ISPs line up for slice of $250m backhaul fund

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ISPs line up for slice of $250m backhaul fund

Optus and iiNet have become the first ISPs to indicate their intention to bid for some of the $250 million fast-tracked by the Federal Government to build competitive backhaul links into regional broadband ‘blackspots’.

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Both confirmed to iTnews today that if the backhaul blackspot program proves to be economically and commercially viable, they will enter or re-enter the construction space.

Communications Minister Stephen Conroy announced the funding fast-track last night, releasing a stakeholder consultation paper [PDF] that calls for responses from industry by May 12.

"We're very keen to get involved," said Maha Krishnapillai, director of government and corporate affairs at Optus.

"A lot of areas don't have competitive retail supply and they will get that with [the introduction of new] backhaul. For example, Optus can't economically service around 50 per cent of businesses in Australia.

"The addressable market Optus and others will have available is dramatically changed with these decisions on backhaul and the NBN. The industry is excited about the significant increase in the addressable market for data services in regional Australia."

iiNet CTO Greg Bader said the Perth-based ISP will also be involved in the consultation process.

"I've chatted to the [DBCDE] briefly and we are setting up a more detailed meeting over this," Bader said.

"We're more than happy to be part of the consultation process/paper and think it's great that they are talking to the industry.

"The OPEX (operating expenditure) on backhaul between the exchange and capital city point-of-presence is still the single biggest variable in our [valuation] model to roll out [services] to an exchange.

"If this program through competitive access provides an economically viable solution for us - then we will be building," he said.

Optus and iiNet are likely to be the proverbial tip of the iceberg when it comes to participation in the Government scheme.

Infrastructure providers with ties to the utility sector - for example Nextgen - are also likely to bid, according to telecommunications analyst Paul Budde.

"This is an important test case for how serious companies are to participate in the Government plans," Budde said.

But not everyone is convinced ISPs are appropriate candidates for backhaul builds.

"It's possible for ISPs to build backhaul but it would be wrong to underestimate the kind of resources they'll need to build out this infrastructure," said David Kennedy, research director at Ovum.

"It's very different from putting DSLAMs into exchanges. Building these links can sometimes require hundreds of different land access agreements and be subject to a number of different environmental processes.

"The legalities are quite complex and can't be rushed. The Federal Government may need to look at overriding various state environmental and indigenous ownership laws but I'd be surprised if they had the appetite for that."

Read on to page two for how the plan will affect Telstra Wholesale.

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