National Broadband Network Fact Sheet - updated May 2010
The National Broadband Network (NBN) (open an external site) is to be a wholesale only and open access high-speed network through which services are to be supplied to retail service providers (carriage and content service providers) on a non-discriminatory basis.1 The network will provide 90 per cent of Australian homes, school and businesses with 100 Mbps fibre-to-the-premises (FTTP) (open an external site) connections while the remaining 10 per cent of premises will have 12 Mbps (or more) next generation wireless and satellite connections.2
The initial steps to create the NBN
As a first step to fulfil its 2007 campaign promise of a national broadband network,3 the Rudd government initiated a Request for Proposals (RFP) to build and operate the new NBN.4 If it had come to fruition, the $4.7 billion plan would have provided a minimum download speed of 12 Mbps to 98 per cent of Australian homes and businesses within 5 years of project commencement.5 However, after the tendering process was complete the Government announced that it would try a different tack as the proposals provided inadequate value for money, and this led to a new vision for the NBN.6
The current plan for construction and operation
The Government responded to the tendering process by creating NBN Co (open an external site) to construct and operate the new network as part of an 8 year project.7 The Government will maintain a majority stake in the ownership of NBN Co for a maximum of 5 years from the time the $43 billion project is concluded.8 The Government will then sell down its stake to relinquish control of NBN Co so that it may become a privately controlled entity. To ensure continued competition after privatisation, the exposure draft of the NBN Companies Bill (2010) (open an external site) provides that “NBN Co must take all reasonable steps to ensure that an unacceptable private ownership or control situation does not exist in relation to NBN Co.”9 However, the term “unacceptable ownership or control situation” is currently undefined. Thus, a retail service provider (or a consortium of such providers) theoretically might become a major shareholder of the NBN Co, and such ownership could lead (to some extent) backwards to the vertical integration model.
The NBN business model
As an open access network, the NBN will have a horizontally layered network architecture and business model that separates physical access to the network from service provisioning.10 Such separation is expected resolve long-standing structural problems that have limited the development of effective competition and investment.11 In particular, this model permits multiple providers to compete for end-user customers without duplication of infrastructure. This model will eliminate legal disputes between providers with regard to unbundling of last mile facilities.
As a wholesale-only network, NBN Co’s customers will be retail service providers (such as iiNet, TPG, etc) rather than end users.12 However, the exposure draft of the NBN Companies Bill (2010) provides that the Communications Minister may make exceptions to this wholesale-only requirement, if appropriate, so that NBN Co can provide services directly to end users (e.g., the government agencies). 13 Some retail service providers fear that this provision would allow NBN Co to compete against them for downstream markets, such as the market for service to governmental organisations.14 Consequently, these critics believe any provisions that allow NBN Co to provide retail service will undermine the network’s separation of the physical and service layer.15 However, the Communications Minister is obligated to consult with the ACCC with regard to implementing this exemption.16
Technical details of the network
NBN Co plans to offer a wholesale-only Layer 2 bit stream product in order to minimise its footprint in the overall value chain. NBN Co highlights that it chose Layer 2, which merely provides the means to transfer data between network entities, instead of Layer 3, which provides the actual routing functions, not for technological reasons but for sustainable strategic growth of the Australian ICT (open an external site) industry. This gives retail service providers significant ability to innovate and develop new services across the higher levels of the value chain.17
Current progress
Currently Tasmania has had the most development on the NBN and retail service is expected to begin in July 2010.18 Five sites in mainland Australia have also been selected to test-run the NBN before service is rolled out nationwide, though service in these areas is not expected to begin before early 2011.19
1 The Parliament of the Commonwealth of Australia 2008-2010, Telecommunications Legislation Amendment (National Broadband Network Measures — Access Arrangements) Bill 2010, Exposure Draft (12/02/2010) (PDF 97.90KB) ↑
2 National Broadband Network (open external site) ↑
3 NBN bid to stretch China ties (open an external site) ↑
4 Government invites National Broadband Network proposals (open external site) ↑
5 Id. ↑
6 Broadband gets go ahead (open an external site) ↑
7 National Broadband Network (open an external site) ↑
8 National Broadband Network (open an external site) ↑
9 The Parliament of the Commonwealth of Australia 2008-2010, National Broadband Network Companies Bill 2010, Exposure Draft (15/02/2010) (PDF 250.41KB), Division 3, ^42. ↑
10 Open Access Network (OAN) (open an external site) ↑
11 Australian Government 2009, National Broadband Network: Regulatory Reform for 21st Century Broadband Discussion Paper. ↑
12 Retail Service Providers (RSPs) (open an external site) ↑
13 Explanatory Notes For Exposure Drafts Of Bills (PDF 81.01KB) at p 3. ↑
14 Optus sides with Telstra in national broadband controversy (open an external site) ↑
15 Id. ↑
16 Exposure Draft (15/02/2010) (PDF 250.41KB) at ^9(4). ↑
17 Fibre, Wireless and Satellite (open an external site) ↑
18 Test customers set to pay $50 a month (open an external site) ↑
19 National Broadband Network test sites named (open an external site) ↑
