The National Broadband Network Company today signed several major billion-dollar contracts that will allow it to proceed to roll out its planned fibre network in several major states, as well as its wireless network covering a smaller proportion of the population nationally.
The first contract is with construction firm Silcar, a joint venture between electronics specialist Siemens and construction giant Thiess. Worth $380 million over the next two years, with the option to extend for a further two years with an additional value of $740 million, the deal will see Silcar and contracting partners roll out the NBN in NSW, Queensland and the ACT.
It represents almost 40 percent of the national construction activity planned for the NBN over the next two years, and is slated to see about 390,000 premises receive services.
The deal ends much of the uncertainty surrounding NBN’s construction rollout following the resignation of its head of construction Patrick Flannigan in April this year, after NBN Co’s talks with the construction industry over contracts broke down. Silcar was the construction partner responsible for the NBN early stage rollout in the test sites in the city of Armidale in NSW.
NBN Co head of corporate services Kevin Brown acknowledged in a press conference today that the cost of Silcar’s services had come down, but said he wouldn’t describe NBN Co’s previous negotiations with the industry as ‘price gouging’, as some commentators have characterised it.
“Through the negotiations, NBN Co and Silcar have established the optimal balance between price reductions, certainty of volume, location of premises, appropriate payment terms and the benefits of initial exclusivity to defray overheads,” he said in a separate statement. “Achieving this result would not have been possible negotiating with multiple partners concurrently.”
Discussions has also commenced with a select group of construction companies for all other regions in Australia, with talks expected to be finalised over the coming months. Silcar is to construct nine of the second release sites in the NBN network — with the remainder being in other states.
In a separate deal, NBN Co has inked a $1.1 billion contract with Swedish networking giant Ericsson to roll out its planned 12Mbps wireless network to premises which won’t be covered by the national fibre rollout. The wireless service and an additional satellite service are designed to service a seven percent remainder of the population.
The 10-year contract with Ericsson will see the company design, build and operate a fixed wireless network using the same Long-Term Evolution (LTE) standard which telcos like Telstra are already deploying in their own mobile networks.
However, NBN Co chief technology officer Gary McLaren today went to lengths to emphasise the differences between the NBN Co wireless network and existing mobile networks, pointing out that NBN Co’s network would be utilised by routers fixed to buildings, as opposed to mobile networks, which let consumers roam around with mobile devices.
The network will initially provide peak speeds of 12Mbps, although McLaren acknowledged that NBN Co would look at the potential to offer higher speeds in future after they could assure a certain base level of service to all customers in each area, and technology in the area also developed. He said the latency on the wireless service would be similar to that on existing 3G mobile networks.
The first services on the wireless network will be available from mid-2012, although NBN Co has not yet confirmed which locations will be first to receive the service. However, the entire wireless network will be completed by 2015 — much faster than the wider fibre rollout.
“It’s only right that those parts of the country with some of the poorest access to high-speed broadband should be among the first to receive the National Broadband Network, either via satellite or the fixed wireless solution we are announcing today,” said Brown.
NBN Co has initially entered into what it has described as a 12 month ‘turnkey’ arrangement with Ericsson, to enable a fast start to construction and delivery, but anticipates taking greater responsibility for construction and operation of the wireless network over time.
With a spectrum buy in February from pay TV operator Austar, NBN Co has enough wireless spectrum to meet most of its needs; however, it still needs more spectrum for Western Australia and the Northern Territory, which it hopes to acquire through the Australian Communications and Media Authority’s upcoming allocation process.
The Ericsson deal invites comparisons with Telstra’s billion-dollar contract with the Swedish company to roll out its flagship 3G network nationally. At the time, Ericsson acknowledged the telco pushed it hard to get the network done, with Ericsson hiring staff around the nation to match Telstra’s gruelling schedule. The Swedish company is still highly involved in supporting and developing the Next G network.
Video credit: Delimiter. The video features (from left), Ericsson Australia managing director Sam Saba, Kevin Brown, and Gary McLaren