Additional fibre roll outs to new business parks funded through this arrangement could later be extended to residential homes for a lower cost.
A NSW Department of Education spokesman said the NBN Co was supplying connections and infrastructure for “proof of concept” tests and the state department was separately seeking a provider of telco services to help provide steady bandwidth for students.
The NBN Co is due to report its first half financial results on Tuesday morning and this round of deal-making comes as industry speculation ramps up that the broadband wholesaler cannot afford extensive upgrades under its current budget.
Telecommunications industry sources believe the federal government would be unlikely to tip more funds into the network for upgrades as data demands grow, saying it would be “politically difficult”.
The NBN Co has had ongoing discussions with the federal government and Communications Minister Paul Fletcher about upgrades. Telco sources said extra funding from the states simply “makes sense” as they were better placed to know which upgrades were required.
The NBN Co is set to finish its 10-year build in June, marking a significant milestone for the government-owned corporation that has faced years of criticism over its speed.
It is not clear whether the government will commit more funding to the NBN Co for upgrades. There are growing economic headwinds following bushfires, the drought and the coronavirus outbreak affecting the federal budget and the government is under pressure to deliver a promised surplus in April.
Finance Minister Mathias Cormann said in a statement that the funding commitment was $49 billion, including $29.5 billion in equity and a $19.5 billion Commonwealth loan.
“NBN Co is responsible for developing network upgrade plans and proposals for further investment as part of the annual corporate planning process,” Mr Cormann said, adding that the 2020-23 Corporate Plan shows upgrade paths have been identified to provide more capacity and speed.
Some sources familiar with the NBN Co said it was a “tough sell” to ask state governments and departments to chip in on upgrades, there has been a bigger push recently to secure deals.
The move comes after the NBN Co abandoned plans in January to expand heavily into the enterprise space following a turf war with major clients and telecommunications companies like Telstra. This lucrative part of the business was believed to be one way to attract lucrative contracts and increase revenue.
While the public experience on the network has improved, some of those connected to the network through technologies like fixed wireless have had poorer experiences. The NBN Co is required to provide 25Mbps peak speeds to all premises and 50Mbps to 90 per cent of fixed line connections but there has been growing demand for faster speed tiers.
Jennifer Duke is an economics correspondent for The Sydney Morning Herald and The Age, based at Parliament House in Canberra.