Australian Government Cancels US$869-mil. Broadband Funding Agreement

The A$958-million funding agreement was reached between the former government of then prime minister John Howard and OPEL Networks, a joint venture between Optus and Elders Telecommunications Infrastructure, before Howard was ousted by a general election in November 2007. The funding was for the roll-out of a broadband network, based on ADSL2+ and wireless broadband technology, covering identified under-served areas and premises across rural and remote areas of Australia. The Minister for Broadband, Communications and the Digital Economy, Senator Stephen Conroy, today announced that the new Labour government has terminated the funding agreement because OPEL's Implementation Plan did not satisfy the coverage requirements. A condition precedent of the contract stated that OPEL would provide coverage reasonably equivalent to 90% of identified under-served premises in rural and remote areas. Although Labour had promised to honour the decision by the previous government to award funding to OPEL, assessments by the authorities showed the network would have only covered 72% of the identified under-served premises and, as a result, the contract has been terminated, said Conroy.

Outlook and Implications

• Labour's National Broadband Network Project: Internet access was one of the topics debated heatedly by competing political parties before the federal election last year, amid allegations that Australia's broadband speeds and coverage lag well behind other industrialised nations, particularly in rural and remote areas. Both the former government and the Labour party proposed their own plans for rolling out a national broadband network before the election. The plan of the former government included two major parts: a high-speed fibre-to-the-node (FTTN) network in the city areas and the deployment of a network based on ADSL2+ and wireless broadband technology in the rural and remote areas—OPEL was selected to implement the second part. The new Labour government had promised to roll out a FTTN national broadband network with minimum speeds of 12 Mbps to 98% of Australian homes and businesses by 2013. It has pledged A$4.7 billion of government funds for the construction of the network.
• Tender Soon to Come: Although it is questionable whether Labour's all-fibre national broadband plan is sensible—given that the costs of providing fibre-based internet access to rural and remote areas would be tremendously high—the new government appears determined to take its plan forward. One of the reasons for the termination of the OPEL project, although not officially stated, could be that the OPEL network would duplicate the fibre-based national broadband network planned by Labour. The new government is set to issue a tender for proposals soon for its planned national broadband network project. A number of telecoms groups, including Telstra and the G9 consortium of nine telecoms companies, led by Optus, had been eyeing participation in the project. The termination of the OPEL project will make the upcoming tender for the national broadband network even more competitive. Without the commitment to the OPEL broadband project, SingTel-backed Optus will be more determined in winning the bigger national broadband project.