Australian state and regional governments have begun rolling out their own fiber networks as alternatives to the underwhelming National Broadband Network (NBN).
In the biggest move to date, the largest state, New South Wales, has begun tendering for its A$100 million (US$66 million) Gig State Plan.
Part of a broader statewide A$4.5 billion ($3 billion) infrastructure program, it is aiming to build rural broadband networks that are at least as good as metropolitan counterparts.
The first leg of the scheme will deliver service to towns and rural areas in the central and western parts of the state.
Telecoms consultant Paul Budde says many Australian cities are realizing "they need a better broadband network if they want to stay relevant in attracting business and good quality workers."
He told Light Reading: "The business case for gig cities is especially sound for the business district, and from there they have the possibility to reticulate into residential areas.
"It is interesting as well that affordability is significantly better in the model the NSW Government is proposing. If that works that would make life very difficult for NBN."
Outside NSW, Adelaide in the state of South Australia has been offering its own business district gigabit network, built by TPG, for the last two years. It's now extending that to regional cities in the state.
Budde points out that other regional cities, such as Newcastle and Wollongong, are also developing their own gigabit networks.
All of this puts Communications Minister Paul Fletcher in an awkward position. The former Optus executive supports competition for the NBN but needs to find a path to viability for the state-owned wholesaler.
A spokesperson for Fletcher's office said while the Gig State proposal was a state level initiative, he had been in discussions with the NSW government and NBN Co on "co-investment opportunities to leverage NBN infrastructure" in areas currently served by NBN satellite and fixed wireless networks.
In its latest result, NBN Co has reported revenue of A$2.8 billion ($1.8 billion) for the first three quarters, up 38% from the previous year. It has just about completed its national rollout, with 11.2 million of the country's 11.5 million premises ready to connect.
Despite these advances, Australia languishes in the middle order of world broadband rankings. The April Speedtest Global Index places it 64th, behind Kosovo and Jordan, and two positions lower than the previous month.
To shore up NBN Co's financial position, the government is to introduce a "broadband tax" from July 1, requiring non-NBN broadband users pay A$7.10 ($4.67) per month to help fund NBN's loss-making rural services.
Fletcher describes it as a transparent and sustainable funding mechanism for regional broadband.
Critics say it is a complex way of avoiding the need to write down the value of the NBN, which has cost around A$51 billion ($33.5 billion).
In a submission last year, Vodafone Australia criticized what it called "a tangled web of legacy subsidies and tax schemes" in telecoms, including the A$297 million ($195.2 million) universal service scheme and the NBN Co itself, which is the nation's statutory default network provider.
It noted that the Productivity Commission had estimated the industry subsidies totaled A$1 billion ($657.3 million) annually and had called for them to be replaced by a direct budget subsidy rather than another industry levy.
"Given the USO was established as a funding mechanism to provide subsidies for uneconomic communications infrastructure, it should be updated for the 21st century and directed towards funding NBN services in regional Australia," Vodafone said.
— Robert Clark, contributing editor, special to Light Reading