Government to keep a leash on NBN Co

NBN Co is to remain Government property until Minister Conroy sees fit, according to an exposure draft of legislation enshrining the National Broadband Network (NBN) introduced to Parliament today.

The legislation said that whilst the Commonwealth has committed to "sell down its stake in NBN Co" within five years from when the national network is up and running, the sale is "subject to market circumstances and security considerations".

The Communications Minister must determine that the network is "fully built and operational" - and the Finance Minister must determine that it is the right time to sell - before any decision on NBN Co's sell-off is taken.

The legislation "allows the Communications Minister to extend the time" to declare that the network is finished, using an unlimited number of "declared pre-termination periods" of up to 12 months each.

Once the Communications Minister declares the network finished, the Finance Minister has five years (plus an extension of a further 12 months, if need be) to sell down the Government's stake in NBN Co.

But there is an exception: the Government has also allowed itself the ability to sell up to 49 percent of its equity in NBN Co prior to the NBN being built and fully operational, as long as the Government maintains the majority stake.

"The Government welcomes private investment in NBN Co so long as it does not compromise the wholesale only model," the explanatory notes to the legislation read.

"The Government will set out any necessary ownership controls to protect this wholesale only model in regulations."

Wholesale only

The legislation enshrines that NBN Co can only be a wholesale provider of telecommunications services, or else its license is revoked. It is also not permitted to be a content player - preventing what is arguably Australia's next Telstra from becoming Australia's next Foxtel.

But there are some notable exceptions.

Firstly, Minister Conroy has given himself the power to pick and choose exceptions. This flexibility will "allow NBN Co to offer services directly to certain end-users, for example government agencies."

The Minister also has the right to force NBN Co to not provide a given service if he feels it doesn't have "socially beneficial outcomes, or conversely that its supply of a service may hinder the development of competition."

The Telstra problem

The second major exception relates to the Government's great white NBN hope, that Telstra CEO David Thodey will submit to Australia's largest service provider being swallowed up by NBN Co.

Any law that forces NBN Co to only maintain a wholesale operation is somewhat challenging in the face of NBN Co's attempts to negotiate the purchase of Telstra. Telstra is Australia's largest retail operator and buying it would result in NBN Co being in breach of its requirement to remain purely wholesale.

The Government has tried to avoid inhibiting these negotiations by including an exception that allows NBN Co to make acquisitions and gives the company an unspecified amount of time to sell off retail arms in the aftermath.

"The Government's clearly stated policy is that NBN Co is a wholesale-only company," reads the explanatory notes. "However, the Government considers that NBN Co should not be prevented from purchasing telecommunications companies, even if they have retail businesses, if such an acquisition could support the early development and rollout plan of the NBN.

"NBN Co... would need to set in place clear transitional arrangements for divesting any retail operations involved in such acquisitions," the notes read.

"NBN Co will need to notify the Commonwealth of any proposed acquisitions, including acquisition of a significant shareholding, as part of its reporting obligations."