NBN Update No.3: NBN Legislation & more
25 February 2010

1. NBN Co Limited: exposure drafts of legislation released

The Government yesterday released exposure drafts of legislation to establish a regulatory framework for the National Broadband Network Company, NBN Co Limited (NBN Co). The two draft bills, released following a public consultation process on the legislative framework in July 2009 through which more than thirty submissions were received, are the:

• National Broadband Network Companies Bill 2010, and
• Telecommunications Legislation Amendment (National Broadband Network Measures – Access Arrangements) Bill 2010.

On the release of this draft legislation, Minister for Broadband, Communications and the Digital Economy, Senator Conroy said: “These bills deliver on the Rudd Government’s commitment to change the competitive dynamics of the telecommunications sector by ensuring NBN Co will operate as a wholesale-only company, offering open and equivalent access."

National Broadband Network Companies Bill 2010 (the NBNCo Bill)

The NBNCo Bill establishes the regulatory framework covering NBN Co’s ownership and operations, and deals with how the Commonwealth’s stake in NBN Co will be sold.

The NBNCo Bill comprises seven parts, arguably the most important of which are:

• Part 2 – which deals with the operations of NBN Co Limited, NBN Tasmania Limited and any additional wholly-owned subsidiaries of NBN Co, and details the rules about the supply of services by NBN Co, including that such supply must be on a wholesale basis
• Part 3 - which deals with the ownership and control of NBN Co and sets out the Commonwealth’s majority ownership provisions and arrangements for terminating those provisions and introducing an NBN Co sale scheme
• Part 4 – which sets out reporting obligations on NBN Co while the Commonwealth’s majority ownership provisions are in force, and
• Part 5 - which establishes an anti-avoidance mechanism under which NBN Co must not enter into or carry out a scheme for the purpose of avoiding the application of any provision of the Act.

Telecommunications Legislation Amendment (National Broadband Network Measures – Access Arrangements) Bill 2010 (the Access Bill)

The Access Bill amends the Trade Practices Act 1974 (the TPA) and the Telecommunications Act 1997 so as to introduce new access and equivalence obligations relating to the supply of wholesale services by NBN Co and its wholly-owned subsidiaries.

The Access Bill builds upon recent reforms to the telecommunications competition regime introduced through the Telecommunications Legislation Amendment (Competition and Consumer Safeguards) Bill 2009 (the CCS Bill), the goal of which was to reform the access regime in Part XIC of the TPA to reduce delays and opportunities for gaming and to provide upfront certainty as to access prices and terms. NBN Co will be subject to the reformed access regime implemented by the CCS Bill, but specific amendments are introduced by the Access Bill to reflect the unique wholesale only nature of NBN Co.

The Access Bill sets out three mechanisms under which NBN Co may provide services. Firstly, NBN Co may publish a Standard Form of Access Agreement (SFAA) in relation to a service, or give a Special Access Undertaking (SAU) to the ACCC in relation to the provision of access to a service. Secondly, if the Minister makes a condition of NBN Co’s carrier licence that it must supply a specified eligible service that NBN Co is not currently supplying, NBN Co must give a SAU or formulate an SFAA in relation to that service. Thirdly, the ACCC may declare a service that NBN Co has not indicated it will supply, but which the ACCC considers would be in the long-term interests of end-users to supply.

What happens next?

The Government is seeking feedback on the draft bills between now and 15 March 2010. Senator Conroy stated in the joint media release:

"Before we introduce the bills formally we are keen to seek further feedback from key stakeholders to ensure we get the details right. We have an open mind on any amendments put forward that we believe can improve the bills."

The Government then proposes to introduce the bills into Parliament in the Autumn or Winter sittings, depending on the feedback it receives.

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2. Telecommunications Legislation Amendment (Competition and Consumer Safeguards) Bill 2009 delayed

• This bill contains provisions in relation to a mandatory functional separation or voluntary structural separation by Telstra, as well as in relation to reforming the current access and anti-competitive conduct regimes. Additionally, Telstra is to be limited from being able to purchase future wireless spectrum and potentially divest its interest in Foxtel and its ownership of its HFC network if a suitable structural separation proposal is not put forward.
• Telstra’s proposal was originally due at the end of 2009 but Telstra and NBNCo are currently still in negotiations.
• This bill is now scheduled to be put to the Senate in late February after it was pushed back from its original date of 2 February 2010.

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3. Terms of Engagement between Telstra and NBNCo

• On 18 December 2009, NBNCo and Telstra agreed on “Terms of Engagement” in relation to their negotiations for a "preferred model for any agreement which would see a progressive transition from Telstra’s copper access network to a fibre to premise National Broadband Network."

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4. Third report from the Senate Select Committee on NBN

• In November 2009, the Senate Select Committee into the NBN released a report which recommended that the government should provide a rigorous cost-benefit analysis of the proposed NBN, an interim implementation study report, a skills audit as well as work towards bringing forward legislation to provide the funding and a proper governance framework for NBNCo.
• This report also recommended that the government include in its implementation plan its intention to prioritise “the needs of underserviced communities, particularly those in regional, rural and remote areas" as well as provide a detailed business plan for Tasmania's NBN rollout by the end of 2009.
• The terms of reference for the Senate Select Committee were also revised to enable scrutiny of the NBN Implementation Study.
• The final report is due by 30 April 2010.

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5. Regional backhaul blackspots tender awarded to Nextgen Networks

• In December 2009, Nextgen Networks was awarded this contract and are to operate and maintain the backhaul links for 5 years. The network is planned to have an initial capacity of 10Gbps as well as the ability to be upgraded in 10Gbps increments.
• NEC subsidiary Nextep has already been signed on as the first ISP to use this network.

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6. NBN Co requests capability statements from potential FTTP suppliers

• In December 2009, NBNCo requested that potential suppliers provide capability statements for GPON and point-to-point ethernet technology deployment by 21 December 2009 with shortlisted candidates being briefed earlier this month. The RFP was planned to be released on 15 February 2010 with the deadline for proposals 15 March 2010; however the RFP has not yet been announced.
• NBNCo is not yet seeking statements from suppliers of optical fibre cables. These statements reinforce its intention to build a Layer 2 network.

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7. Fibre In Greenfield Estates: Telecommunications Legislation Amendment (Fibre Deployment) Bill 2010

• On 23 December 2009, this bill was released. It amends the Telecommunications Act 1997 to require that all estates that receive planning approval from July 1, 2010 are built with FTTP connectivity i.e. an "optical fibre line."
• The initial provision in this bill notes that this rule would apply to both "building lots" and "building units" with the relevant minister, in this case Senator Conroy, given the ability to determine which types of housing estates this will apply to and what estates are exempt.

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8. Industry briefings in Sydney and Melbourne

• In January 2010, NBNCo held two industry briefings in Sydney and Melbourne based on an industry consultation paper about the high-level network architecture and proposed wholesale bitstream product definition.
• At the Sydney briefing, Mike Quigley, CEO of NBNCo said that NBNCo was not planning to use existing HFC networks in its creation of the NBN which proved disappointing news to those companies hoping to vend in their existing HFC networks.
• Additionally, the session focused on the fact that the NBN would be a Level 2 product to best encourage competition in the marketplace. Submissions on the bitstream products discussion paper closed 12 February 2010.
• NBNCo requests capability statements from potential satellite internet services suppliers.
• On 19 January 2010, NBNCo issued a request for capability statements for the delivery and operation of satellite internet services with the intention of releasing an RFP for these services.

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9. Auditor General report on the initial failed NBN tender process

• On 3 February 2010, the Auditor General released a report on the initial NBN tender process in 2008. He found that the total costs of the process was approximately $30 million. Of this, approximately $17 million were taxpayer funds as part of the Department of Broadband, Communications and the Digital Economy’s costs and the rest was incurred by the bidders.

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10. Senate Estimate Hearings

• On 5 February 2010, a senate estimate hearing was held which highlighted the appointment of Mike Kaiser, former ALP state secretary in Queensland and chief of staff to Queensland Premier Anna Bligh to the position of Head of Government Relations and External Affairs in a process where the job was not advertised and there were no other candidates. Mike Quigley has defended the appointment, saying that the process was appropriate in terms of efficiency and Mike Kaiser’s suitability for the position.

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11. Google as an ISP

• Google has recently announced its decision to trial 1Gbps FTTH broadband as an independent ISP in certain areas in the USA. However, Google Australia has confirmed that they currently do not have plans to recreate this trial in Australia.

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12. Rollout

• In December 2009, John Holland was awarded the contract to install backbone fibre for Tasmania’s pilot program. Completion has been planned to occur in March 2010.
• The Nextgen team began work in Mount Isa, QLD on the regional backhaul blackspots program on 17 February 2010. This is the first regional work done for NBN in mainland Australia. Corning Cable Systems has already started on the process of laying the first NBN fibre in Tasmania.
• In December 2009, Tas NBNCo announced that it had signed a letter of intent with Opticomm to supply and manage the active components of the network which are to serve the towns of Smithton, Scottsdale and Midway Point. Opticomm has announced its intention to deliver trial services to the NBN’s first customers by March 2010 and to have hundreds of customer connections fully operational by July 2010.
• On 8 February 2010, Mike Quigley said to the Senate Standing Committee on the Environment, Communications and the Arts that NBNCo expects to start work on mainland test sites for the NBN early in the second-half of this year.
• Mike Quigley has described the roll out of the network as being conducted in three stages:
  • deploying passive network components e.g. fibre optic cable;
  • deploying active network equipment which would include access nodes within customer premises; and
  • working with retail service providers to provide them with the appropriate network access and test services.

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New appointments to NBNCo

• Head of Construction - Patrick Flannigan, founder of Service Stream
• Two new directors:
  • Clem Doherty – He has been an experienced member of Government taskforces and review panels and has also worked as an advisor to telecommunications companies.
  • Terrence Francis – He has had experience banking and finance including as managing director of Bank of America in Australia and executive director of Deutsche Bank locally.
• The NBNCo now has 112 staff. It expects to recruit 300 by June 2010.

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