The Australian telecommunications industry is facing a major shake-up as the Government begins to implement the nation's largest ever infrastructure project. Briana Everett reports

In April 2009, the Federal Government announced plans for the establishment of a super fast National Broadband Network (NBN), worth $42.8 billion. Last month (June), an agreement detailing the roll-out of the NBN was reached between the specifically established company NBN Co and Telstra. However, amendments to the regulatory regime introduced last year are yet to be passed by the Senate, leaving an air of uncertainty within the market.

Resolving uncertainties

The uncertainty and highly politicised debate surrounding the NBN is set to heighten as a federal election becomes imminent. With the Federal Opposition claiming the NBN will be scrapped if elected, the work for lawyers in the telecommunications space is increasingly difficult as they are forced to keep abreast of a multitude of developments, including policy and regulatory changes.

Baker & McKenzie partner Patrick Fair agrees that Australia needs a better and more up-to-date network and says any policy which achieves that is a good thing. "I don't reject the argument that the same outcome might be achieved in a different way, perhaps without such a large government commitment, but this is the deal we've got. The main thing is that the uncertainties around [the NBN] proceeding are resolved rapidly," he says.

Amid this rapidly changing environment, Fair says the main challenge is staying on top of developments. He says it is imperative that lawyers stay in touch with different players in the industry and leverage their analysis of the proposed legislation by talking to people who are looking at it from a policy perspective, rather than a legal perspective.

According to Mallesons Stephen Jaques partner Renae Lattey, part of the team acting for Telstra on the NBN project, the uncertainty as to what the future regulatory environment will look like requires an awareness of the Government's level of commitment.

"From a legal perspective, we have had to read [the draft legislation] and assess where the Government might be planning to make its move in terms of regulation," Lattey says. "A large chunk of the challenge for those partners and junior lawyers is keeping on top of everything that is coming, what is being published - whether it's coming from the Government or NBN Co."

With a high level of engagement between regulatory bodies and the telecommunications industry, Lattey says being aware of policy announcements is imperative.

"It's fair to say that telecommunications is going to be a very exciting, busy time for the next couple of years," she says. "These are the most significant changes to this industry, definitely since 2002, and arguably since 1997."

The regulatory waiting game

It is hoped the NBN will alleviate many of the issues within the telecommunications sector. However, its completion is not expected for another eight years, necessitating substantial regulatory reform in the short term.

Last year, the Government introduced the Telecommunications Legislation Amendment (Competition and Consumer Safeguards) Bill 2009, which mainly focuses on the current structure of the sector and the separation of Telstra. However, the Bill is yet to receive Senate approval, exacerbating the degree of uncertainty within the industry. "There are many people who have reservations about forcing Telstra to structurally separate," says Maddocks partner Brendan Coady. "Senator Fielding, in particular, has said he does not think the Bill should be passed until the negotiations between the Government, NBN Co and Telstra have completed."

And although an agreement was achieved just weeks ago, Coady says it arrived too close to the Parliamentary winter break for the legislation to be passed.

As consideration of the Bill continues, there has been a lot of work involved with respect to the structure of the reforms, according to Coady.

"There has actually been a lot of work in putting in submissions to the Government about what those reforms should look like and reviewing the legislation," he says. "That has been an ongoing process that we have been quite heavily involved in ... we are trying to be very actively engaged in the industry-level debate around what the NBN services should look like."

Adding to the list of reforms industry members must be aware of, Communications Minister Stephen Conroy recently tabled the Telecommunications Legislation Amendment (Fibre Deployment) Bill 2010 which provides requirements for new housing estates, ensuring they are "fibre-ready" or prepared for the installation of the NBN fibre-optic telecommunications cables.

Making waves

While only in its initial stages, the establishment of the NBN is already having a significant impact on the competitive dynamics within the market, creating a high level of activity and a range of new issues confronting telecommunications lawyers.

In this environment, content-related issues are surfacing as the focus of competition within the industry. According to Coady, the NBN has moved the debate and focus of the telecommunications industry away from people arguing about the price of access, to a focus on content and what other services players are going to provide. "We start to see a lot more focus on people trying to develop new and interesting applications and people looking at new ways of delivering and consuming content," Coady says. "With NBN Co you've got a whole new player entering the market that's really going to change how the market works in quite a fundamental way."

Coady supports the Government's "bold approach" and says the NBN has changed the game. "It's quite a visionary, nation-building project," he says. "I think it has really galvanised the industry in Australia and not just the traditional telco industry. A lot of other people in related areas, particularly content [and] construction, [are] being drawn in to the whole NBN."

He describes the new opportunities that will start to arise as the NBN unfolds. He says market players will develop an incentive to consider how they can change their business to take advantage of those opportunities presented by the new technology.

"It also creates risks in relation to the existing position of you and your clients," he says. "Whether your clients are going to ride those waves of change successfully or whether they are a threat to existing business models."

Likewise, Fair says his team has a lot going on, including examination of bills, writing submissions and examining what the risks are for businesses internally.

"We'll have a more competitive environment," he says. "There might be opportunities for new entrants to take in the latest technology and create value. On the other hand, smaller players are looking at delays and facing difficult challenges in terms of whether they keep rolling out, or wait and see where the NBN will be built and be ready."

The uncertainty has suspended a lot of network rollout, says Fair, but it is encouraging a lot of positioning for consolidation and new entrants. "There is too much uncertainty in the market, but as we get more of a picture of what has been agreed with Telstra, some of those deals will start to happen."

The political horizon

The changes in Government over the past four or five years have disrupted the telecommunications environment and further disruption is anticipated as the industry awaits an announcement by Prime Minister Julia Gillard as to when the federal election will be held.

Despite calls being made for an early election to "legitimise" Gillard's appointment, it will still be some time before the telecommunications industry discovers what its future holds.