Australian government enters broadband business

Posted on April 7, 2009  /  0 Comments

Interesting route chosen by Australia: taxpayers will fund most of the costs of building the broadband network and the operators, including the formerly government-owned Telstra, will have to buy capacity on it to provide services. Unlikely to be effective in most countries, but Australia along with the Scandinavian countries was among the most advanced in providing services to most citizens during the period of government ownership.

Assuming that the backbone is relatively static technology, this might work as well as having a private entity operate the backbone under regulation. Given it will be an essential facility, there had to be regulation anyway.

One does have to ask why none of private bidders met the requirements. Were the risks too much? Did they want to lose?

THE federal government will establish its own company to build the national broadband network to provide faster internet across Australia. Prime Minister Kevin Rudd made the announcement during a joint press conference with Communications Minister Stephen Conroy and Finance Minister Lindsay Tanner in Canberra today.

Mr Rudd described the announcement as “historic”, describing broadband as the core of 21st century infrastructure.

The network, described as the single biggest infrastructure project in Australian history, will be built in partnership with the private sector. The new national broadband network will take eight years to fully roll out, and will cost taxpayers $43 billion.

While the Government will be the majority shareholder, it will also need significant private investment. That will be capped at 49 per cent.

Within five years after the network is built and fully operational, the Government will start selling off its majority stake. Not one of the private consortia tendering for the network met the government’s requirements, Mr Rudd said.

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