IHS Global Insight Perspective | |
Significance | It remains unclear whether the incumbent Labor Party or main opposition Liberal-National coalition will come into power as Australia faces its first hung parliament in 70 years. |
Implications | This means it is still uncertain how the country's broadband infrastructure will be upgraded as the two major parties have each proposed their own plans for providing faster broadband services. |
Outlook | The proposed broadband plans themselves could be a key factor in deciding who will come into power, as negotiations between the parties and the independent lawmakers get under way. |
With Australia facing its first hung parliament in 70 years following the federal election on Saturday (21 August), it is unclear whether the incumbent Australian Labor Party or main opposition Liberal-National coalition will come into power, according to Dow Jones. The next government will be formed only after winning the support of nonparty lawmakers. That raises the influence of three re-elected independents drawn from rural Australia, with backgrounds in conservative politics, and a newly elected Greens party lawmaker, who has secured that party's first-ever lower-house seat. There is also a possibility that a fourth nonparty member will be elected, who is a former member of the Greens. As the two major political parties attempt to lobby independent members of parliament to form a government, plans to update Australia's broadband infrastructure are shaping up as a potential swing issue. The three independents—Rob Oakeshott, Bob Katter, and Tony Windsor—will have to decide between the A$43-billion (US$38.4 billion) fibre national broadband network proposed by Prime Minister Julia Gillard and her Labor Party, and the watered-down version on offer from Tony Abbott and his conservative Liberal-National coalition. All three have indicated broadband will be a key part of their discussions in coming days, particularly access for the regional areas they represent.
Outlook and Implications
- Competing Plans for Broadband Upgrade: Broadband has been a hot political topic in Australia since before the 2007 federal election, with current Internet speeds lagging well behind those available in many other advanced nations, particularly in the rural and remote areas. Both Labor and the Liberal-National coalition have proposed their own plans to upgrade the broadband infrastructure and will be keen to pitch their plans to provide better broadband services. Under Labor's plan, the government would build a high-speed fiber-to-the-home (FTTH) network across the nation, replacing Telstra's aging copper network and filling in blank spots in regional areas with wireless technology. In early June, NBN Co., the company set up by the government to run the planned new network, struck a preliminary agreement with Telstra, after months of intense negotiations, which would see Telstra effectively lease its fixed-line infrastructure, such as pits and ducts, to the new network and gradually retire its copper network. NBN Chief Executive Mike Quigley this month said the network would be able to offer speeds as fast as one gigabit per second, as much as 10 times faster than originally expected. The Liberal-National coalition is offering a scaled-back network that relies on a mix of fibre, copper and wireless technologies. It will provide A$2.75 billion to help fund construction of a national fibre-optic backbone, with an additional A$750 million expected from industry. That would in turn form part of a A$6.32-billion government outlay over seven years that would include A$1 billion to upgrade existing copper networks.
- Uncertainties over Telstra: The uncertain election outcome means it is still unclear how the broadband infrastructure will be upgraded. So far, it appears Labor’s big-spending NBN plan is more popular with voters. The alternative plan offered by the Liberal-National coalition would require less government funding, but it does not address how the bottleneck of last-mile access to homes would be resolved. The opposition plan has also failed to offer a solution on how to reform Telstra, a key step required to create a more level playing field in the industry. In light of this, the future of Telstra also looks unclear as its involvement in the broadband network project will be a key factor in determining the company’s long-term growth prospect. A Labor win would mean Telstra would be guaranteed a major role in the project at the cost of separating its vertically integrated businesses. A coalition win would result in Labor’s NBN plan being scrapped and would spare Telstra from structural separation, but without the A$11-billion compensation to be paid by Labor for its co-operation with the NBN. The full-year financial results released by the company earlier this month has already shown that the company is in need for a strong driver for its long-term business growth, as it faces continuous declines in its traditional fixed-line businesses and growing competition in the mobile segment (see Australia: 12 August 2010: Telstra Reports 0.9% Drop in Full-Year EBITDA).