Australia election threatens shape of $34 billion broadband plan

Reuters News
Posted: Jul 15, 2013 5:08 PM
Australia election threatens shape of $34 billion broadband plan

By Jane Wardell

SYDNEY (Reuters) - The future of an ambitious project to connect almost all Australia's far-flung inhabitants to high-speed internet, the largest infrastructure enterprise in the country's history, is hanging on the outcome of an upcoming federal election.

The Labor government and conservative Liberal-led opposition have vastly differing plans for the A$37.4 billion ($34.2 billion) National Broadband Network (NBN), potentially hurting some business stakeholders and opening the door to others, including China's Huawei Technologies Co Ltd.

"It will be a significant shift, we are talking about completely changing the idea of the rollout," Melbourne-based RMIT University electrical engineering expert Mark Gregory said about a possible Liberal-led coalition election victory.

"There will still be activity, but there will definitely be winners and losers."

A national high-speed network is central to Australia's plans to become one of the world's leading "digital economies" as it seeks alternative drivers of growth to replace a fading mining investment boom.

Prime Minister Kevin Rudd's Labor government has promised to deliver Internet speeds of up to 100 megabits per second (Mbps) to 93 percent of premises by 2021 using fiber-optic cables, with the remaining remote locations served by satellite and fixed wireless.

The planned network, which takes the fiber-optic cable direct to households and businesses, would be one of the most advanced in the world.

But just three years in, the 10-year project is plagued by problems, including delays that led the government-owned NBN Co to seize back control of construction in the Northern Territory from Syntheo, a joint venture of Lend Lease Corp Ltd and specialist construction firm Service Stream Ltd.

NBN Co's chief executive Mike Quigley quit last week after the interim targets for the number of premises connected in the rollout were lowered three times.

The government has promised to connect 8.5 million premises to the network by 2021. By June this year, just 163,500 had been hooked up, less than half the downwardly revised interim target.

The delays have opened the door for Rudd's challenger, Liberal Party leader Tony Abbott, to lambast the project as too expensive and unnecessarily complex.

Abbott instead promises a A$30 billion fiber-to-the-node network. Under this plan, high-speed fiber would be laid to streetside "nodes" but the final connection to homes and businesses would rely on Telstra Corp Ltd's ageing copper wires, with much slower download speeds than fiber.

The Liberal Party says this would provide 25 Mbps minimum by 2016 and 50 Mbps for the "vast majority of households" by 2019.

Abbott argues that is "more than enough for the average household", dismissing critics' warnings it would leave Australia with an outdated network that would only be as good as its weakest, copper links. The opposition would also use satellite and fixed wireless for remote locations.


Rudd has until the end of November to hold an election and the NBN is shaping up as a key battleground. Opinion polls show Labor and the Liberal-led coalition running neck-and-neck.

Should the coalition win office, Shenzhen-based Huawei, which Labor has banned from bidding on any NBN contracts because of cyber security concerns, could be one of the big winners.

Coalition communications spokesman Malcolm Turnbull has said a coalition government would take another look at advice from spy agency ASIO that led to the ban on the private Chinese company.

"Huawei has a fiber-to-the-node solution and I imagine they are in there giving Turnbull as much guidance as possible," Gregory said.

Huawei declined requests for comment.

Any entry by Huawei into the bidding for future work could take business from current lead contractor, France's Alcatel-Lucent SA.

Another potential winner from the coalition's plan is leading telecommunications firm Telstra, as the speedier rollout would mean quicker payments for the switchover of customers from its copper network.

Deutsche Bank analysis suggests Telstra will retain its broadband market share of around 47 percent, instead of a slide to 35 percent under Labor's project.

Telstra would also keep its hybrid fiber coaxial cable for Pay TV delivery as a competitor to the NBN, a scenario that does not sit well with Singapore Telecommunications Ltd's Australian unit, Optus.

The coalition plan could also marginally reduce business for Silcar, the 50:50 venture between Germany's Siemens AG and Leighton Holdings Ltd's Thiess, which is focused on fiber optics.

But if Rudd pulls off a victory, it will be business as usual to a certain extent for current contractors.

Still, Service Stream is likely to exit after confirming its foray into the project had left it with "material losses."

(Editing by Stephen Coates)