NewSat offers to buy NBN Co satellites


news Pure play satellite company NewSat has made an offer to the buy the National Broadband Network Company’s two satellites before they are even launched, as speculation continues to swirl around the potential privatisation of chunks of NBN Co’s infrastructure under the new Coalition Federal Government.

NBN Co is currently building two major, brand new satellites with the assistance of Space Systems/Loral under a contract worth some $620 million. The company plans to launch the satellites in 2015 to provide high-speed broadband coverage to about three per cent of premises that fall outside the reach of the NBN’s planned fixed-line and fixed-wireless services. The locations include outback areas and Australia’s external territories such as Norfolk Island, Christmas Island, Macquarie Island and the Cocos Islands.

NBN Co’s contract forms part of a total investment of approximately $2 billion required to deliver the NBN Long Term Satellite Service (LTSS). Under the terms of the contract, SS/L will also provide associated telemetry, tracking and command systems for NBN Co’s LTSS. NBN Co also signed a separate contract with Optus in February this year for the company to provide tracking, telemetry and control services to the satellites.

The launch of the satellites is widely anticipated in Australia’s rural communities. Currently, many residents and businesses in those communities are being served by either existing satellite services from other companies, or through NBN Co’s existing satellite services, which it operates through renting capacity on existing Optus satellites. However, the interim NBN satellite service has already reached its capacity cap of 48,000-odd customers, meaning many other rural customers will need to wait until 2015 to get upgraded services.

Simultaneously, while development of its satellite services goes on, NBN Co is also conducting a review of the future of the satellite and fixed wireless portions of its planned network. Yesterday, Sydney Morning Herald journalist Malcolm Maiden reported that new NBN Co chief executive Bill Morrow would seek to sell the networks to the private sector as soon as possible.

In a submission to the Federal Government’s Panel of Experts conducting a cost/benefit analysis of broadband and associated regulation (the Vertigan Review), published this week, existing satellite player NewSat made a bald offer to buy the infrastructure (PDF).

The company bills itself as Australia’s largest pure-play satellite communications company. NewSat specialises in global satellite communications and provides tailored teleport, VSAT and satellite services to 75 percent of the earth’s surface from its two teleports in Adelaide and Perth. The company has established a strong presence in the mining, oil and gas, telecommunications, government and military markets. The company also claims to have a strong relationship with most satellite operators offering services into Australia and our region from the 23 large antennas in the company’s teleports, and is also currently planning to launch two new satellites, Jabiru-1 and Jabiru-2, in the near future.

In its submission, NewSat wrote that it agreed the NBN satellites should be privatised. “To this end, NewSat lodged a proposal with the Government prior to Christmas to purchase the NBN satellites from NBN Co and to operate them as a wholesale service provider to NBN Co,” the company wrote.

“The NewSat proposal envisages the NBN Co paying a fee for the wholesale service for the life of the satellites plus one renewal. The fee must be guaranteed and must enable the purchaser to service debt and return a profit on the service in order for the business case to be sustainable.”

“Because the NBN Co is constrained to offer remotely disadvantaged NBN users a service at a comparable price to urban fibre users, the business case for providing the service is not sustainable based on the expectation of 3% of the user population. Therefore, with or without privatisation, the satellite service will have to be subsidised by NBN Co.”

“NewSat contends that privatisation will benefit the NBN Co by dramatically reducing debt and de-risking the provision of the service by introducing an experienced, efficient quality service provider. It is anticipated that this would also result in a significant reduction in staffing required by NBN Co.
NewSat believes that this type of agreement, subsidising specified services for a defined target population should underpin the sale and operation of the NBN satellite assets and service provision.”

NewSat added in its submission that it believed there was scope for any successful purchaser of NBN Co’s satellites to use the infrastructure to offer services beyond the subsidised services, provided that the provision of the subsidised services at agreed service levels was always the priority. “These should be offered by the purchaser of the satellites as commercial satellite products and should not be subsidised services,” the company said.

If the satellites weren’t sold, NewSat noted that it “strongly opposes” extending the range of satellite services offered by NBN Co to include enterprise users, particularly if the pricing of the services is fixed by a regulator and could benefit from subsidies. “This will run a real danger of negatively impacting the commercial satellite marketplace through artificially fixing prices and through dumping subsidised satellite capacity into an already competitive marketplace,” the company wrote.

Do I think NBN Co’s satellites should be sold before they are even built? No. Let the company build this infrastructure and get it fully operational. Then let NBN Co consider privatising it. Privatisation of partially built infrastructure, with no customers and the associated IT systems not completely set up, would be a recipe for disaster, particularly for end user customers caught in the flotsam of a sale, and would probably not deliver full value for NBN Co. It doesn’t represent standard practice for this kind of sale.

If NBN Co were to privatise its satellites, I think it would be much more likely in any case to sell the infrastructure to Optus, and not NewSat. Optus already manages NBN Co’s interim satellite service and will manage the new birds as well. Plus, there is no doubt that Optus has bigger pockets than NewSat and much more to lose, as it’s currently the dominant player in Australia’s satellite market (you may remember that Optus was actually formed originally from the government-owned AUSSAT group back in the 1980’s).

The only problem with this is that a sale to Optus would make Optus a vertically integrated satellite operator … and NBN Co is supposed to be a wholesale-only player. Decisions, decisions. So many decisions for the new Coalition Government.

Image credit: NBN Co


  1. There are no decisions to be made. Simply continue with the original plan, no issues at all.

    LNP are just making the issues, when none really exist.

  2. I think an important part the reason for the suggestion, that wasn’t really mentioned in the opinion, is that if the NBN satellites start providing non-residential access NewSat stands to loose some very lucrative contracts with the mining groups, and even some outback government locations which require more bandwidth.

    By purchasing the satellite – before it’s launched – they’re able to lock NBN into paying above market rates for many years to come, all while using the capacity to extend their own contracts. This would for example, allow them to repurpose an entire beam for a single contract providing a significant bandwidth to a single mine site, all while not having to contend with the situation where the mine could purchase capacity from elsewhere.

    This is simply a move to prevent any competition stealing their traffic (Current generation Optus satellites are not a viable competition for their markets)

  3. I could never understand why NBN Co seemed to decide to buy its own satellite before thoroughly looking at viable alternatives from existing service providers. Satellite technology (in terms of speed) is evolving as quickly as terrestrial services and therefore owning a satellite with a 25 year life span seems to assume a lot about the pace of technological change. In ten years time the 3% of rural Australia on the NBN’s satellite might be getting a service akin to “dial up speed” compared to what is then available from other providers.

    I also have never seen any estimates of the forecast utilisation of the NBN’s Satellite. What was their plan in respect of the spare capacity? Sell it off cheaply to other wholesalers, such as Newsat, who would use it to service the mining industry?

  4. “…would be a recipe for disaster, particularly for end user customers caught in the flotsam of a sale,..”

    Yes, because that hasn’t been the consistent pattern for the Noalition since coming to power. By offering a flotsam sale, the Noalition get the political advantage of blaming the significant loss on Labor”s NBN and guarantee themselves thousands in political donations for years to come.

  5. Does anyone really care in the end? It is only the last 3% we are talking about here.

    If we were really concerned we would have been asking why so many residents that were never remote to start with were getting satellite in the first place.

    At the end of the day, I think no one really cares and it is just another reason to have a partisan based stab at the current government, whom I agree they have gone full retard with the NBN… Labor only went part retard with it. ;)

  6. They argue that the Satellites were not overkill in the first place because ample space wasn’t available in the market place. I hope they considered hosted payloads/JV partnerships before committing to throwing around so much cash (for so little benefit really as Frank has said).

    Also remember who the parent company of Optus is…

  7. The recommendations of the (Labor-minority) NBN Senate Committtee included that any decision regarding privatisation should be left until the entire national broadband network is substantially completed.

    A purpose of this recommendation was to prevent private ownership before people understood the nature and value of the public asset which the government of the day was selling.

    Until the satellites are operational and have a sizeable user base, it would be imprudent to allow sale of any part of the infrastructure, including base stations, longhaul links and satellites.

  8. My my. NewSat jumping up and down saying ‘Me, me, me.’
    Just as they did when the contracts were announced by NBNCo as being awarded to Space Systems/Loral

    Just the latest of the circling jackels impatient for the Liberal Govt and Turnbull to kill off the NBN.

  9. Let’s hope, or perhaps contribute to, the term “impeachment” being considered alongside any “privatisation” A government is supposed to work in the national interest, any clear devaluation or outright sabotage of national assets, existing or upcoming, especially for the purpose of party politics should be thoroughly investigated. There is already a new trend to examining all the decisions of the previous Labour goverment, an eye should be kept open for reciprocal examination in future.
    Penalties for outrageously bad decisions (desalination plant, made in the face of a lot of contraindications) would go a long way to improving the Australian political scene. Parliamentary priviledge, say what you like about who you like with impunity, perform badly in your portfolio… and get rewarded for life regardless.
    Unfortunately the Yes Minister rule applies, what politician would vote to change the system that put them in power?

  10. Considering how often Australia has droughts, desalination plants make a lot of sense.

    Can’t disagree with the rest of it though.
    I believe the QLD government passed a bill to make it illegal for politicians to make statements that they knowingly knew to be false. It would be nice if they’d do the same in Canberra.

  11. Makes no sense to let Optus have the whole show. Yes they should handle the retail side of things that’s what they are best at. BUT satellites not owned by an Australian company? Most have forgotten or never knew about the quotations below.

    “The Singapore-owned telco has been at the heart of allegations at home that it’s been used to spy on its own people and its links to the ruling oligarchy and the military in the island state are profound. So, can we secure our own telephones if SingTel takes over Optus?”

  12. I think NBNCo shouldn’t pay for the satellite until it is launched and operational, it’s like your just paying something you wont have yet. NBNCo maybe agree with NewSat that it should pay for some percentage so they can operate but full payment will be done upon launch and operation.

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