news Communications Minister Malcolm Turnbull has reinstituted a direct consumer subsidy scheme very similar to the Australian Broadband Guarantee program initiated under the Howard administration, in a move which will directly fund some 9,000 premises to access satellite services from commercial providers that are not NBN Co.
The Australian Broadband Guarantee was instituted in early 2007 and ended on 30 June 2011. Funded to the tune of $162.5 million, it followed the similar Broadband Connect program also instituted by the Howard administration, and sought to provide residential and small business premises throughout Australia with a high-quality broadband service regardless of where they were located. The service was typically taken up Australians living in remote locations for whom pricey satellite access was the only broadband available in their area.
The service was eventually ended under the tenure of then-Labor Communications Minister Stephen Conroy in 2011, as the Government changed its focus from direct subsidies to building out its National Broadband Network policy. However, existing users of the subsidy were able to continue using it.
To serve the needs of rural and remote users, 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.
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 44,000-odd customers, meaning many other rural customers will need to wait until 2015 to get upgraded services.
In addition, that interim satellite service is not just reaching its capacity in terms of the number of users who can connect to the service, but also in terms of the experience each user is able to achieve on the platform, with congestion starting to occur.
To deal with these issues, yesterday Turnbull formally announced measures he had already discussed in Parliament, including the fact that $18.4 million will be spent on delivering additional capacity to the existing 44,000 users of the interim satellite service.
“Each user will receive around a third more capacity, which will enable them to carry out tasks like email, Internet banking and Voice over Internet Protocol (VOIP) services, such as Skype, during peak periods,” the Minister said in a statement issued yesterday. “NBN Co and retail service providers continue to work together to ensure that the end user experience is consistent with expected outcomes.”
Secondly, new monitoring tools are also being put in place to allow the NBN Co to better manage existing capacity, in a new “fair use” policy approach. This means, according to Turnbull, that retail providers will be better able to manage “high end” users “unfairly” slowing the service levels of all other users.
However, it is the last measure which may prove the most controversial for the Minister. Turnbull also said yesterday:
“In addition, the NBN Co has agreed to establish a subsidy scheme to allow up to 9,000 homes, farms and small businesses unable to access the ISS to access commercial satellite services. Similar to the Australian Broadband Guarantee, the new scheme will subsidise the cost of in-premises equipment and its installation. Retail service providers will set the price of the broadband packages available to consumers.”
The news comes as NBN Co is also conducting a review of the future of the satellite and fixed wireless portions of its planned network. Several weeks ago, 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. Pure play satellite company NewSat has already made an offer to buy the satellite infrastructure. Yesterday Turnbull committed to releasing the fixed wireless and satellite review publicly “this month”.
It might seem like a small deal for NBN Co to initiate this direct satellite subsidy program. But it’s absolutely not.
The model which NBN Co has taken up until now was that of a national wholesale telco providing services to Australians. This is an “infrastructure” model which is seeing the company deploy its own telecommunications infrastructure. In contrast, the Australian Broadband Guarantee approach was a direct subsidy to end users to allow them to buy services from commercial telcos with their own infrastructure.
It’s no secret that the Abbott administration would prefer to take this approach to deal with rural and regional broadband users, rather than NBN Co building out its own infrastructure. Abbott and Turnbull, after all, were ministers in John Howard’s administration, which always preferred the subsidy approach, and the $100 million promised by the Coalition during the Federal Election to fix mobile blackspots is also a direct subsidy model.
However, seeing Turnbull reference the Australian Broadband Guarantee so explicitly here constitutes a clear signal being sent to the rest of the telecommunications industry: NBN Co is now being opened to the direct subsidy approach, and it will be used where the Minister deems it appropriate.
Personally, I strongly expect the upcoming review of NBN Co’s satellite and wireless operations to outline the sale of at least the satellite division, including the upcoming birds to be launched. Most likely they will be picked up by Optus, which is already managing much of the operations to do with the new satellites, as well as the interim satellite service. We’re seeing this signposted pretty clearly here, both though the direct subsidy hints as well as Turnbull’s mention that the satellite and wireless review will be released publicly, and Malcolm Maiden’s shadowy article in the Sydney Morning Herald last month.
Privatisation, direct subsidies, winding back government ownership of infrastructure. It’s a clear pattern and I don’t think anyone in the telecommunications industry should be surprised to see this approach coming from the Abbott administration, which is taking the exact same approach in several other areas.
Image credit: NBN Co