TASSIE BROADBAND EOI DOOMED TO FAIL – DECEMBER 2003
Some 18 months ago I congratulated the Tasmanian government on its foresight in using their gasline projects to also establish a broadband network. The plan (which has since been abandoned) was as follows:
Basslink (the electricity interconnecter between Tasmania and the mainland) – will have a fibre cable to be lit at end of-2005.
Deploy an optical fibre backbone (called TAS21 by Downer Engineering) next to the overland north-south and north to northwest gas transmission pipe in Tasmania. Completed by Downer Engineering in November 2002
Select a gas distributor able to roll out gas aggressively to as many population centres as possible and encourage the chosen party to consider a broadband roll-out in parallel with gas, or allow a third party to access open trenches to co-locate broadband telecommunications infrastructure with gas pipes.
It therefore came as a complete surprise when, out of the blue a few days before Christmas 2002 (a year ago), the government changed its gas distribution plans and appointed a small overseas company (PowerCo New Zealand) to build a very selected gas distribution network – over a very extended timeframe (seven-plus years), and also without any apparent commitment towards utilising the fibre project to commercialise the fibre-optic backbone. This revised gas project doesn’t have a commercial reality that would make it an economically feasible option to be used for a broadband roll-out.
A year later, and it is still unclear what exactly happened behind those closed doors in Hobart. Ever since that time the government has been back-pedalling, trying to get itself out of the morass.
After the startling Christmas 2002 back-flip it was obvious that a business case no longer existed for Downer to develop the TAS21 fibre-optic telecommunications network in Tasmania. Downer looked at a range of alternatives during early 2003, but was unable to secure the state government’s cooperation for alternative broadband plans.
The key issue was that Downer attempted to aggregate telecoms demand from the government for use as an anchor tenant service on the new broadband network. With this initial ‘secured’ revenue the broadbanding of Tassie could have become a reality. However the government refused to consider that option. Consequently Downer’s business case fell through and the government bought the fibre network out, at a cost of $23 million.
Despite numerous efforts the government was unable to find another partner to execute a broadband plan. There is no doubt that they have missed out on a once-in-a-lifetime opportunity to combine two residential infrastructure roll-outs – gas and broadband.
In its May Budget the government established an infrastructure fund and it looks as though this could provide some more money to be used for the broadbanding of Tasmania.
In that same announcement the government indicated that its original vision was still in place. However, without a good business model it will be impossible to implement that vision. Their present plan appears to be a very complicated, irksome and confused way to turn that vision into workable strategies.
An open Expression of Interest (EOI) process, released in December 2003, is now aimed at identifying strategic partners, for both ‘last mile’ service provision and network management. It is a ‘try anything’ plan; however, the underlying elements of the plan remain shaky. The infrastructure now needs to be rolled out separately from the gas pipes, and this will make the broadbanding of Tassie a very expensive exercise. Furthermore, the government is once more stressing the fact that its current telecommunication business cannot be taken into account in any responses to the EOI.
The sad fact is that the handling of telecommunications in Tasmania and the current EOI documentation clearly indicates that the government doesn’t appreciate what is needed for a complex, island-wide broadband network. This is not something that a few fringe operators can put together on a Saturday afternoon.
And apparently their advisors don’t understand it either. There are now plenty of examples in Australia and around the world that can be used as case studies on how to move forward. Even the technical elements of the EOI don’t make sense, so what hope is there of Tassie getting a proper broadband network? I would like to be proved wrong, but the EOI is bound to fail in the delivery of a comprehensive broadband solution for Tasmania.
It was interesting to note that Telstra is specifically excluded from this EOI. However, one has to realise that they are currently the major beneficiaries of all the government’s telco business. Telstra already has the business that other companies would need to make the broadbanding of Tassie a reality. One of the few potential outcomes of the current EOI is that nobody will be interested in the government’s plans, and that thus the broadbanding of Tasmania will automatically flow back to Telstra.
By April 2004 the government hopes to have a better understanding as to whether they will be able to find partners for their broadbanding plans. My question would be ‘what’s going to change?’ During the course of 2003 virtually everybody in the industry had a look at the government’s plans and to date nobody has put up their hand. AAPT had a look at the Tassie telecoms market years ago, but, despite their foothold in the market, they have never shown any further interest. And, as far as I am aware, Optus has never shown any serious interest in the ‘Apple Isle’.
It will now be up to the industry fringe participants to throw their hats into the ring and come up with their usual array of half-baked solutions, hoping to ride across the line on the government’s apron strings.
It is sad to see that the government is ignoring the people outside the government who have been advising it on what strategies are needed to broadband Tasmania. These are the people who know how to run networks and what business models are needed to make the process work. Their expertise on broadband matters is far more comprehensive that that of the government and their internal advisors. The broadbanding of Tassie will, from a commercial perspective, always be a marginal business at best; and it will most probably cost taxpayers money.
At the same time, governments elsewhere in the world are recognising the social and economic benefits of broadband. I estimate the economic benefits of broadband to Tasmania to be approximately $200 million per annum.
In order to get such an infrastructure underway, the key strategies are combining infrastructure roll-outs and demand aggregation. But, for some unknown reason, the Tasmanian Government is refusing to use these options. The only other remaining option is direct infrastructure funding. On previous occasions I have estimated that would cost the government between $100 million and $150 million, which is roughly one-third of the total roll-out costs.
Ever since the Christmas 2002 debacle I have advocated a complete rethink of the broadband plan. It is impossible to broadband Tasmania without any of the three strategies mentioned above.
One option is to look at council-based initiatives. While this course of action is proving very successful elsewhere (municipalities are driving broadband roll-out in the USA), Tasmania has some bad experiences in this area also – Launceston became the victim of a political broadband disaster created by Senator Harradine, and Telstra and Burnie ended up with a stranded cable.
However, I would still strenuously encourage local councils to take the broadbanding of their council seriously, and I would like to challenge the City of Hobart to take the lead in this. Under the current circumstances a city-based piecemeal approach makes far more sense than the doomed-to-failure State EOI.
See also:
Australia – Regional Projects (VIC, TAS & SA)
Australia – Government Markets – New South Wales
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