Allen & Overy and Venture Consulting have released a comprehensive report ("NBN Options for a Coalition Government") that evaluates the NBN policy alternatives open to the Coalition, should it be elected at the Australian Federal Election on 14 September 2013.
The capital cost alone for Australia’s NBN is currently estimated at $37.4 billion and the Government does not expect the network to be completed until 2021. It is the largest single government infrastructure project in Australia. The Coalition, in opposition, has objected to both the significant cost and time involved in the project and has expressed its intent to reshape the NBN to be more efficient and cost-effective, should it be elected to government at the 2013 Federal Election.
The authors, Michael Reede (Partner, Allen Overy) and Justin Jameson (CEO, Venture Consulting) review a timeline from now until the Federal Election, the first 100 days of a Coalition Government and then provide a detailed evaluation of three broad potential phases to restructure the NBN:
- Renewed NBN Co: Immediately after the election NBN Co is redirected to deploy a ‘technology efficient’ outcome. While more controversial aspects of the current deployment may be reviewed, others will continue. Once policy has been reset, deployment will accelerate on a different path.
- Metro and Regional NBN Cos: NBN Co could be split into a Metro Co and a Regional Co, recognising the metropolitan and regional NBN solutions will operate under fundamentally different economics and technologies. This model could be designed to optimise private sector participation that could be put to tender later in the Coalition's first term.
- Listed New Net Co (including a potential Telstra demerger): A new national wholesale access entity (Net Co) could be listed on the ASX. This could be implemented on a standalone basis or through the demerger of the Telstra customer access network assets. This is unlikely to be an option until shortly before or after a 2016 Federal Election. A Telstra demerger would depend on its shareholders and may never occur.
The extensive report analyses the significant economic pressures on the existing NBN policy model and identifies the questions that will need to be answered by any independent review after the Federal Election. The report analyses the five critical issues the Coalition will need to address:
- The market for broadband services – Understanding the timing, scale and value to society of mass market demand for very high bandwidth applications that require superfast broadband networks, the consumer applications driving mass market high bandwidth connections and whether there is any evidence that consumers are willing to pay a "fibre premium".
- Major regulatory settings – Preserving the right balance between facilities based competition and achieving national deployment goals, maintaining structural separation and potential approaches to national uniformity of bandwidth and pricing.
- Scale and technology – The scale of the NBN and the optimal mix of technologies and the areas in which to deploy them. The scope to change direction, scaling back FTTP, upgrading the HFC networks, scaling up FTTN and expanding fixed wireless.
- Ownership and funding - The best structure and ownership model for the NBN, the form and timeline for private sector involvement and aspects of the project that may appeal to specific investor classes.
- Industry stakeholders – How complex is a "new deal scenario" and the benefits and trade-offs associated with renegotiating the deals with Telstra and Optus?
“The NBN is a project with a projected economic life of more than 30 years. Australia can no longer allow itself to be stalled between competing policies,” said Allen & Overy partner, Michael Reede. "The burning question for the communications sector as Australia enters the longest formal Federal Election campaign in its history, is what could the NBN look like under a Coalition Federal Government?”