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G9 lodges draft FTTN Network Special Access Undertaking
20 Apr 2007

The G9 Consortium - comprising AAPT, iiNet, Internode, Macquarie Telecom, Optus, PowerTel, Primus, Soul and TransAct - announced today the lodgement of a draft Special Access Undertaking (SAU) with the ACCC for its fibre-to-the-node (FTTN) network proposal.

The draft SAU is a concrete step towards building a competitive, next generation high speed broadband network in Australia.

The draft SAU lodged today, details the G9's proposal for a high speed broadband network that would deliver greater choice and better pricing.

The network would initially reach more than four million households and businesses and then progressively roll out to densely populated regional centres such as Newcastle, Townsville and Ballarat. Building the network in areas currently not served by exchange-based infrastructure would be prioritised.

The G9 proposal is for an average price for access seekers of between $21 and $24. This reflects the cost structure of a range of products from basic access at $15.00 to high speed broadband access at $45.00.

The proposal does not rely on a taxpayer contribution from the Federal Government and would instead be financed through domestic and international equity and debt markets.

"This proposal is in stark contrast to Telstra's plans. Our proposal offers Australia fair and reasonable pricing and promotes competition which will drive greater broadband choices for consumers. Importantly, each access seeker will have the ability to differentiate their product and service offering," Paul O'Sullivan, Chief Executive, Optus said.

"The work of the G9 and Investec has confirmed building a high speed broadband network is an attractive and viable commercial opportunity in its own right. Taxpayers funds are not required to support this commercially viable broadband network," Simon Hackett, Managing Director, Internode said.

"Our focus has always been on a high speed broadband network plan that will bring broadband competition and choice to Australians," Mr Hackett said.

"This draft SAU is the culmination of months of discussions and negotiations with G9 members, financiers, policy makers and the ACCC and demonstrates the seriousness of the consortium's proposal," Ravi Bhatia, Chief Executive, Primus said.

"Our focus will now be working with Government to fine tune the regulatory arrangements to support our proposal while the ACCC considers the draft SAU," Mr Bhatia said.

It is anticipated the ACCC will review the draft SAU and provide comments to the G9 over the coming weeks. A public consultation process would be undertaken by the ACCC following the final SAU being lodged.

Media contacts:  
Matt Healy
Macquarie Telecom
Tel: 0402 259 140
Melissa Favero
Optus Corporate Affairs
Tel: (02) 9342 7850


Highlights of the G9's draft Special Access Undertaking include:

Broadband Services

  • The draft Special Access Undertaking provides for wholesale broadband access services (BAS) over the FTTN Network.
  • A range of different BAS would be provided by the Fibre Access Network Operating Company (FANOC) ranging from a voice equivalent basic service to high speed broadband transmission as well as tailored services that meet specific needs of particular access seekers.

Pricing

  • The SAU would set initial prices and then provide a formula for re-setting prices for successive three year access periods. The price setting formula will ensure that FANOC can recover its costs (including a cost of capital), but no more than its costs. The proposed prices will be, on average, $21 to $25 per month over the term of the undertaking.
  • This reflects the cost structure of a range of products from basic access at $15.00 to high speed broadband (12 - 24mbps plus) at $45.00.
  • To ensure that there is an incentive for FANOC to be efficient a price cap formula will apply to the BAS from the second access period.

Investment Certainty

  • The SAU would be for 12 years from the commercial launch of the service in order to provide investors with appropriate long term certainty in relation to return on this significant long term asset.

Technology

  • The FTTN Network will be an IP based next generation network capable of delivering high speed broadband services to over four million Australian homes.
  • The undertaking is technology neutral and allows for the network to evolve from ADSL2+ network to VDSL network architecture and beyond.

Corporate Governance

  • The corporate governance principles detailed in the draft Special Access Undertaking underpin the pro-competitive merits of the G9's proposal.
  • The arrangements will establish the separation of the ownership and operation of the FTTN Network. The draft SAU contains provisions to ensure regulatory transparency and create the economic incentives that will promote vigorous competition in the retail supply of broadband services in Australia. Both access seekers and institutional investors would have an opportunity to invest in FANOC, but importantly no single carrier will be allowed to control it.
  • As the network owner, FANOC would not provide retail telecommunications services. Its objective would be to deliver high quality and cost effective wholesale services to access seekers who will then compete in downstream markets.
  • FANOC is required to establish a manager for its BAS, SpeedReach, that will operate and manage the FTTN Network and make key operational decisions. In establishing SpeedReach:

- No individual carrier will control SpeedReach and all access seekers will be entitled to membership of SpeedReach, including Telstra.
- SpeedReach will have both access seeker appointed and independent directors and managers tasked with optimising the use of the FTTN Network.

  • FANOC will be required to withdraw the undertaking if these pro competitive governance principles are not implemented to the satisfaction of the ACCC.

Transition Arrangements

  • The draft SAU includes obligations on FANOC to implement arrangements to ensure the timing and scheduling of its roll out take into account the interests of parties affected.