Building a national high-speed broadband network a titanic task

THE Rudd Government will be preoccupied with explaining the complications of emissions trading to voters for a long time yet. But Labor will also soon have to explain the practical details of another deceptively simple "big idea" it took to the election.

That was the promised $4.7 billion public investment to ensure that Australia got a national high-speed broadband network. This certainly sounded good, bolstering Labor's claim to have a grip on the future in contrast to a government stuck in the past.

Putting the idea into effect is proving much, much tougher. And there is little evidence yet that Communications Minister Stephen Conroy knows how to handle the conflicting pressures he once dismissed.

It's not just the inevitable delays with the timetable for selecting a winning tender, which is now stretching into next year, it's the whole, messy argument over the rules for the ownership, running and prices of the proposed new network.

Put simply, it's Telstra versus the rest.

That power equation is hardly unusual, of course. But it's far more significant in the context of Australia having a broadband network that Labor likes to describe as crucial to the country's economic and social future.

Indeed, Conroy likens the scale and importance of creating a fibre network to the building of the Snowy Hydro project.

It's actually more like a mirage -- shimmering on the horizon, but evaporating at close range.

So far, the jargon of telecommunications talk means the vicious fighting among those supposedly turning an idea into reality has largely gone unnoticed by voters. Time will run out.

The original tender deadline was scrapped after Telstra's competitors complained they didn't have enough details of Telstra's existing network infrastructure.

Telstra argues that this is yet another tactic to try to ensure the fibre-to-the-node network is either delayed as long as possible or never actually built.

Assuming the squabbling eventually stops, the would-be bidders will have 12 weeks to consider the information before putting in their proposals.

These will be considered by the Government's expert panel for another eight weeks with a recommendation -- optimistically -- by early next year. That's just to begin what will take several years to build.

But that's also assuming that some viable agreement actually can be reached. The government's election promise is for broadband for 98 per cent of the population that has a minimum speed of at least 12 megabits per second. Given the rapidity with which technology and demand are developing, that speed will soon seem extremely slow. But it certainly beats the average broadband speeds of about 1Mbps available to a majority of the population now.

Although wireless broadband is becoming ever more popular and ever faster, it doesn't replace the need for a fibre network, particularly given that wireless slows down the more people use it. At the moment, according to Telstra's head of regulatory affairs, Tony Warren, the 3G networks are averaging around 7Mbps to 8Mbps for most people using it at home, and much less if a lot of users jump on.

Not that everyone -- even if willing to pay -- is equal in the broadband world. About a third of Australian homes are within 1.5km of an exchange. That means they can already get the higher speeds available on current networks using ADSL2+ -- more like 24Mbps than 12Mbps.

Those homes largely but not completely overlap with suburbs and residences that have cable running down their streets -- which also gives them the choice of high-speed broadband.

Add in the central business districts where a variety of companies already provide high-speed fibre networks to offices. The result is that close to 40 per cent of Australians don't need to wait for a fibre-to-the-node network to get over the politically magic 12Mbps figure. They are often well over that and rising.

The catch is the rather large problem of the rest of the country.

Although there are at least three groups proposing state-based fibre networks, the only two players proposing a national system are Telstra and Terria, the consortium led by Singtel/Optus and formerly known as G9.

The government needs a national rollout. Its contribution of $4.7 billion effectively will be a subsidy to rural areas, where the numbers of people and distances involved mean it is otherwise not economic for anyone to build.

Despite the noise made by Terria, many in the market believe that it is not a real contender, particularly given the extraordinary difficulties in raising finance and the clear reluctance of Singtel to invest its own funds in Australia. That would make Terria's primary purpose to exert sufficient pressure on the Government to drastically limit Telstra's power.

This is most easily achieved by what has become the holy grail to Telstra's competitors -- structural separation, or the splitting of the wholesale and retail services from the fibre network. It would involve Telstra hiving off the network to a completely separate company. It is complete anathema to Telstra.

And for all the talk about this option, it is not going to happen -- at least not according to the Minister, who has repeatedly and publicly ruled it out.

What is far murkier is just what the Government will end up doing on what is called operational separation. That's where the network still remains under Telstra's ownership but would be run as a stand-alone business.
Over the years, attempts by the Howard government to enforce a modest version of this on Telstra were described by Stephen Conroy while in opposition as completely inadequate and a sham.

If he tries to harden this attitude in government by toughening the rules on Telstra running a distinctly separate network, Telstra would find the idea of investing in the new network far less appealing.

It argues the current system is already absurdly expensive and inefficient.

Sol Trujillo and the boys would fight any toughening as hard as they know how. That would mean, at best, yet more delays and legal brawling.

At worst, no deal whatsoever and Labor's grand broadband plan in tattered fibres.

This is all aside from the inevitable arguments between Telstra and the newly reappointed Graeme Samuel over pricing of the new services to consumers and rivals.

It makes the Snowy Hydro look like building a backyard pool. Stephen Conroy is yet to get wet.