Australia's problems with high-speed Internet can be summed up in one word: Margaret.

Margaret is a carrier pigeon that raced the nation's biggest broadband service to send a 700 megabit file over a distance of 132 km (82 miles) -- a televised contest that Margaret, with a memory stick taped to her leg, won easily.

That was in 2009. Things haven't got much better.

It's pretty sad, isn't it, said telecoms lobbyist Teresa Corbin.

I don't think we will see that (a pigeon win) when we have fiber-optic cable, added Corbin, head of the Australian Communications Consumer Action Network, which represents almost 100 separate community groups, all keen supporters of Australia's $38 billion plan for a national broadband network.

Made up mostly of fiber-optic cable and offering virtually unlimited bandwidth, the plan cleared its last major hurdle on Thursday with two deals worth almost $13 billion to effectively annex the fixed-line infrastructure of Telstra and its major rival, Optus, owned by Singapore Telecommunications.

These assets of Telstra and Optus, which include high-speed cable and the ducts that carry them, will be the initial building blocks for a network spanning a continent the size of western Europe and take about eight years to build.

But for users like 66-year-old Laurie Nelms, a retiree living in the fast-growing tourist town of Nelsons Bay north of Sydney, the age of high-speed Internet cannot come fast enough.

Nelms uses Internet tools like Skype to keep in touch with distant friends and has found that his broadband connection has been steadily deteriorating over the past few years, as the town expands and more and more people use the same Telstra network.

It's gotten to the point where Skype doesn't work anymore, he said in a phone interview, noting his broadband speed was down to 3.56 megabits per second -- about 15 times slower than the average advertised speed in Internet leader South Korea.

Telstra is jamming more and more people onto the system but they have not upgraded it...The line speed we've got here is about a third of the national average. It's far too late. All this work should have been done 10-15 years ago.

Australia ranks sixth in terms of gross domestic product per capita among rich nations, but it offers one of the most expensive and patchy broadband services in the developed world, according to Organization for Economic Cooperation and Development (OECD) data.

The reason is a combination of geography and population: it has been uneconomic for Telstra and rivals like Optus to invest heavily in new infrastructure such as fiber-optic cable outside central business districts or wealthy city suburbs.

In rural and outback areas, where population centers are small and distances between them great, broadband is either non-existent or relies heavily on aging strands of copper wire, creating a digital divide that hurts the economy.

There are not many countries that have the same geography as Australia. We have a big, wide brown land and it's extremely expensive to wire it up, said consumer lobbyist Corbin.

That's why we need the government to move into this space with a national strategy. They will build the road and let anybody run on it, and that should encourage competition.

The government aims to build a network that will wean the economy off Telstra's own infrastructure, which the former monopoly had fiercely guarded as new rivals sought to use it, and replace it with a neutral state-owned network.

In the long run, Canberra plans to privatize its broadband network but wants to always keep network ownership separate from the phone companies that use it, so that industry competition focuses on services and avoids turf-wars over infrastructure.

With Telstra shareholders expected to sign off on Thursday's deal, the main question now is whether the government can manage the project well and bring it in on time and on budget.

I'm concerned, retiree Nelms said. The cost blows out and then they say we (taxpayers) have to dig a little deeper.

($1 = 0.946 Australian Dollars)

(Reporting by Mark Bendeich, Editing by Jonathan Thatcher)