In a surprise announcement last night, the Australian Department of Broadband, Communications and the Digital Economy has announced that it terminated the current tender for a National Broadband Network due to lack of "value for money" in the proposals submitted.
Instead, the government has announced the creation of a network company that will be owned 51% (at least) by the government but open to all current players on the market. This company will benefit from the initial 4.7bn A$ investment and also be funded with 43bn A$ in the course of the next 8 years to deploy FTTP to 90% of the population. The network company will be privatised after five years of operation.
This is momentous in many ways although I can't help having a slight apprehension about it. If I try to analyse the process so far in Australia cool-headedly, it doesn't seem to me that it's been optimally run to say the least. The idea that the same people would be in charge of such a huge investment may not be all that reassuring...
Having said that, one shouldn't predict future failures on past ones and if the government indeed delivers on its promise, the impact for Australians and Australia is considerable. This is the single most important investment in broadband ever (and the single biggest Australian public infrastructure investment ever).
For Telstra, this is probably mixed blessings. In one sense, it spells the doom of its current network unless Telstra takes the bold step of joining the network company as a shareholder and bring its network assets as part of the deal. Having said that, Telstra's predicament was dire and I'm not sure any other outcome would have been any easier on them. At least with this scenario they still have options.
You can check out further analysis by Paul Budde on this. He's very enthusiastic about the results, and some of the aspects he raises are very relevant (particularly the practicality of delivering public services over broadband or people who are not telco subscribers).
The New Zealand announcement goes back a week or so, but I haven't had time to look into them in-depth until now. Essentially, the ultimate outcome for New Zealand is similar although the goals and financial means are much more modest (it should be noted though that the scale is too!).
The NZ Government proposal is to create a crown-owned investment company that will co-invest the 1.5bn public money alongside private investors on a region by region basis. The aim is to deploy dark fiber in 25 cities and towns (the project does not cover rural broadband, unlike the Australian project), focusing first on priority targets, ie. "businesses, schools and health services, plus green field developments and certain tranches of residential area".
The resulting structures will be called Local Fiber Companies in which the Crown-Investment Fund and the selected partners will have equity. The public investment will not exceed 50% of the equity. The Local Fiber Companies will be fibre infrastructure carriers providing dark fiber (and other wholesale services if they wish to) but will be restricted from selling retail services.
Significantly for Telecom NZ, partners that own retail service operations will not be entitled a majority share of the voting of the LFC board unless they divest themselves of their retail operations. This means that either Telecom NZ will be a minority holder in one or many local networks or they will structurally separate if they wish to have a more significant control of the infrastructure layer
The official announcement and further consultation paper is to be found here.
Overall, both of these announcements, much as they may be frought with risk, are momentous because they dare to break the current paradigm that was inherited from the (largely botched) telco liberalisation back in the 80s-90s. It's hard to anticipate how either will play out simply because for a large part we are now in unknown territory.
It will be very interesting to closely follow what happens in Tasmania though, since the Australian announcement specifically states that work there is to begin almost immediately. Within a couple of years, we should be able to get a fair assessment of Tasmanian developments and depending on the success there, this could become inspiration for governments everywhere...
