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Federal Government ditches broadband policy -

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Federal Government ditches broadband policy

The World Today - Tuesday, 7 April , 2009 12:10:00

Reporter: Lyndal Curtis

PETER CAVE: The Federal Government has junked its national broadband network policy after failing
to get what it wanted from the tender process.

Instead, there's a whole new scheme that the Prime Minister promises will deliver much faster
broadband speeds to 90 per cent of the population and faster than promised to everyone else.

There will be a new, majority Government-owned company, with taxpayers' money and funds from both
the private sector and private investors.

Our chief political correspondent, Lyndal Curtis reports.

LYNDAL CURTIS: As the Prime Minister's so fond of describing things these days, this is a glass
that's both half empty and half full.

Half empty because the broadband policy Labor released just over two years ago is now consigned to
the scrapheap and the highspeed broadband it promised will take years longer to deliver.

And, according to the Prime Minister, it's the global economic crisis that has killed the
Government's plan, meaning companies couldn't deliver what it wanted.

KEVIN RUDD: We've actually tested the market through the exercise we've been through.

Shaped by the current state of the global economy, that has not produced an outcome which we
believe - and we've been advised - makes the best use of the taxpayer's dollar.

LYNDAL CURTIS: So, he says the Government's decided to step in.

KEVIN RUDD: I don't intend to be Prime Minister of Australia which consigns our 21st-century to a
20th-century technology. I just don't intend to do that.

This new, super fast national broadband network is the single largest nation-building project in
Australia's history.

It is the most ambitious, far reaching and long term nation-building infrastructure project ever
undertaken by an Australian government.

LYNDAL CURTIS: The glass is half full because what will be delivered over the next seven to eight
years - starting in Tasmania in July - is much faster broadband than promised.

What was promised is 12 megabits per second to 98 per cent of households.

What's now promised now is 100 mega bits per second for 90 per cent of homes and businesses,
through fibre right to the home instead of just to the curb.

The remaining 10 per cent will get the 12 mbps promised through wireless and two new satellites the
Government will launch.

KEVIN RUDD: We've decided, given the current state of the global economy, to step over this stage
of broadband network development to where the economy would need to land anyway.

This is a huge enabler for the Australian economy for the 21st century. This is a very big project.

LYNDAL CURTIS: And the cost has grown from an estimate $10 to 15-billion, to $43 billion.

So where's the money coming from?

The Government is putting in the same amount it has promised; $4.7-billion into the new company
that will be set up in the same way as Australia Post is set up - a Government business enterprise.

The private sector will put in up to 49 per cent of the costs, about half the rest will be raised
by the company, and the other half raised by selling infrastructure bonds to investors.

An implementation study over the next eight to nine months will decide on the fine details.

But the Treasurer Wayne Swan believes the money will be raised without any impact on Australia's
sovereign debt rating.

WAYNE SWAN: And I think there'll be a lot of interest, particularly from retail and investors, in
Aussie bonds.

I believe this is a responsible investment.

We are establishing a commercial entity; we are putting it together on commercial terms; and it
should give a return over time to the Australian people.

LYNDAL CURTIS: There will be a cap on the amount each private sector company can put in, but five
years after the project is completed, the Government will start getting out of the broadband
business, selling down its stake if market conditions and national and identity security
considerations allow.

But the new company is being built to compete with the other major player in the telecommunications
world - Telstra.

KEVIN RUDD: Today's decision also injects a new competitive force in the Australian
telecommunications market.

The broadband network will be Australia's first national wholesale-only, open access broadband
network not controlled by Telstra.

This solves, once and for all, the core problem created when the previous prime minister privatised
Telstra a decade ago without ever resolving the conflict of a private monopoly owning the network
infrastructure and dominating the retail market.

LYNDAL CURTIS: But while Mr Rudd is selling the new company as a competitor for Telstra, the
decision does let Telstra - which had been excluded from the old process after not putting in a
full bid - back in.

No company will be excluded from investing in the new body, meaning if Telstra wants to put money
in, it can.

But it also seems likely that this process will end up with what's called the structural separation
of Telstra - splitting its wholesale and retail arms.

The Government's set up a review of regulation and it includes separation as one of the options.

At the end of the process, the landscape for telecommunications in Australia may well be
significantly changed.

PETER CAVE: Lyndal Curtis with that report.