NBN costs to be capped to $3,000 a home

19 April 2010

The Federal Government has released a position paper Proposed subordinate legislation to give effect to fibre in new developments late last week.

New urban developments would only be obliged to be “fibre-ready” if the development was less than 200 building lots and/or units.

Furthermore, if the cost of installing fibre exceeds $3,000 per residential lot or unit, even larger developments will only need to ensure that their premises are “fibre-ready”.

In other circumstances developers will need to install fibre.

We welcome the decision to cap the cost to developers – it follows a year long campaign by the Urban Taskforce highlighting the risk to the development pipeline if the impositions on the development projects are not controlled.

The Federal Government still has an expectation that some development projects will carry the cost of “backhaul”. Backhaul is the network infrastructure that is not located in a development site, but might be necessary to integrate new homes or business premises into the national broadband network. The financial costs of backhaul are to be included in the $3,000 cap.

At this stage the Federal Government has not thought through the timing issues that arise in large-scale developments staged over many years. It is not clear when a contribution for backhaul would need to be made.

Consider, for example, if a developer is funding $2,500 a home for on-site works and their contribution to “backhaul” is therefore limited to $500 a lot. In a large master-planned greenfield estate, say 4,000 lots, this liability would be $2 million. If the estate is to be developed gradually – say 200 lots per year – the initial backhaul contribution could amount to one third of the initial gross revenue. We are highlighting that the timing of even apparently “modest” off-site contributions is critical to project viability.

There is also a suggestion that infill development projects might need to carry the cost of backhaul if a new development required an upgrade to existing passive infrastructure in the street

There is also still no clarity on the rules on the development of new business premises. The cap on the costs that residential development projects may face does not yet appear to apply to non-residential development. We are pursuing this issue.

The government is yet to set out clear technical specifications, despite the imminent 1 July 2010 start date. The government is proposing that all projects that negotiate infrastructure levies and detailed structure planning after 1 July will be covered by the new rules. We have already explained to them that is very vague and we trust they will be providing more detail soon.

More information is available here.