Subject: Bombshells in NBN documents - Gillard government must pass - Australian
From: "Michael Andrews" <[email-masked]>
To: "Curtis Hastings" <[email-masked]>, "Devon Archer" <[email-masked]>, "Neil Callahan" <[email-masked]>, "Hunter Biden" <[email-masked]>, "Eric Schwerin" <[email-masked]>
Date: Wed, 3 Nov 2010 14:56:45 -0400

Bombshells in NBN documents
EXCLUSIVE: Annabel Hepworth and Mitchell Bingemann From:The Australian  
November 04, 201012:00AM
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THE Gillard government must urgently pass legislation to smash apart  
Telstra's near-monopoly position for the implementation of the $43bn  
NBN to proceed.

This has been revealed by previously secret documents.

A brief to the incoming government, obtained by The Australian under  
Freedom of Information laws, also makes the explosive revelation that  
NBN Co abandoned its support for key recommendations from the $25  
million implementation study on the NBN.

Despite NBN Co being "heavily involved" in the McKinsey-KPMG study,  
the briefing says that "significant differences" emerged over the  
recommendations relating to the design of the high-speed broadband  
network and the nature of the prices and products that NBN Co will  
offer to customers.

The revelation could shed light on the government's failure to release  
its response to 84 recommendations in the implementation study,  
despite Treasury making an "early priority" of responding to the study.

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The office of Communications Minister Stephen Conroy has been saying  
for months that the government would release the response "shortly".

The documents also highlight the massive funding task to roll out the  
network, confirming that the government would provide $26bn in equity  
funding. This is likely to be largely done through commonwealth-issued  
debt, leading to interest costs that would have a "negative impact on  
the budget bottom line", the briefing states.

Slabs of the documents released by Senator Conroy's department were  
blacked out. The documents would have gone to the minister soon after  
the election but there was no date on those released.

The briefing paper stresses the urgency of acting swiftly on the NBN.  
The government has been told that the laws to structurally separate  
Telstra must be passed during the spring sitting of parliament, due to  
finish on November 25.

Telstra has agreed to structural separation -- splitting its wholesale  
from its retail arm -- as part of its $11bn non-binding deal with the  
NBN Co.

The laws were re-introduced to parliament on October 20. Although  
there is now broad support for elements of the bill that deal with  
structural separation, a dearth of detail on the costings of the  
network have hindered the government's aims in getting the support to  
push the bill over the line.

Senator Conroy has been frustrated by what he claims is an attempt by  
the opposition to delay the bill. He has previously warned that its  
failure to pass could result in cost and timeline blow-outs for the NBN.

The bulk of the telecommunications industry has said that building an  
NBN without first overhauling the regulatory system could jeopardise  
the project.

According to the briefing: "The passage of this legislation will drive  
the timing of Telstra and NBN Co being able to finalise a deal."

Telstra chief executive David Thodey told investors at the company's  
annual strategy day in late September that passage of the law was  
fundamental to getting the deal approved by the board and shareholders.

He said the law needed to be passed between October and next March so  
that shareholders could vote on the deal before its deadline of next  
June.

Legislation requiring new property projects to be "fibre-ready" also  
needs to be passed "as early as possible" during the upcoming  
parliamentary sitting, the brief says. These new arrangements are  
supposed to take effect on January 1 and property developers have  
warned that their work on new construction has been plagued by  
uncertainty.

According to the documents, issues needing to be resolved include when  
NBN Co can start seeking contributions from developers in  
"particularly high-cost situations".

Other legislation setting up core aspects of NBN Co's role --  
including relating to its ownership and governance -- should be passed  
this session.

Another area where the briefing calls for urgency is in the release of  
a long-term digital economy strategy, noting that the government  
pledged a raft of e-health initiatives during the election campaign.

It warns that the government risks being criticised unless it has  
funded initiatives and says that "most serious funding activity can  
only be dealt with by user portfolios: health, education, etc".

On the matter of NBN Co having departed from the findings of the  
implementation study, the briefing specifies the contentious question  
of the number of interconnection points through which retail service  
providers can access the broadband network.

There have been recent tense talks between the NBN Co, Telstra and the  
Australian Competition & Consumer Commission over the matter, which  
led to an ACCC discussion paper late last month.

The documents suggest a tension between boosting competition and  
making the roll-out cost effective. Many telcos are threatening to  
seek compensation if the plan leaves their assets "stranded".

Additional reporting: Sid Mah