The Australian Government in a surprise move said it plans to back a $43bn national high speed broadband network, with investment from the private sector, after the global financial crisis decimated any hope of a single private company completing the project. The Government said it will set up a new majority-owned company to build a high speed, fibre-to-the-premises network, but said it wants investment from the private sector. All telecommunications groups, including the nation's dominant telco Telstra, can participate in the new network, which the government expects will create thousands of new jobs, Rudd said. Broadband speeds in Australia lag well behind those in many other advanced nations and the issue has caused headaches for lawmakers. The new network will reach 90% of Australia's wide-spread population by 2018. Those not served by the FTTP network will be served by wireless technology, Rudd said. The private sector can hold up to 49% of the new company. Finance Minister Lindsay Tanner said that "time will tell" on how much the private sector is willing to tip into the new network in the current credit constrained environment.
Canberra will initially invest $4.7bn in the wholesale, open access network. The amount is unchanged from an election commitment the government made in late 2007. The government plans to fund its investment in the company, which will be sold down within five years of completion, through the government's Building Australia Fund and then through issuance of so-called Aussie Infrastructure Bonds that will allow households and institutions to invest in the network. While the government will have control of the network it also will have to take on a much greater debt burden and risks from building the infrastructure at a time when its fiscal position is already under tremendous pressure. Still, Finance Minister Lindsay Tanner said the project wouldn't affect Australia's AAA sovereign credit rating.
For Telstra, the announcement means that it can participate in a network that it had previously been excluded from, but it won't be able to control the process as it might have wanted to. Telstra welcomed the announcement, and Chairman Donald McGauchie said the company would immediately review the government's proposal, which it said is unlikely to affect earnings any time soon. "We will work with the Government to assist with the implementation of its strategy, but will remain at all times committed to ensuring the best interests of our shareholders, employees and customers," he said. "The new NBN will have little short-to-medium-term financial impact on Telstra's business as it would take at least eight years before it is completed," he said. TLS rose 14 cents (4.36%) to $3.35.