The federal government backtracks on its earlier commitment of hooking up newly built homes in Australia to the national broadband network (NBN), deciding instead that large-scale development projects would be given priority.

Communications Minister Stephen Conroy said on Thursday that the original plan for NBN's residential connection packages proved too costly and time consuming for the federal government.

With that consideration, Conroy said that Telstra Corporation will instead provide internet access to housing developments with less than 100 units though he noted that the telco firm's copper network and wireless services would be much slower than the services that would be carried by NBN's fibre optics network.

Prime Minister Julia Gillard had originally hoped that all homes developed after January 1 2011 could be connected to NBN but the plan proved costlier than earlier thought, apart from more time required to realise the residential phase of the broadband project.

Also, many residential developers expressed fears that Ms Gillard's plan could not be implemented at all since the necessary legislation for its roll out has yet to be introduced and approved, which should at least provide a guarantee that such phase of the NBN project comes with the government's stamp of approval.

Developers of new housing projects complain too that including NBN connection on their project blueprints require an additional cost of $2600 for every unit but Conroy said that this has been solved as NBN Co will prioritise large housing projects, with the assurance that the hook up cost would be picked by the broadband firm.

According to the Australian Financial Review, private developers are poised to save close to $5 billion once the revised NBN residential connection plan has been integrated to existing and proposed housing developments.

Meanwhile, Telstra welcomed its role in providing internet access to certain housing projects in Australia as mandated by the adjusted NBN plan, with a spokeswoman for the giant telecommunication firm pointing out that "we will continue to work with the government and NBN Co to help ensure the arrangements are implemented smoothly for the industry, developers and customers."