NBN wholesale costs to rise under minority government agreement, but experts say regional rollout won’t add to price tag

Changing the rollout of the National Broadband Network to service regional areas first will not increase the project’s overall price tag, but creating a uniform wholesale price will mean urban areas will pay more than they would have otherwise, one telco expert says.

The comments come as the telco industry has breathed a collective sigh of relief following yesterday’s announcement that Labor has won power through a minority government, ending weeks of speculation about whether the NBN would actually go ahead.

Ovum research director David Kennedy says the promise to create a uniform wholesale price will mean urban areas pay more than they would otherwise. However, he says the wholesale price hasn’t been set and any discussion about pricing is purely hypothetical.

“The whole purpose of a uniform national wholesale price is for the cities to subsidise the bush. That will be passed on to the end user,” he says.

“However, we don’t know what the wholesale price will be and that is very difficult to predict. The wholesale cost will not reflect the cost of the whole network. To be frank, we simply don’t know what the wholesale pricing will be… but it will be passed on to the end user.”

Communications minister Stephen Conroy confirmed this morning the NBN will change its timetable to shift more focus onto regional areas, as per a deal negotiated with independents Rob Oakeshott and Tony Windsor. Windsor in particular said the NBN was one of the key points in his decision to back a Labor government.

“We’ll be talking to the team at (NBN Co) over the next few days about how we can redesign the roll out timetable,” Conroy said this morning. “So this is a question of a timetable about where they’ll start, rather than any increase in cost.”

“It will mean that we’ll be focussed more regionally than we otherwise would have been.”

While Kennedy says this won’t increase the cost of the network, it will instead bring forward some of the most expensive rollouts including wireless and satellite technology.

“I don’t believe it will affect the overall price because rolling out in rural areas was always envisaged. But it will bring forward the most expensive part of the network, and that’s the big change we can expect to see.”

“But it’s hard to say whether this is a change at all, because we’ve never actually seen a full timetable for the rollout. And ironically, this first rollout looks a lot like the Coalition’s plan. But we have to keep in mind there was never a commitment to rolling out in cities first, so this just provides opportunity to give clarity about their planned sequence.”

Telsyte research director Foad Fadaghi says the decision to roll out the NBN through regional areas first makes sense given the biggest backspots are located in the country.

“It makes sense to roll out first in areas that have been underserviced, seeing as the priority should be to get access in the first instance, rather than just the high speeds that were talked about in much of the campaign.”

Meanwhile, the telco industry has welcomed an end to the uncertainty surrounding the future of the NBN. In a statement, Optus director of government and corporate affairs Maha Krishnapillai agreed the project is necessary.

“Optus welcomes the decision by the two independents to support a minority Labor Government under the leadership of Julia Gillard. As acknowledged by both MPs broadband it is crucial to Australia’s future prosperity and fibre is indisputably the best way to deliver high speed broadband for the long-term.”

“As Tony Windsor said and we agree: ‘You build it once. You build it right. You build it with fibre’.”

The Australian Information Industry Association also welcomed the decision, saying it would once again place an emphasis on the need for high-speed universal broadband.

“Given the high level of significance of the broadband issue, and in particular its resonance with the independents, we now expect to see the rollout of the NBN prioritised in this Government’s term,” chief executive Ian Birks said.

“Both independents identified broadband as a major factor in their decision; we welcome this recognition for the importance of technology infrastructure to the future of the Australian economy, and particularly the emphasis on the need for consistent levels of access at a national level.”

Birks also called for the creation of a “digital economy implementation summit” to be held with industry representatives within the first three months of the new government.

iiNet managing director Michael Malone gave a much more succinct reaction on Twitter, saying only, “Oh goodie. We’re going to have an NBN”.