and the ACCC is currently considering submissions for this proposal.

But this plan has been attacked by ISPs and the NBN Co. even admits in its amended business plan that if the 14-POI plan is rejected, the rate of return on the whole NBN project could drop by as much as 80 basis points.

So although the Government will pass the bill, there are still a lot of unknowns?

Definitely, and the biggest piece of the puzzle, the full version of the NBN Co.’s business plan, has still yet to be revealed. This document contains financial statistics on rates of return, expectations for consumer take-up rates and expectations on how long the Government expects to recoup its investment.

So while the Government appears set to pass its legislation and the public now has its hands on some of the business case, there is still plenty to come. Until Conroy releases the full business plan, the full impact of the NBN is still up in the air to some extent.