Plan to limit broadband cost for new homes welcome

19 April 2010

The latest information from the Federal Government on the roll-out of the national broadband network, released on the eve of a Senate inquiry, has been welcomed by the Urban Taskforce, but the group said much more detail was required before the impact on urban development was clear.

The Federal Government released a position paper Proposed subordinate legislation to give effect to fibre in new developments late on Friday afternoon (16 April 2010) and it has not yet been reported in the media. Its release has taken place prior to public hearings by a Senate inquiry into the broadband legislation, which is scheduled to take place in Sydney today.


The Taskforces chief executive, Aaron Gadiel, said the Federal Government had come a long way from its original announcement last year, that suggested all new urban developments would need to carry optic fibre.


We welcome their recognition that, in some cases, the cost of installing optic fibre may be prohibitive.


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.


We are concerned that the Federal Government still has an expectation that some development projects will carry the cost of ˜backhaul, Mr Gadiel said.


˜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.


We appreciate that the financial costs of ˜backhaul are to be included in the $3,000 cap, but it is inconsistent that new home owners and businesses will be required to make a direct contribution to off-site network infrastructure through their propertys purchase price, but existing home owners and businesses will not face these costs, Mr Gadiel said.


At this stage the Federal Government has not thought through the timing issues that arise in large-scale developments staged over many years.


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.


In this scenario, the contribution itself will probably prevent development from getting underway.


The timing of even apparently ˜modest off-site contributions is critical to project viability.


Mr Gadiel said he was also worried by the 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.


He also expressed concerns that there was 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 appear to apply to non-residential development and more stringent rules are flagged, Mr Gadiel said.


This is a problem for two reasons.


Firstly, non-residential development generally takes place on the back of a pre-committed tenant. Prospective tenants have enough bargaining power to set out their own communications requirements without regulation by the Commonwealth.


Secondly, these days, many developments are a mix of residential and non-residential uses. Prohibitive costs for non-residential development may discourage developers from integrating retail, services and workplaces into residential development.


The government is yet to set out clear technical specifications, despite the imminent 1 July 2010 start date.


Mr Gadiel will be appearing before the Senate Environment, Communications and the Arts Committees Inquiry into the Telecommunications Legislation Amendment (Fibre Deployment) Bill 2010 today to detail the Urban Taskforces remaining concerns.


The Urban Taskforce is a property development industry group, representing Australias most prominent property developers and equity financiers.


For every $1 million in construction expenditure, 27 jobs are created throughout the broader economy. The construction activity made possible by property developers contributes $78 billion to the national economy each year and creates 849,000 direct jobs.



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