Metropolitan Broadband Blackspots Program

Purpose

The Australian Government's National Broadband Strategy (NBS) recognises the important role broadband services play in enabling major improvements in economic and social wellbeing for Australians. Widespread access to high-speed communication services can deliver significant increases in productivity, expand employment, increase international competitiveness and improve quality of life.

While the NBS acknowledges the market is the primary means for the delivery of broadband services, it identifies an important role for government to take action where the market will not provide broadband services at fair and reasonable prices within an acceptable timeframe. The Metropolitan Broadband Blackspots Program (MBBP) is the Australian Government's initiative to assist customers in metropolitan areas gain access to equitably priced broadband services.

This Discussion Paper outlines the Department of Communications, Information Technology and the Arts' (the Department) proposed framework and processes for the implementation and delivery of the MBBP. In addition to meeting the primary objective of providing broadband services at equitable prices to customers in metropolitan areas, there are two other key considerations central to the design of the program. These are to minimise the potential for the MBBP to distort the competitiveness of metropolitan broadband markets, and to effectively target the available funds.

Differences between the MBBP and HiBIS

It is proposed that many of the key features of the MBBP will mirror arrangements currently in place under the Australian Government's Higher Bandwidth Incentive Scheme (HiBIS). However, some elements of the MBBP may differ from the HiBIS approach, to reflect differences between metropolitan and regional/rural broadband markets. These elements include:

1. the period of time over which service providers are able to claim incentive payments for the supply of MBBP services to upgraded areas;

2. arrangements to take into account service providers' commercial plans to extend their network;

3. arrangements relating to the sharing of incentive payments between wholesale and retail service providers; and

4. arrangements to assist customers requiring a high cost solution.

Similarities between MBBP and HiBIS

Like HiBIS, the MBBP will seek the participation of commercial service providers to achieve its objectives. Other important proposed similarities with HiBIS include:

1. financial assistance to be made available to registered service providers through a per customer subsidy;

2. participation in the program to be open to all Internet service providers;

3. services offered under the program to be offered at a specified ‘threshold' quality of service and at or below a maximum specified price – the threshold service to be based on what is generally available to most metropolitan premises;

4. value-added services (increased performance and/or functionality) could also be registered and offered at a higher price than the threshold limit;

5. the technology platform used to deliver services to be at the discretion of registered service providers;

6. administrative measures to be in place to limit the extent to which a single service provider could benefit financially from the program;

7. the arrangements for customers serviced through the MBBP to mirror, as closely as possible, the normal commercial arrangements that are in place for customers to obtain a service; and

8. tools, including a demand register and maps, to be provided to assist both consumers and registered service providers to establish eligibility and effectively participate in the program.

Proposed Key Elements of the Program

Overall coverage

The program will cover the areas that are not covered by HiBIS, that is, areas within the Metropolitan Exclusion Area (MEA). The MEA includes each state and territory capital city and the adjacent regional centres of Wollongong, the Central Coast of New South Wales, Newcastle, Geelong, Palmerston and the Gold Coast, including Tweed Heads.

Eligible customers

It is proposed that eligible customers will be those residential customers, small businesses, small not-for-profit organisations and other not-for-profit organisations that provide a public access service that are unable to obtain a MBBP threshold service equivalent at the beginning of each period of the program. The definition of eligible customers would be identical to the HiBIS approach.

Level of standard incentive payment

The Department is yet to determine the level/s of the payment that would be made available to registered service providers. The Department's initial view is that, given the higher teledensity and lower costs associated with operating and maintaining telecommunications infrastructure in metropolitan areas, a lower standard incentive payment than the Standard Incentive Payment available under HiBIS is likely to be appropriate.

High cost incentive payment

It is proposed that if customers cannot be provided with a MBBP service by any registered provider using the Standard Incentive Payment, they would be invited to register their interest on the MBBP demand register (if they had not already done so). If they were still not able to obtain a service by the end of a designated period (eg six months from the date of registering on the demand register) then they would be deemed eligible to receive a high cost solution. Providers would be able to register high cost service solutions and receive a high-cost incentive payment for supplying customers with such a service.

Period within which claims for incentives payments can be made in a particular area

It is proposed that the period of time over which service providers would be able to claim incentive payments for the supply of MBBP services to customers in upgraded areas would be limited, to 18 months for the first period of the program and 12 months for the second period. This proposed approach reflects both the generally greater commercial viability of service provision in metropolitan areas, and the rapidly growing demand for broadband services.

Taking commercial investment into account

There will continue to be a business case for service providers to invest in new broadband networks, or to upgrade their current networks, independent of financial assistance being provided by the Australian Government. It is considered appropriate under the MBBP to take into account the provision of services that would have been provided on a commercial basis, independent of the program. It is therefore proposed that, in assessing the level of financial support necessary to assist providers to upgrade their broadband networks, the Department will take into account service providers' commercial plans to extend their networks.

Identifying commercial investment and making payments

Given the above consideration, a key design challenge in the MBBP is both to identify the number of services provided by a registered provider that are considered to be commercially provided, and to establish which particular services they are. Commercial providers' budgets do not target all funds to specific areas in advance, but to a large extent apply budgeted funds to meet demand that emerges over the budget period. It is therefore likely to be very difficult to identify which services provided by registered MBBP providers in a funding period are provided commercially, and which are provided through MBBP support.

The Department proposes to manage this issue in the following way. To identify the overall level of commercial investment by a registered provider in a funding period, it is proposed that the Department will negotiate with each registered provider to agree the number of MBBP eligible premises that its commercial plans will service for the funding period. This number of services would then be subtracted from the total number of MBBP eligible services provided in the funding period, to arrive at the number of services that would be eligible for a full MBBP incentive payment.

To facilitate an even cash flow, for both the Department and registered service providers, the Department would calculate a standard partial incentive payment, to be paid for each eligible premises serviced to be based on the ratio of forecast commercial services to MBBP services across the program. At the end of the funding period, the amount of funding received by the registered provider in partial payments would be reconciled against the amount due (according to MBBP services provided), and either additional payments made to the provider, or surplus funds received repaid. This arrangement may not need to be applied to the high-cost payments, given that these are identifiable against specific services.

Possible wholesale payment

The MBBP is proposed to be open to both wholesale and retail service providers. It is proposed that, as under HiBIS, incentive payments will be shared between the wholesale service provider and retailer where an agreement is in place. An issue that has been raised in the HiBIS context is the difficulty that infrastructure providers face in establishing a business case to upgrade services when connected services do not attract an incentive payment because they are provided by a non-registered retailer. In order to address this problem, the Department is considering whether the MBBP could make partial payments to wholesalers for upgrades provided to customers where the customers have connected via non-registered retailers.

Checking eligibility of customers

To determine eligibility, the Department proposes to prepare and make available to the public and to registered providers broadband coverage maps that show the service coverage of all commercial broadband service providers in as much detail as possible.

To assist customers to identify new coverage of MBBP providers, and to assist registered providers to determine their eligibility for an incentive payment, the Department will require all registered providers to keep records of network upgrades during the funding period, and to make this information available to other registered providers.

It should be emphasised that these maps cannot capture exact coverage, and will therefore be indicative to some extent. The program will therefore rely on supporting rules to ensure both that customers are able to access MBBP services and that registered providers are able to achieve a high degree of certainty about their eligibility for an incentive payment in all circumstances.

The Discussion Paper is seeking feedback from interested stakeholders about the proposed structure and operation of the MBBP. The approach set out in the Discussion Paper is not fixed and may change as a result of feedback received.

Next steps

Industry and other key stakeholders are requested to provide feedback on the proposed arrangements by 31 August 2005. It is envisaged that, where required, further consultation will continue through one-to-one meetings between the Department and individual stakeholders. To facilitate the commencement of the program in January 2006, the Department is also inviting service providers who are likely to register under the MBBP to indicate their interest in participating in the program as soon as possible.

At this stage, the Department intends to release a draft of the program guidelines in September 2005. These draft guidelines will contain comprehensive information on the structure of the program. The Department intends to formally open registration for service providers upon the release of the program's final guidelines in October 2005.