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  • Analysis, Featured, Telecommunications - Written by on Wednesday, February 1, 2012 13:53 - 120 Comments

    Correction: Cutting the NBN won’t save money

    analysis Yesterday Opposition Leader Tony Abbott stated in a high-profile speech at the National Press Club in Canberra that cutting Labor’s National Broadband Network project would free up Federal Government money to be spent in other areas such as transport. It was a nice political soundbite. However, unfortunately, this statement was factually incorrect.

    To illustrate why, firstly, let’s go through Abbott’s statement’s yesterday to get it clear what the Liberal leader said. According to the speech notes available on the web site of the Liberal Party, Abbott firstly said the following:

    “At the heart of our plan for a stronger economy is getting government spending down and productivity up so that borrowing reduces, the pressure on interest rates comes off, and taxes can responsibly come down … A good government wouldn’t spend $2 billion buying Victorian brown coal power stations only to close them down; or $11 billion buying Telstra’s copper wires only to shut them down too; or $50 billion plus on a National Broadband Network that people don’t need and don’t want to pay more for.”

    He later added:

    “By the close of the next coalition government’s first term, I am confident that waste, mismanagement and reckless spending will have been brought under control … Better broadband will once more be delivered through market competition freeing more money to tackle traffic gridlock.”

    Breaking Abbott’s comments down a little into real financial terms (because the Federal Budget is a complex beast), at the heart of the Opposition Leader’s comments here is the idea that the cost of the National Broadband Network project is an expense which will appear in the Federal Budget every year, requiring the Government of the day to balance its cost with other yearly expenses like spending on transport. The Coalition believes the NBN is too costly a project for Australia to undertake, and also believes that it should appear as a line item in each year’s budget. That is, the Coalition believes the NBN is actively costing the Government money on an ongoing basis, and should be expensed as such.

    However, because the NBN is expected to make a modest return on the Government’s investment, according to its business case available online here, Labor has not entered the vast majority of the project’s actual costs in the Budget as expense items over the past few years. Furthermore, Labor does not see the NBN project as a whole as costly — because it will end up making money like any other investment (for example, interest on cash in a bank). According to NBN Co’s business case, the NBN will cost between $36.5 billion and $44.6 billion to build over the next ten years:


    However, it is slated to make an internal return on that investment of between 5.3 percent and 8.8 percent on that investment — from $1.93 billion in the worst case to $3.92 billion in the best case:


    So who’s right? Let’s throw the issue to an independent adjudicator.

    According to a research note recently published by the Parliamentary Library of Australia, Labor is technically correct on this matter, and the Coalition is wrong. “Australia has adopted internationally accepted accounting standards, and these are applied in the budget treatment of the NBN,” the library’s Brian Dalzell, who works in its economics division, wrote in the report (available online here in PDF format).

    “While the applied accounting treatment depends on the specific transaction conducted between the Government and NBN Co, this treatment is governed by accepted accounting standards and is applied equally to all government business entities (GBEs). This treatment is not determined by the return generated by NBN Co (or any other GBE).”

    Dalzell goes on to provide a great amount of detail around how the Federal Budget treats the NBN, breaking up the Government’s investment in the area into a number of different sections and looking at the differences between cash flow, equity, debt and so on. But all of it only serves to reinforce the impression that the Coalition is improperly defining the NBN initiative as an expense. In fact, the economist addresses this misconception directly.

    “Can the NBN be accounted for as an expense item in the budget operating statement?” he asks. “In the budget statement, the NBN is accounted for as a financial asset (equity investment) under the ‘investments in other public sector entities’ line item of the balance sheet. The NBN is not accounted for on the operating statement as an expense item, because it cannot be defined as such under accepted accounting standards.”

    Of course, it is very possible to argue that this is all accounting semantics. Real money is actually being spent by NBN Co right now — billions of dollars — and that money is the Federal Government’s money, courtesy of equity injections into the company. However, that money is not diverting government funds away from other projects. It is funding which is being invested with the expectation of a return which will actually fuel other projects. The money the government is spending on the NBN is not an expense to be written off; it is a different type of money. It is capital — and Governments, courtesy of their incredible credit rating and asset base, have almost unlimited amounts of capital to draw on for investments which will make a return.

    In addition, is also true that it is far too early to be able to show whether the Government will end up making any kind of significant loss on its investment in NBN Co, and what that loss might be. We are not far enough yet down the road of NBN Co’s business case.

    Currently, early indications are that NBN Co is broadly on track with its project of rolling out a national fibre broadband network (and smaller satellite and wireless networks) around Australia. Furthermore, the company’s multi-billion-dollar deals with Telstra and Optus provide a great deal of revenue assurance for the company — it will have millions of guaranteed end user customers migrating onto its network over the next few years.

    With this in mind, it is likely that even if NBN Co does make a loss over the next decade period and beyond, that loss will not represent anywhere near the full cost of building the network — just that cost minus NBN Co’s revenue, much of which is already virtually locked in.

    In short, even if NBN Co does make a loss and end up costing the Government money in the long term, that loss would not be $50 billion. Would it be $10 billion? My gut says it’s unlikely, given the guaranteed customers it will receive from Telstra and Optus, the current growth in bandwidth demands and the fact that virtually the entire Australian telecommunications industry has swung in behind the project. But we just don’t yet know.

    Yet another unquantified figure is how much the Government might make from its investment in the NBN if the capital it invested in NBN Co was realised (changing from an investment return on paper to money in the bank) through a full or partial sale of the company to the private sector, through a stock market float or other type of asset sale. In this case, the Government could stand to make quite a lot of investment return on top of its asset, as investors might be quite positive about a company like NBN Co, which would, at that point, somewhere between 2025 and 2040, be able to solidly predict what its revenues would be in future, in a growing broadband market.

    There is also the Coalition’s own policy, which features a scaled down approach to the NBN, focusing on the likely separation of Telstra, upgrading current HFC cable infrastructure and targeted fibre to the node rollouts. Abbott didn’t mentioned the cost of the policy yesterday, but a recent analysis by Citigroup found that the Coalition’s policy would cost $16.7 billion. The Citigroup report didn’t mention what financial return, if any, the Coalition’s proposal was slated to bring in on its own investment.

    Looking at these facts, it seems clear that Abbott’s statements yesterday at the National Press Club about the ability to save money by cutting the NBN were factually incorrect.

    Firstly, if the NBN policy delivers on its current plan, it will make between $1.93 billion and $3.92 billion in money for the Government, and won’t cost anything. Ironically, cancelling such a project would cost the Government money. If the NBN policy hits its worst case scenario, it will probably still come close to breaking even, and so still won’t cost the Government anything. It remains unclear at this point whether the Coalition’s rival policy would make a return or not.

    With all of this in mind, we urge Tony Abbott and the Coalition to reconsider the way they are discussing the NBN issue. A more targeted criticism of the NBN policy would serve the Opposition better than Abbott’s incorrect statements yesterday.

    Table image credits: NBN Co

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    1. Future Economic Growth Earnings Potential
      Posted 01/02/2012 at 2:21 pm | Permalink |

      In relation to revenue, I think the author left out the potential impact and future earnings for existing and new businesses that a fully fledged and innovative NBN would bring.

      Obviously this impact would be very difficult to estimate. However I think its safe to speculate (‘facts aside’) that the Federal Government’s Fibre National Broadband Network would be a far more beneficial proposition for Australia’s future economic growth…. especially when you compare it to the Coaltion’s ‘let market competition decide the fate of the Telecommunication industry’ policy which has never worked in the past.

      • Clinton
        Posted 01/02/2012 at 3:57 pm | Permalink |

        especially when you compare it to the Coaltion’s ‘let market competition decide the fate of the Telecommunication industry’ policy which has never worked in the past.

        here’s an example of just how well market competition works in the telecommunications industry.

        WA Govt funds Telstra mobile expansion

        • Paul Grenfell
          Posted 01/02/2012 at 4:12 pm | Permalink |

          Precisely, and where is the Competition there? Its all going to Telstra at taxpayers expense..What if im on Optus or Voda..?

          • Michael
            Posted 01/02/2012 at 4:27 pm | Permalink |

            what sort of “competition” do you have in mind exactly?

            maybe the Federal Government should pass a law forcing Telstra to subsidise Optus or Vodafone when they bid against Telstra to help them secure government contracts.

            funny how the WA Govt decided that the open competitive tender should be awarded to the lowest bidder (subject to other non-price requirements). how quaint! maybe, the WA Govt should implement a points system for their next tender and award 500 bonus points if the applicant is not a Telstra subsidiary.

            this should help divert more taxpayer-funded service contracts to foreign beneficiary companies such as Optus and Vodafone, instead of the domestic Telstra.

            what a good idea…. yeaaahh!

            • Francis
              Posted 01/02/2012 at 4:59 pm | Permalink |

              Michael, as at 27 January 2012, Telstra was 28.20 percent foreign owned.

              Like Optus and Vodafone, whilst a sizeable chunk of its revenues thus goes offshore, in profits to shareholders and purchases from Chinese, Korean and German technology suppliers, the remainder goes into thousands of Australians’ pay packets.

              The zenophobia card just doesn’t wash in the globalised world of telecoms.

              • Michael
                Posted 01/02/2012 at 5:40 pm | Permalink |

                Michael, as at 27 January 2012, Telstra was 28.20 percent foreign owned.

                glass half-empty?

                that means Telstra is 72% owned by Australians, and is about as “Australian” as you get in today’s world of “globalised investment flows”.

                on the other hand:

                Singtel (which owns Optus) is majority-owned by the Singaporean Government via the state-owned investment vehicle, Temasek Holdings.

                Vodafone is not even listed on the ASX (unlike dual-listed Singtel), so even fewer Aussie punters will have Vodafone stock in their retirement portfolios (as compared to Singtel).

            • Alex
              Posted 01/02/2012 at 5:08 pm | Permalink |

              http://www.asialink.unimelb.edu.au/video/business/telstra_ceo_asia_is_where_we_must_be

              ‘Thodey said that Telstra has changed the way it looks at the world, and while its proud to be Australian, it no longer considers itself to be an Australia company’.

            • Clinton
              Posted 01/02/2012 at 5:47 pm | Permalink |

              what sort of “competition” do you have in mind exactly?

              the sort where a company uses it’s own resources to provide a service to customers rather than refusing to deploy comms gear into an area unless it is paid for by the government.

              i would making the same complaint regardless of who won the tender.

            • Clinton
              Posted 01/02/2012 at 5:51 pm | Permalink |

              what sort of “competition” do you have in mind exactly?

              the sort where a company uses it’s own resources to provide a service to customers rather than refusing to deploy comms gear into an area unless it is paid for by the government.

              i would making the same complaint regardless of who won the tender.

              from the telstra article that i linked to…
              “Keeping people connected is a vision both Telstra and the State Government share and Telstra looks forward to providing a network that will benefit not just individuals but also business, government, indigenous communities and emergency services in WA” said Fink.

              if it was such a vision for telstra then why didn’t it build the network off its own back instead of waiting for the government to pony up the dough?

              • Michael
                Posted 01/02/2012 at 6:02 pm | Permalink |

                facepalm

                since when is wireless part of the Universal Service Obligation? Telstra was privatised as a fixed-line company that built a wireless business off its own bat.

                • Posted 01/02/2012 at 6:10 pm | Permalink |

                  If Telstra can’t provide you with a phone over copper as per the USO, they will supply you with a “comparable” service driven by a wireless connection, at the same price as if they were to deliver via copper cable.

                  That’s where it has a LOT to do with it.

                  • Michael
                    Posted 01/02/2012 at 6:16 pm | Permalink |

                    and what does that have to do with the WA Govt contract for extending wireless coverage to hundreds of kilometres of remote highways?

                    • Posted 01/02/2012 at 6:22 pm | Permalink |

                      That’s the WA Government’s business.

                      If they are providing funds to Telstra to improve regional services, are Telstra never going to use the infrastructure resulting from this to apply to USO-dictated wireless based services?

                      No.

                      Of course it will be used for that – so it’s perfectly valid.

                      • Michael
                        Posted 01/02/2012 at 6:33 pm | Permalink |

                        so, you are arguing that it was completely unnecessary for the WA Govt to subsidise the extension of wireless networks to hundreds of kilometres of remote highways because Telstra was planning to do so anyway?

                        interesting. if that’s true, some heads within Colin Barnett’s Administration should start rolling (if not the Premier himself).

                      • Posted 01/02/2012 at 6:37 pm | Permalink |

                        No, I’m saying that if the government is paying for this, good luck to them. Telstra is still going to treat the extension the same way as the rest of their network.

                      • Granny Anny
                        Posted 01/02/2012 at 7:42 pm | Permalink |

                        The WA Govt. subsidised the roll out of mobiles bases because the sites are very remote and it would not be economic to provide bases without the subsidy.

        • Michael
          Posted 01/02/2012 at 4:13 pm | Permalink |

          so, you prefer the WA Govt to acquire its own spectrum, set-up a state-operated wireless company and build its own wireless network in regional WA?

          or, maybe, you prefer the WA Govt to award the competitive tender to the second lowest bidder for the wireless contract, instead of the lowest bidder which happens to Telstra?

          • SMEMatt
            Posted 01/02/2012 at 4:29 pm | Permalink |

            Well the WA government could acquire it’s own spectrum set-up a state-operated wireless company and sell wholesale access on an equal basis to all providers with revenue repaying the expensive and any profits being channelled into maintenance increasing coverage into more regional areas and have a government doing what a government is supposed to do supply infrastructure.

            But I guess option B is “good” where we give a couple of billion to a private company who then make a profit of the infrastructure and channel it in to share holders then do the same again in a few years time when it needs to expand or has been allowed to decay due to under investment. I mean the private sector acts in the public interest all the time don’t they?

    2. ozimarco
      Posted 01/02/2012 at 3:51 pm | Permalink |

      Absolutely correct! Not only will the NBN end up not costing the government anything, or, at worst, very little, but it will bring enormous benefits to Australia’s business community, resulting in improved GDP.

      • Roberto
        Posted 01/02/2012 at 10:53 pm | Permalink |

        Ozimarco, if you believe this government is able to do anything without completely screwing it up you must be kidding yourself. Need I remind you of the ceiling insulation scheme, or the million dollar shelter shed scheme (BER). Not only are they incompetent, they are dishonest, which is why you will never see them release a business plan which will reveal how insane this investment of 30 to 50 billion$ is.
        Sure, we’d all like super fast internet, but at what cost? The Labor government are the very last people I’d trust with this sort of project. Early indications are that take up of the NBN where rollout has occurred has been abysmal. Sack all the fatcats at NBN, sack all the PR crew who spam blogs and sites like this with their pro NBN propaganda. Stop the waste now.

        • ozimarco
          Posted 01/02/2012 at 11:12 pm | Permalink |

          Actually, it is not the government that is rolling out the NBN but it is NBN Co. I have full confidence in Mike Quigley and his team of professionals to deliver what they have been asked to deliver by the government in a timely and cost-effective manner.

          The poor early sign-up rate is no indication of its eventual success. I’m sure that, when the telephone first arrived on the scene, few people had any idea of how it would change their life. So it is with ubiquitous fast broadband. Of course, state governments could have helped by making connection to the NBN opt-out, but relentless criticism from the Opposition and its associated media have had the result that the initial take-up was less than what it would have been otherwise.

          At what cost? The cost to the govenment will be nil. On the contrary, they will get a modest return on their investment. In the worst case scenario, they would break even, so the cost would still be nil.

          Fat cats? If you want professionals to run the show, you need to pay them well, otherwise you are not going to attract the calibre of people you want for the job.

          I would just like to add that I am very impressed with Mike Quigley and the outstanding job he is doing.

    3. SMEMatt
      Posted 01/02/2012 at 3:51 pm | Permalink |

      It’s only a lose when you sell down the asset something the the CLP should already know about as they’ve been there and done that.

    4. Michael
      Posted 01/02/2012 at 3:56 pm | Permalink |

      so, let us get this straight…

      one political party sets up a corporate entity external to (but under the direction of) DBCDE to carry out a political pet project of fibre pork-barrelling.

      said corporate entity subsequently publishes a skimpy “business plan” declaring its intention to earn a range of “positive returns” on the Labor Government’s equity injection.

      because of the release of this one flimsy piece of partisan political document that contains virtually no substantive or relevant evidence to back up its key projections, the opposing political party is apparently, under some bizarre, unknown political convention, instantly barred from criticising the political project in a manner which directly contradicts any assertions contained within the “business plan”.

      to quote John McEnroe: you cannot be serious!

      • Posted 01/02/2012 at 4:15 pm | Permalink |

        hi Michael,

        there have been thousands of pages of analysis written about NBN Co’s business plan. Sure, it’s possible to argue that it’s a partisan document, but I’d like to see a similar level of analysis from the Coalition before I could conclude the merit of that statement.

        Cheers,

        Renai

      • iceyone
        Posted 01/02/2012 at 4:24 pm | Permalink |

        Okay Michael, go and collect your cheque from the coalition :)

        Maybe if you did some research you would find that this article is correct!

        The money from the nbn can’t be transferred to other projects, it’s not contained in the budget.

        Something that has been known for a few years!

        The previous coalition government sold off the network with Telstra, that is why we have to build a new network/fttn was never undertaken!

        • Michael
          Posted 01/02/2012 at 4:51 pm | Permalink |

          Tony Abbott, as an Opposition politician, is entitled to challenge and reject any utterances coming from NBNco (just as you are perfectly entitled to disagree with the Coalition’s views).

          in the context of our open, democratic political system, to suggest that the Leader of the Opposition is somehow constrained from expressing a differing point of view on the economics of the NBN is completely absurd.

          • Jean W
            Posted 01/02/2012 at 5:03 pm | Permalink |

            The problem is not that he is challenging it. That is expected.

            The problem is that he’s playing around with numbers he doesn’t understand and making arguments that don’t make sense.

            You could argue that NBNCo might not reach their revenue goals – but Tony is *not* doing that. He is flat out lying by impying that there is no return from the NBN at all.

            By *falsely* claiming that the objection is to Tony challenging it (a classic straw man), you are falsely implying that his objections are valid. They are not. Read what he said. Where does he suggest that the business plan could fail? Nowhere. He just makes vague claims about diverting money to roads and market competition magically providing better broadband.

            Many commenters here would like to see some *good* criticisms of the NBN. Tony is failing to deliver. Miserably.

            • Michael
              Posted 01/02/2012 at 5:26 pm | Permalink |

              some clarification:

              Tony Abbott is a Rhodes Scholar and read Politics, Philosophy and Economics (PPE) at Queen’s College, Oxford. (he knows what he is talking about.)

              if NBNco’s “costs” exceed “revenues”, the return on the NBN will be negative. (this is a very real risk that the Coalition is entitled to focus on.)

              by repeatedly calling the NBN a “white elephant”, Tony Abbott is implicitly rejecting NBNco’s projections in its so-called “business plan”.

              • Noddy
                Posted 01/02/2012 at 5:37 pm | Permalink |

                And that makes it even more disgusting that he is making the arguments that he is. If, as you say, he knows what he is talking about, then he isn’t misinformed or mistaken, he is just outright lying.

              • SMEMatt
                Posted 01/02/2012 at 6:05 pm | Permalink |

                All that means is he should know better.

              • Jean W
                Posted 01/02/2012 at 7:02 pm | Permalink |

                Where did Tony say that the costs would exceed revenues?

                His wording suggested that the Government was spending $10 billion on the Telstra deal then $50 billion on the NBN. Spending, not investing. In other words, Tony is saying that a $60 billion loss is going to take place. Zero revenue.

                Let’s not forget that the $50 billion figure came from adding the $10 to the $40 billion actual projected NBN cost, so he is counting the Telstra deal twice.

                Obviously that is not correct, and you’re right in that he ought to know better. Either he is somehow too stupid to see the truth, or he is blatantly lying to us. Either way, he ought to be thrown out of office, or into a large pit of playpen balls where he would remain both entertained and unable to ruin the country.

              • Damo
                Posted 01/02/2012 at 7:06 pm | Permalink |

                So what you saying Michael, is that he is intentionally misleading the general public? I have no problems in him presenting an opinion that is different to Labor’s or even challenging their statements. The problem is when he manipulates facts/numbers/etc to mislead people. To make them believe a different reality to what is real. If he is intentionally doing this, then that is pretty scary!

            • Harley
              Posted 02/02/2012 at 11:50 am | Permalink |

              @ Jean – your suggestion that Abbott does not understand the numbers is absurd – because you don’t know whether he does or doesn’t. I doubt whether any of us posting here has as much privy to government budget numbers and access to top notch economists or accountants as he does. And realistically he’s been in the game long enough to understand the numbers. It’s pretty easy to say “you’re wrong” (oh the irony).

              @ no one in particular – An important note on the article. It asserts that the Liberal party is factually wrong. It does this by suggesting that they believe someone else is right. The article does not show why the other person is definitively right, nor does it dissect the Liberal party’s numbers to show why they are definitively wrong. It only scratches the surface. I think it’s better to at things as a balance of probabilities. You generally don’t get “right” or “wrong”.

              @ Renai – “for investments which will make a return” – should be “for investments which may make a return”. Unless you can see into the future you don’t know. Just like most people were blindly abandoning Apple stock in the mid 90s – because they couldn’t see into the future to “know” whether there was a return or not – it’s all guess work, and most of them guessed wrong (remember that famous Michael Dell statement?).

              • PeterA
                Posted 02/02/2012 at 12:21 pm | Permalink |

                Sorry Harley,

                He is wrong. He is calling something an expense in the budget that if cut would fund “other projects” in infrastructure. That is what he said. This is a lie. He knows it. Or, if he doesn’t he has access to someone who can explain it for him, if he chose to ask.

                Either he has asked, and ignored the answer. (lying).
                Hasn’t asked, and ignores all commentary from the last 2 years. (incompetent)
                Has asked, received the answer he wanted, but provides no evidence (over the last 2 years) to back it up. (disingenous)

                We are spending 40 billion dollars here. Abbott can say: “We disagree with the whole project, but if you are dead-set on spending 40 billion dollars you could at-least change [something]”
                Instead we get: “We won’t do that. It’s a waste, and we could spend it on roads instead.”

                You should be looking at government, less as combat and more like discussion (where certain people make decisions, and others have been asked to sit in the room and make helpful comments about said decisions) and what you’ll find is Abbott makes no helpful comments. Doesn’t even try. He just says “waste” and “tax” over and over again.

                Says lies like: “if we cancelled that project we could spend that same money on roads”. We can’t. It Won’t be recorded on the budget in the same column as Road spending. It doesn’t matter if it makes a 100% 40 billion dollar loss. When it does make a 100% 40 billion dollar loss, THAT is the time it hits the budget.. Of course it will never make a 100% loss, because we will still have a network to sell. And that network will still have earned *some* revenue. But that doesn’t matter. Right now, Abbott is lying. End of story.

                • Michael
                  Posted 02/02/2012 at 1:07 pm | Permalink |

                  disagreeing with NBNco’s financial projections does not make Tony Abbott a liar.

                  • Posted 02/02/2012 at 1:30 pm | Permalink |

                    Yes but not providing any evidence for his claims that they are false makes him a fool.

                    • Michael
                      Posted 02/02/2012 at 2:04 pm | Permalink |

                      the Labor Government is saying: “it will cost $X to build a national FTTP network, and the network will reap $Y of revenue, where $Y is a larger number than $X”. these forecasts of $X and $Y are clearly based on certain (implicit or explicit) assumptions.

                      on the other hand, the Coalition believes $X will be larger than $Y. obviously, the Coalition is working on the basis of a different set of assumptions. what are these differing assumptions (or concerns)? well, if you read through the Opposition Spokesman for Communications’ speeches, they range from doubts over the claimed cost of building the NBN to the likely revenue the fibre network will generate.

                      moreover, the supposed “evidence” produced to support NBNco’s financial projections in their skeletal business plan is no more (in fact, much less) substantive or rigorous than the various “evidence” Malcolm Turnbull has produced in his criticisms of NBN’s financial viability.

                      not only is Tony Abbott entitled to his differing view on the economics of the NBN, his view is far from extreme or controversial. anti-Telstra industry luminaries ranging from Bevan Slattery, Paul Broad to John Linton (and many others) have publicly stated that NBNco will end up a financial disaster for the Federal Government. are they “liars” and “fools” too?

                      is the public supposed to completely ignore the knowledgeable voices of dissent coming from within the telecommunications industry, and only pay heed to the sycophantic chorus of “Yes, Minister” coming from “paid consultants” panhandling for “fees”?

                      • Alex
                        Posted 02/02/2012 at 3:22 pm | Permalink |

                        Seems to me that their are two distinct tacks being taken by those who oppose the NBN.

                        1. It is a horrible monopoly and everyone will be made to use and pay for it, without choice
                        2. It will be a financial disaster

                        But if everyone is forced to use and pay for it, without choice of anything else, how can it possibly be a financial disaster?

                        It can’t, either 1 or 2 or both are wrong.

                        But the sad part about this debate is, it doesn’t matter, because it’s been hijacked by the politics, like no other I have ever seen. Even the GST, carbon tax and republic debates are tame by NBN standards.

                    • Jackey J
                      Posted 02/02/2012 at 10:08 pm | Permalink |

                      Actually Tony is probably going to be right.

                      From what I am reading the profits don’t roll in until 2028, there seems little chance the Govt will last the next election let alone long enough to see any substantial roll out. I cant see the Libs ever allowing the NBN to run at a profit in its current form should they take Government. It will be used forever more as a ‘black hole’ in the budget and a shining example of Labor waste.

                      Come next election what ever money has been spent is going to be used as a hammer to hit Labor with over wasteful spending, X amount of money spent on Y amount of users. The X amount is the figure that Labor would have wasted that could have be spent on ‘more important’ infrastructure such as roads. Z will equal X/Y and will represent an astronomical number for the roll-out of fibre to an individuals house, disregarding the costs of backhaul, trials etc.

                      NBNCo needs to lift its game and get the message, and fibre, out as soon as possible.

                • Harley
                  Posted 02/02/2012 at 3:05 pm | Permalink |

                  “Sorry Harley, He is wrong.”

                  No need to be sorry. I already wrote how easy it is to simply say to someone they’re “wrong”. It doesn’t actually make them wrong. Jumping up and down and holding your breath also would not change this (not recommended).

                  “You should be looking at government, less as combat and more like discussion…..”

                  Funny, I don’t remember writing that I saw government as combat. Please don’t make assumptions.

                  “Says lies like: “if we cancelled that project we could spend that same money on roads”. We can’t.”

                  Why can’t we? Please say why if we cancelled the NBN today why we couldn’t spend money that is slated for the NBN but hasn’t yet even been diverted to the NBN on other things. Tell me what rule or concept prevents that money (that hasn’t even been spent on the NBN yet) from being spent on other things.

                  Keep in mind that the Parliamentary Library report linked to above states:

                  “To sum, accounting treatment does not depend on the realised rate of return of NBN Co, or whether
                  that rate falls below a benchmark. In addition, the accounting treatment does not depend on
                  whether the government intends to sell NBN Co in future. The sale, funding, operation and all
                  payments stemming from these activities, are accounted for in the budget statements as per normal
                  accounting procedures. These procedures are considered in detail below.” (pg 2 of the report)

                  So it is in the budget (of course it is – it’s money being spent). It’s just not recorded as an expense, instead it’s recorded as an asset. (pg 16 of the report).

                  This is of course partly rhetorical – the answer is that we can divert the money into whatever projects we want to. The money does not come out of the ether – it comes out of tax payer pockets or borrowed from overseas. It may be treated as asset because it’s projected to make a return on paper – but it is real money, it hasn’t all been diverted to the project yet, and it does not mean that we can’t divert that money elsewhere. Even to roads.

                  • Noddy
                    Posted 02/02/2012 at 3:43 pm | Permalink |

                    What you are arguing is that spending money on a house is the same as spending it on say… a holiday. Take a 500K holiday and you will never see the money again. Buy the house and your net worth remains the same. You may even make a profit on it when you sell it. Or you could make money on it immediately by renting it. Yes, with both you have “spent” 500K, but the house is an asset the holiday an expense. Roads, unless they are a toll roads, are an expense.

                    The bottom line is spend 40b on the NBN the government will recover some/most/all/profit over the period of it’s usefull life. Spend the same on the roads and all you have done is increase your non paying infrastructure you have to keep maintaining. The US knows all about this, they can now not maintain their infrastructure the way they could in the past.

                    • Harley
                      Posted 02/02/2012 at 8:14 pm | Permalink |

                      I’m not arguing what you suggest (although it is close). If the money is already spent then it’s already spent – you can’t go back on that. If it hasn’t been spent and you have a choice then you can spend it on whatever the hell you like. Be it hospitals, buildings, education, roads, a bag of jelly beans for everyone, etc, etc. I can be an asset or it can be an expense. You choose. The point is we actually have a choice – not all the money is spent and we can use it for other things if the people of Australia so choose it.

                      I only chose roads as a glib example because there was a suggestion you couldn’t spend it on that (when you can if you want).

                      Note: I’m certainly not saying there are better things to spend it on. I wouldn’t know – but we will know with hindsight in the future (Captain Hindsight will save us!). I bet if you asked a cancer patient if they’d rather an NBN or the same money into education, research, and hospitals they’d choose the latter. Food for thought – it all depends on your perspective, needs and wants.

                      • Noddy
                        Posted 02/02/2012 at 9:30 pm | Permalink |

                        Yes, there is lots of money to spend on many things. The NBN on the scale of government spending is pretty small. Why not spend it on the NBN? We have an old broken down communication system that will need to be switched to fibre at some stage in the next 10-20 years. The majority of those asked are in favour of the NBN. How about spending the arts budget on roads? It’s bigger than the NBN spend/ They put more money into tourism than comms. What is the big deal with upgrading Australia’s communications infrastructure? Is it because the bogan majority don’t understand what it is and would prefer more roads to carve up in their V8 utes who spend WAY more on beer each year (which attracts less tax than other alcohol, a loss of more money than the NBN spend, just to keep them happy). What the F, spend the lot of 4 and 20 pies so we all know what we are missing out on.

                      • Noddy
                        Posted 02/02/2012 at 9:33 pm | Permalink |

                        PS. Those nerds who wantr the NBN typically pay more tax than the boguns. I know I pay my total NBN cost in tax about 5-6 times over every year, TOTAL contribution, so 50-60 times the year expenditure for the NBN. And I don’t drink beer so they should tax it to the max :P

                      • Harley
                        Posted 02/02/2012 at 11:21 pm | Permalink |

                        Noddy, I’m for the NBN as well. I don’t pretend that I know how it’s going to pan out – no one does know. I do know it’s a good investment from my perspective. I also want Australia to win the SKA telescope – which needs a fibre backbone to handle any distributed data processing.

                        I’d go one step further and do the same thing with wireless, guaranteeing minimum 3G coverage to all areas and lease them out to resellers.

                        I’d also regulate mobile phone voice call prices to help move everyone on to mobiles phones at the same cost or less (hopefully much less) as a landline (I want the copper land line phone call concept to die). I’d regulate data costs of SMS (text) messages as well, bringing them in line with other data transfer costs (i.e. a text message should be virtually free of cost).

                        I don’t subscribe to any particular view other than that which I think is truly objective – which is why I argue the way I do.

                      • Posted 03/02/2012 at 12:14 am | Permalink |

                        I also want Australia to win the SKA telescope – which needs a fibre backbone to handle any distributed data processing.

                        So, yeah, the computers doing the work for the SKA telescope will be in homes across the country will they? I find it ironic that your “sympathy clause” for the NBN is one example of the NBN is not required for.

                        I’d go one step further and do the same thing with wireless, guaranteeing minimum 3G coverage to all areas and lease them out to resellers.

                        Why? No seriously, is the coverage of the Big 3 not big enough for you? Has the billions invested by Telstra on NextG, which they now are upgrading and supplementing with LTE not covered enough of this fine country? Has the billion Vodafone have just invested to upgrade their overtaxed network not been enough for you?

                        Seriously, give me one good reason why the mobile sector needs government intervention like the fixed-line sector does. Competition in this sector works, and very well. In fact that is part of the reason the fixed-line sector has been so neglected, Telcos are investing in the mobile sector, with new technologies being deployed, and capacity constantly being upgraded, and all for a very good ARPU. In the residential fixed sector, however, they do the bare minimum to keep the infrastructure running, because upgrades are slow to see returns, and the market is very close to saturation.

                        I’d also regulate mobile phone voice call prices to help move everyone on to mobiles phones at the same cost or less (hopefully much less) as a landline (I want the copper land line phone call concept to die). I’d regulate data costs of SMS (text) messages as well, bringing them in line with other data transfer costs (i.e. a text message should be virtually free of cost).

                        Why? I think you’ll find what you are asking has already happened.

                        So let’s see, a plan with virtually free SMS and calls “as cheap as landline calls”. Well, from Amaysim you can get an unlimited talk and text plan for $39.90. And they are not alone if offering an unlimited talk and text deals, although they are the cheapest. You’d pay about $30 a month for a land-line, and depending on your provider that could mean some free calls (Optus for example give you $50 worth), no free calls but cheap rates, free local calls but costs to call mobiles, etc.

                        Now since the Amaysim plans also come with 4GB of data, you can effectively think of that “extra $10″ as for some mobile bandwidth. So with that in mind, I would say that in some cases it is cheaper to have a mobile plan than a landline. The wonders of competition? So remind me again why this sector needs regulation? Where is the problem?

                        I don’t subscribe to any particular view other than that which I think is truly objective – which is why I argue the way I do.

                        Objective arguments do not include redundant suggestions like regulation of mobile prices, as I have proven your stated goals have already been met. Arguing objectively requires an intimate understanding of the subject you are talking about. Now, you are far from being emotive, however, you have demonstrated that some of your arguments are poorly researched, and this prevents you from providing an objective stance that stands up to scrutiny in these areas.

                      • Noddy
                        Posted 03/02/2012 at 9:29 am | Permalink |

                        “So, yeah, the computers doing the work for the SKA telescope will be in homes across the country will they?”
                        Actually they could be. I and many others donate computer time to distributed computing projects such as molecular bonding for the search for a cancer curing drug, processing of data from radio telescopes, during 9/11 they used a similar scheme for searching for a anthrax cure.

                        “No seriously, is the coverage of the Big 3 not big enough for you?”

                        I’d have to agree there. Competition in this area is driving things along well. There are things I would like see regulated, more for an honesty in marketing point of view. Stop these bogus caps and call value claims, make them use real numbers, say minutes of talk time to another providers network, so that job public can understand the plans without a spreadsheet to analyse them. Stop bogus caverage maps, I am looking at you Optus. Don’t claim you cover all of Bendigo and the surrounding area with 3G when you have to be withing a km of the CBD to get a 3G signal. All over I have found coverage maps are complete am utter BS.

                      • Harley
                        Posted 03/02/2012 at 10:33 am | Permalink |

                        @NightKhaos – Firstly, don’t ask questions and then put your answer after it unless you’re being rhetorical – which you aren’t. Secondly my suggestion are not arguments – they are actions that I’d do which I did not argue the merits or reasons of (i.e. suggestions – as you already said). Thirdly, I didn’t say “why” I’d do these things, unfortunately leaving it open for wild conjecture.

                        “So, yeah, the computers doing the work for the SKA telescope will be in homes across the country will they? I find it ironic that your “sympathy clause” for the NBN is one example of the NBN is not required for.”

                        Yes. This the best way of dealing with the large data sets and computations required. Research it please.

                        “Why? No seriously, is the coverage of the Big 3 not big enough for you? Has the billions invested by Telstra on NextG, which they now are upgrading and supplementing with LTE not covered enough of this fine country? Has the billion Vodafone have just invested to upgrade their overtaxed network not been enough for you?”

                        Because the coverage in a lot of areas is not enough. Because it would mean a guaranteed minimum service level Australia wide when the newer non3G technologies aren’t rolled out to all areas or become congested (I’d said to only regulate 3G). Because it would mean no more overtaxed 3G networks (if you build it well enough). You are not required to like these reasons. The fact is we have a slipshod wireless network that can’t cope with demand that competition is not resolving (except in specific suburban and city areas where there is profit to be made – other areas suffer).

                        “Why? I think you’ll find what you are asking has already happened.”

                        I think you’ll find it has not happend.

                        The sector that will be displaced the most by the loss of copper lines is pensioners. They have phones that were installed by Telstra a long time ago and their phone line rental is $20 a month. They make almost no calls per month. This represents several million Australians.

                        Now, go and tell them they have to buy a $50 mobile phone and subscribe to a $40 a month plan. You’ve just almost doubled their costs. They can’t afford this.

                        As for VOIP using NBN – you’ve got to tell them to subscribe to an NBN plan that starts at $50 a month and get them to buy a VOIP adaptor. Even as costs are wireless is cheaper.

                        You’ve shown a single competitor that has a relatively cheap price (relative to other Australian providers). Now, how have the incumbents reacted? Their prices look static to me. This is because we have an oligopoly.

                        We are being ripped off in Australia because there is only nominal competition. We are too small a market for any effective competition. That’s where regulation can work wonders. Wireless voice and text calls should be virtually free of cost – because we should be charged for what it is – just data and infrastructure.

                        Regulation is not for areas where things succeed. It is for areas where things are failing and people are being adversely affected. This is something you seem to be missing. I’ll gladly regulate to stop the vulnerable from suffering and the middle class being gouged by the Australian telecommunications oligopoly.

                        “Objective arguments do not include redundant suggestions like regulation of mobile prices, as I have proven your stated goals have already been met. Arguing objectively requires an intimate understanding of the subject you are talking about. Now, you are far from being emotive, however, you have demonstrated that some of your arguments are poorly researched, and this prevents you from providing an objective stance that stands up to scrutiny in these areas”

                        As above – you admit they are suggestions then go on to treat them like arguments when I hadn’t argued why anything. I did not show a shred of research because I wasn’t arguing anything. I was trying to show I didn’t have a problem with regulation by suggesting the other things I would like to regulate. Honestly, pull your head out – this is as clear as day.

                        You didn’t prove they have been met. Some of these things have already been met for some given subsets of the Australian people – of course they have – nobody needed to say anything for that to be true. But my suggestions have not been met in general or universally, nor proven by you to be so. Furthermore it is unlikely they will be met in the near future.

                      • Posted 03/02/2012 at 1:01 pm | Permalink |

                        @NightKhaos – Firstly, don’t ask questions and then put your answer after it unless you’re being rhetorical – which you aren’t. Secondly my suggestion are not arguments – they are actions that I’d do which I did not argue the merits or reasons of (i.e. suggestions – as you already said). Thirdly, I didn’t say “why” I’d do these things, unfortunately leaving it open for wild conjecture.

                        1. Actually they were rhetorical questions. If you feel they weren’t, you appear to have answered them anyway, even ones that were blatantly rhetorical.

                        2. And although your suggestions are noted, in order for you political opinion to bare any weight you need to provide arguments as well as suggestions, otherwise you are just throwing around ideas. It is like saying we should cease all defense funding, or drop MediCare. This opinions will be rejected off hand unless the person saying them bothers to provide arguments. The same applies with your suggestions. With politics you are trying to convince people that your view is correct and that your suggested actions are the right course of action, or I’m sad to say the status quo will remain.

                        3. Wild maybe, but not baseless. You may be talking to intelligent people, but we still cannot read your mind. Since your suggestions do not have obviously apparent reasoning, you might want to consider adding this reasoning in future, otherwise you will end up in more pointless arguments.

                        Yes. This the best way of dealing with the large data sets and computations required. Research it please.

                        I think you misunderstood. Let me explain: If you are referring to initiatives like Folding@Home and SETi@Home, where precisely do these programs require fibre to the home infrastructure? If they did they would be technically infeasible today. All of the bandwidth intensive parts of any distributed computation initiative will be sent to computers in university, not some spare box in someone’s basement. Which brings me to back to my original point, your “sympathy clause” is one thing the NBN is not required for.

                        Because the coverage in a lot of areas is not enough. Because it would mean a guaranteed minimum service level Australia wide when the newer non3G technologies aren’t rolled out to all areas or become congested (I’d said to only regulate 3G). Because it would mean no more overtaxed 3G networks (if you build it well enough). You are not required to like these reasons. The fact is we have a slipshod wireless network that can’t cope with demand that competition is not resolving (except in specific suburban and city areas where there is profit to be made – other areas suffer).

                        So now you have actually provided arguments with which your suggestions can be analysis. Thank you. Granted I wasn’t expecting an answer to these questions. You’ll notice that one of the points I made was about the continued investment of networks. If you feel this investment is not been allocated to problem areas properly, then I would like to point out that the problems you are referring to are actually related to the systems utilised themselves, and not by poor investment by the companies.

                        In Europe, America, and other first world countries they too have black spots, towns that have bad coverage, the cliched stand on a fencepost inadequate mobile coverage. They still have overtaxed towers. There networks are still pretty shit. And yes, you’re right, I don’t have to like your reasons, but I do have one glaring flaw with it. What can the government do differently to improve coverage in this sector? Give me some real, practical suggestions, on where government investment could be target, or how to word minimum mandates to ensure that Telcos are not given an impossible task (like providing 3G coverage to every corner of this, rather large, country), nor unfairly penalised when faced with factors affecting their network out of their control.

                        I think Telcos have done a very good job for mobile coverage in Australia. That isn’t to say it is perfect, but as the old axiom goes, do you seriously think you can do better?

                        I think you’ll find it has not happend.

                        I provided specific examples to show that pricing of mobile phone services is coming very close to being inline with prices of landlines services.

                        The sector that will be displaced the most by the loss of copper lines is pensioners. They have phones that were installed by Telstra a long time ago and their phone line rental is $20 a month. They make almost no calls per month. This represents several million Australians.

                        That is $20 for just the line rental. The calls are on top of that. For similar value you can get a mobile plan with a plan with about $500 worth of calls, and 1.5GB of data.

                        Now, go and tell them they have to buy a $50 mobile phone and subscribe to a $40 a month plan. You’ve just almost doubled their costs. They can’t afford this.

                        Right, so, let me do the Maths here, let’s say they’re on TPG’s $17.99 plan, and intend to use this plan for 2 years with a phone for $100 or less, with the setup fees of $40, that equates to $23.83/month. So, in this case, we have not more than doubled their costs, and in fact, if they find they do not use the $550 cap up, they can downgrade to a $9.99 plan, which will save them $8 a month, which comes out less than their home phone line rental.

                        You’ve shown a single competitor that has a relatively cheap price (relative to other Australian providers). Now, how have the incumbents reacted? Their prices look static to me. This is because we have an oligopoly.

                        One being eroded by the budget providers like the one I provided example for. Look, competition can’t force a level playing field, what it can do, on the other hand, is provide you with a lot of options. If your grandma cannot afford a Telstra Mobile, don’t get her one. Get her a TPG mobile on the Optus Open Network, and if she only makes a few calls a month, she will actually end up paying less than what she would for her home phone. You find the best option for you, and stick with it.

                        We are being ripped off in Australia because there is only nominal competition. We are too small a market for any effective competition. That’s where regulation can work wonders. Wireless voice and text calls should be virtually free of cost – because we should be charged for what it is – just data and infrastructure.

                        I’m sorry, but that is not how it works. Telecoms need to recover their rather large (Vodafone invested $1 billion dollars in the network last year) construction and maintenance costs. To do this they marginalize wherever they can, because they need to make a high ARPU so that they can quickly turn their investment to profit, and further invest in better infrastructure. If you try and make the cost to use their service “virtually free” you will stagnate their investment, because I seriously doubt you will be okay with paying $50/GB, which is the ballpark figure you will be looking at in your suggestion.

                        Regulation is not for areas where things succeed. It is for areas where things are failing and people are being adversely affected. This is something you seem to be missing. I’ll gladly regulate to stop the vulnerable from suffering and the middle class being gouged by the Australian telecommunications oligopoly.

                        No, I don’t miss it. However I don’t think their is a problem as I have demonstrated that if pricing is a problem, you can already find a cheaper provider, and in some cases even pay less than you would for your landlines. I also have no idea what you think regulation will achieve in terms of improving coverage. So, in short, I don’t see where you think the regulation can apply.

                        As above – you admit they are suggestions then go on to treat them like arguments when I hadn’t argued why anything. I did not show a shred of research because I wasn’t arguing anything. I was trying to show I didn’t have a problem with regulation by suggesting the other things I would like to regulate. Honestly, pull your head out – this is as clear as day.

                        Regulation for regulation sake is far worse than the problems you are trying to address, and won’t be adequately addressed by your regulation suggestions. In other words, your suggestions are infeasible, and did not support your initial argument at all. Because of that, they stand alone, as suggestions to address no position. With that in mind, I argued against them, to prove that your suggestions are redundant. This is also “clear as day”.

                        You didn’t prove they have been met. Some of these things have already been met for some given subsets of the Australian people – of course they have – nobody needed to say anything for that to be true. But my suggestions have not been met in general or universally, nor proven by you to be so. Furthermore it is unlikely they will be met in the near future.

                        You didn’t prove they have been met. Some of these things have already been met for some given subsets of the Australian people – of course they have – nobody needed to say anything for that to be true. But my suggestions have not been met in general or universally, nor proven by you to be so. Furthermore it is unlikely they will be met in the near future.

                        I only said that your pricing requirement has been meet, and with further evidence I can show your arbitrary requirement (less than landline) has indeed been meet. As for your other goals, to do with coverage, I have pointed out that I believe your requirements to be infeasible to actually provide.

                        Look, I’m glad you seem to support the NBN as you said, but maybe you need to be more constructive in your criticisms of the mobile sector for brandishing around the idea that it needs regulation.

                      • Harley
                        Posted 03/02/2012 at 6:48 pm | Permalink |

                        @NightKhaos

                        “All of the bandwidth intensive parts of any distributed computation initiative will be sent to computers in university, not some spare box in someone’s basement. Which brings me to back to my original point, your “sympathy clause” is one thing the NBN is not required for.”

                        The SKA will generate 1 exabyte of data per day. That’s 1000 petabytes. 1000 000 terabytes. It needs an optic fibre network to transport the data. I’m guessing you didn’t know quite how much data we were talking about. They won’t be able to store it a university or anywhere else. It needs distributed computing with data sent to wherever they can offload it.

                        “What can the government do differently to improve coverage in this sector? Give me some real, practical suggestions, on where government investment could be target, or how to word minimum mandates to ensure that Telcos are not given an impossible task”

                        Build more towers, build them where they need them.

                        “Right, so, let me do the Maths here, let’s say they’re on TPG’s $17.99 plan, and intend to use this plan for 2 years with a phone for $100 or less, with the setup fees of $40, that equates to $23.83/month. So, in this case, we have not more than doubled their costs, and in fact, if they find they do not use the $550 cap up, they can downgrade to a $9.99 plan, which will save them $8 a month, which comes out less than their home phone line rental.”

                        Well, I’ll have to eat my words. One more plan that is comparable or cheaper. Now what of the rest of the market. Pensioners don’t change their habits on price alone. They were with Telecom, now Telstra, and most of them stick with the company they’ve always been with (sad but true). When the copper line disappears I think they should have a viable option with the company they’ll stick with. Telstra won’t drop they’re prices drastically until they’re made to do it. We already regulate with other utility prices – we can with wireless phones as well.

                        “I also have no idea what you think regulation will achieve in terms of improving coverage. So, in short, I don’t see where you think the regulation can apply.”

                        Because we can build more towers where they are needed. Telcos aren’t doing it. The only telco who has reasonably good coverage in Australia is Telstra. Lets make it so that most people get good coverage. Saying “it can’t work” is short sighted. It could work.

                        In regards to making their investments back – their multibillion dollar profits clearly show they pay for their investments and then make billions on top of that every year without fail.

                        They’ll still make craploads of profit. They’ll just have to swallow some extra costs with fixing up the network (which will increase the marketplace size) and have to deliver some sort of plan that gives cheap phone calls to those that need it. We get gouged for just about everything in Australia – and the market place won’t bring prices down when they can just keep them up.

                      • Posted 03/02/2012 at 10:17 pm | Permalink |

                        The SKA will generate 1 exabyte of data per day. That’s 1000 petabytes. 1000 000 terabytes. It needs an optic fibre network to transport the data. I’m guessing you didn’t know quite how much data we were talking about. They won’t be able to store it a university or anywhere else. It needs distributed computing with data sent to wherever they can offload it.

                        You don’t seem to understand the difference between a fibre network in general, and the NBN, which is a FTTP network. Let me lay it out for you: a fibre network uses fibre as a means of transmission, the NBN runs fibre to each and every home in Australia. The SEK will require an extensive fibre backbone to operate between Universities, Research Institutes and the SEK array itself. What it does not need is fibre to each and every home in Australia. Although some Australian’s will allow, assuming a SEK@Home program is started, their computer’s idle time to help analyse the SEK, none of them, unless they are running a significantly large cluster will need bandwidth in excess of what the majority of the Australian’s have today.

                        It doesn’t matter the amount of data they are processing, it doesn’t matter the fact that they will be distributing it between multiple processing sites, the NBN is the wrong type of fibre network to support the SEK. End of.

                        Well, I’ll have to eat my words. One more plan that is comparable or cheaper. Now what of the rest of the market. Pensioners don’t change their habits on price alone. They were with Telecom, now Telstra, and most of them stick with the company they’ve always been with (sad but true). When the copper line disappears I think they should have a viable option with the company they’ll stick with. Telstra won’t drop they’re prices drastically until they’re made to do it. We already regulate with other utility prices – we can with wireless phones as well.

                        Two plans actually. You’ll note I also provided an Exetel Link. And frankly, the problem of pensions stuck in their ways and to stubborn to move away with Telstra is not a problem worth intervening in the sector for. That’s like saying that despite KFC and Red Rooster bringing out healthier products, since most people get their fast food from McDonalds we should intervene because they refuse to do it. Also, we regulate utilities because they are merely resellers for the same product, so any company charging extra has no justification, whereas a company like Telstra who continuously goes above and beyond with their network charges more because their product is far more reliable than their competitors. Can you say you would find any functional difference between energy providers?

                        Because we can build more towers where they are needed. Telcos aren’t doing it. The only telco who has reasonably good coverage in Australia is Telstra. Lets make it so that most people get good coverage. Saying “it can’t work” is short sighted. It could work.

                        You can improve coverage without widespread regulation. If coverage is that important in particular area, and lacking, you can provide subsidies to encourage private companies to fix the issue. Look at Western Australia’s $40 million contribution. As for Telstra being the one that gets all of these subsidies, that is because they are the holders of the USO. A legislation already being replaced with something more flexible (in that a provider must provide an a service, not Telstra) as part of the NBN, no or minor modification to the current plans on the table required.

                        In regards to making their investments back – their multibillion dollar profits clearly show they pay for their investments and then make billions on top of that every year without fail.

                        They make a profit, they must be evil. You do realise the majority of their profits actually go into paying back the billions that their shareholders have invested? That another person, such as yourself, decided to take hundreds, sometimes thousands of their own dollars and invest it in the Telco, and in exchange for this generous act, they get a share of those billions back. Where did you think those billions went?

                        They’ll still make craploads of profit. They’ll just have to swallow some extra costs with fixing up the network (which will increase the marketplace size) and have to deliver some sort of plan that gives cheap phone calls to those that need it. We get gouged for just about everything in Australia – and the market place won’t bring prices down when they can just keep them up.

                        I’m sorry, but have you heard of the ACCC? What does the ACCC do? Here I was thinking that they are an organisation designed to stop price gouging. Maybe you’re just confused about why it it costs so much to use a cell-phone here than it does in Europe. I’ll give you a hint: Australia is about twice the size of Europe with a fraction of the population density.

                      • Posted 03/02/2012 at 10:26 pm | Permalink |

                        And this is why I shouldn’t write long replies on my phone… damn autocorrect.

                        sed s/SEK/SKA/

                      • Harley
                        Posted 05/02/2012 at 10:01 pm | Permalink |

                        “You don’t seem to understand the difference between a fibre network in general, and the NBN, which is a FTTP network.”

                        I already understand perfectly well. The NBN has a fibre backbone. That’s what we need at the least. You’d still have trouble getting data out of the SKA and to other people unless they had FTTP connections. NBN is FTTP so that is what it the SKA needs.

                        “assuming a SEK@Home program is started, their computer’s idle time to help analyse the SEK, none of them, unless they are running a significantly large cluster will need bandwidth in excess of what the majority of the Australian’s have today.”

                        One petabyte of data is way bigger than most people realise. Lets do the maths. Lets assume we send 1 petabyte of data out to 1000,000 active clients (an overestimate considering folding@home has 430,000 CPUs – across the entire planet). That is 100 gigabytes of data per client per day (3 terabytes per month). If you think an ADSL connection can handle that then you’re kidding yourself. You’d need clients to have no less than a 10mbit connection – which can just handle 100 gigabytes a day – and thats saturating all the clients bandwidth with SKA data – zero bandwidth is left for other internet needs. So if you want to maintain a normal internet connection for other uses you’d need something like 20 to 30mbit with QOS packet scheduling. The 25mbit NBN connection would just achieve this. The average ADSL speed is 6mbit – well under what is required.

                        “Also, we regulate utilities because they are merely resellers for the same product”

                        The NBN is just that. Australia classified telecommunications as a utility for decades. Only when it was privatised did people stop referring it to it as such – beforehand it was a public utility – now it is a private utility.

                        “They make a profit, they must be evil.”

                        Don’t be stupid. The profits are obscene though.

                        “You do realise the majority of their profits actually go into paying back the billions that their shareholders have invested?”

                        Yes, lots of profits go into paying dividends. But Telstra have been doing well enough to have billions left over after that. They are still the ASX20 top pick for bluechip (because they make so much money).

                        “I’m sorry, but have you heard of the ACCC? What does the ACCC do? Here I was thinking that they are an organisation designed to stop price gouging. Maybe you’re just confused about why it it costs so much to use a cell-phone here than it does in Europe. I’ll give you a hint: Australia is about twice the size of Europe with a fraction of the population density.”

                        Yes. The toothless tiger ACCC. They are ineffective and largely useless for the everyday consumer. They regularly don’t stop anything. Maybe when I see them enforcing the Competition and Consumer Act properly (which replaced the useless Trade Practices Act) I’ll have a little bit of faith. Maybe if they rallied to get rid of parallel import restrictions I’d feel better (better competition – that’s what solves everything right?).

                        I’m not confused as to why it costs so much in Australia. There is a small amount of companies who use market collusion tactics to keep prices high. Australians, being one of the wealthiest groups of people on earth, don’t really give a care and swallow it. I readily admit the market size contributes to our market problems in general. Of course having a population less than Mexico City distributed across an area the size of the USA doesn’t help. But – 97% of our population lies in dense urban areas adjacent to cities. Perfect for telecommunications rollouts. So good we are often the test bed for new technologies. This is one area where we shouldn’t suffer.

                        This conversation is boring me so I’m leaving it.

                      • Posted 05/02/2012 at 10:58 pm | Permalink |

                        I already understand perfectly well. The NBN has a fibre backbone. That’s what we need at the least.

                        So does our current broadband infrastructure. So does the alternative plan proposed by the Coalition.

                        You’d still have trouble getting data out of the SKA and to other people unless they had FTTP connections. NBN is FTTP so that is what it the SKA needs.

                        One petabyte of data is way bigger than most people realise. Lets do the maths. Lets assume we send 1 petabyte of data out to 1000,000 active clients (an overestimate considering folding@home has 430,000 CPUs – across the entire planet). That is 100 gigabytes of data per client per day (3 terabytes per month). If you think an ADSL connection can handle that then you’re kidding yourself. You’d need clients to have no less than a 10mbit connection – which can just handle 100 gigabytes a day – and thats saturating all the clients bandwidth with SKA data – zero bandwidth is left for other internet needs. So if you want to maintain a normal internet connection for other uses you’d need something like 20 to 30mbit with QOS packet scheduling. The 25mbit NBN connection would just achieve this. The average ADSL speed is 6mbit – well under what is required.

                        You just don’t get it at all do you. First of all, don’t patronize me, I know how big a petabyte is.

                        Second, home clients will not be doing the brunt work of the processing for SKA. They cannot. If we use your figures: how much does it cost get a plan capable of downloading 3 terabytes a month in today’s market? With the exception of Unlimited plans, you cannot actually get a plan with that much quota. Do you really expect that to drop drastically under the NBN by the time SKA is up and running? Further how much will the equipment cost to process 100GB of work packets a day?

                        People maybe generous, but they aren’t that generous. Home clients will therefore by doing a fraction of the work of an equivalent SKA processing system at a University. So I stand by my statement, FTTP is useless for the SKA.

                        Thirdly: the @Home initiatives are global. They will need to be designed to operate on the smallest constraints possible. You wouldn’t put bandwidth constraints on potential clients. That is a retarded move.

                        The NBN is just that. Australia classified telecommunications as a utility for decades. Only when it was privatised did people stop referring it to it as such – beforehand it was a public utility – now it is a private utility.

                        Jesus. Talk about not reading what you’re replying to. So suddenly we’re talking about the NBN being a utility? I thought I already said that, it was mobile networks I was saying that weren’t a utility.

                        Don’t be stupid. The profits are obscene though.

                        Yes, lots of profits go into paying dividends. But Telstra have been doing well enough to have billions left over after that. They are still the ASX20 top pick for bluechip (because they make so much money).

                        So what is an acceptable level of profit then? Go on, tell us.

                        Yes. The toothless tiger ACCC. They are ineffective and largely useless for the everyday consumer. They regularly don’t stop anything. Maybe when I see them enforcing the Competition and Consumer Act properly (which replaced the useless Trade Practices Act) I’ll have a little bit of faith. Maybe if they rallied to get rid of parallel import restrictions I’d feel better (better competition – that’s what solves everything right?).

                        Do you have specific examples as to how the ACCC have failed to prevent the oligopoly as you put?

                        I’m not confused as to why it costs so much in Australia. There is a small amount of companies who use market collusion tactics to keep prices high. Australians, being one of the wealthiest groups of people on earth, don’t really give a care and swallow it. I readily admit the market size contributes to our market problems in general. Of course having a population less than Mexico City distributed across an area the size of the USA doesn’t help. But – 97% of our population lies in dense urban areas adjacent to cities. Perfect for telecommunications rollouts. So good we are often the test bed for new technologies. This is one area where we shouldn’t suffer.

                        The idea that Australian’s allow themselves to be taken advantage of is conjecture. The Vodafail movement is evidence against this position.

                        Also, it’s not 97%. The NBN is a good indicator for how many people live in dense urban areas adjacent to cities, and that puts the figure at about 93%. So where did you get your figures?

                        And yes, we are a testbed, but new and experimental technologies are obviously going to be more expensive to install than proven technologies. Which adds to the reason why services may end up slightly more expensive.

                        This conversation is boring me so I’m leaving it.

                        So why did you bother replying?

                      • Harley
                        Posted 06/02/2012 at 2:45 pm | Permalink |

                        “First of all, don’t patronize me, I know how big a petabyte is.”

                        Actually I didn’t patronise you. You did to me though. Quote:

                        “You just don’t get it at all do you. ”

                        “You don’t seem to understand the difference between a fibre network in general, and the NBN, which is a FTTP network”

                        I wrote “One petabyte of data is way bigger than most people realise. ”

                        Do you see me writing “you don’t realise”? No you don’t.

                        “So does our current broadband infrastructure. So does the alternative plan proposed by the Coalition.”

                        Yes, but our current infrastructure has a minimal fibre backbone, the Coalition plan would greatly extend it with FTTN. These are differences you must recognise.

                        “Second, home clients will not be doing the brunt work of the processing for SKA. They cannot. If we use your figures: how much does it cost get a plan capable of downloading 3 terabytes a month in today’s market? With the exception of Unlimited plans, you cannot actually get a plan with that much quota. Do you really expect that to drop drastically under the NBN by the time SKA is up and running? Further how much will the equipment cost to process 100GB of work packets a day?”

                        Firstly I didn’t say home clients in my example – I left it open and just called them clients. They could be universities or businesses or whatever. You’re reading stuff into it. Either way it’s obvious that you will need the NBN – even if you’re sending it to a million universities.

                        Secondly data like this would be classified as peering data. Just like a lot of inter-ISP data is not counted towards a quota, I don’t expect a significant amount of Australian data to be counted (SKA data included).

                        Thirdly, the SKA is slated for finish in 2019. So yes, even if the data is not peered I expect people to have internet plans in the multi-terabyte range by 2019 and they could take on this sort of processing.

                        Fourthly, assuming every one of those million clients is a university as you suggest, then you would need a million connections all faster than ADSL. What is the best way forward for that? FTTP of course (ain’t nobody rolling out a million cat5e cables from the scant fibre backbone we have).

                        Fifthly, depending on the calculations performed, an average quad core pc from today could easily process 100GB of data a day. In 2019, I expect the 16 core PCs available won’t have much trouble. If GPUs can handle the calculations then it becomes almost trivial.

                        “People maybe generous, but they aren’t that generous. Home clients will therefore by doing a fraction of the work of an equivalent SKA processing system at a University. So I stand by my statement, FTTP is useless for the SKA.
                        Thirdly: the @Home initiatives are global. They will need to be designed to operate on the smallest constraints possible. You wouldn’t put bandwidth constraints on potential clients. That is a retarded move”

                        As above – you’re thinking in todays internet – not 2019s internet. Plus you neglect peering data possibilities. Either way in 2019 an average home user will be in the position to participate to the degree I suggest. Also, of course there would not be a bandwidth constraint – if you can only download and process 1GB of data then everyone would be just dandy with that. But the SKA will be asking for more (and will get it) from the ubergeeks out there.

                        “Jesus. Talk about not reading what you’re replying to. So suddenly we’re talking about the NBN being a utility? I thought I already said that, it was mobile networks I was saying that weren’t a utility.”

                        I simply made the point that the NBN fit into your classification as a utility. I then wrote about “telecommunications” in general. This obviously includes wireless (a telecommunication sector).

                        “So what is an acceptable level of profit then? Go on, tell us.”

                        It doesn’t matter what I see as acceptable. It is an individual metric. What is acceptable for one person may not be acceptable for another.

                        “Do you have specific examples as to how the ACCC have failed to prevent the oligopoly as you put?”

                        Sure, the fact that they still exist in almost all major industries.

                        “The idea that Australian’s allow themselves to be taken advantage of is conjecture. The Vodafail movement is evidence against this position.”

                        How is it evidence? People left because of poor service – not bad prices. My point is about pricing. If we get overpriced – we don’t move to cheaper plans in general. If we did then Telstra would have been dead long ago.

                        “Also, it’s not 97%. The NBN is a good indicator for how many people live in dense urban areas adjacent to cities, and that puts the figure at about 93%. So where did you get your figures?”

                        So what’s your point? If my figure was out by a few percent (I did it from memory) then what difference does it make? This is obfuscation – you are not arguing the point – you argue over a figure that is off by a few percent instead.

                        “So why did you bother replying?”

                        To say my view. I’m still bored by this.

                        No matter what I put up I’m sure you can quickly google something to find a reply and say “well what about this?” or “hey your number was off by a statistically insignificant figure”, etc., etc.

                        This time I’m leaving for sure. Say what you like – it will make no difference to the outcome (neither will what I write).

                    • Harley
                      Posted 06/02/2012 at 4:35 pm | Permalink |

                      Not directed at anyone in particular – this is a correction of my own error for posterities sake

                      I wrote “One petabyte of data is way bigger than most people realise.”

                      Correction: This should say 1 exabyte – I wrote exabyte the first time around but then accidentally wrote petabyte the second time around.

                  • Alex
                    Posted 02/02/2012 at 11:59 pm | Permalink |

                    “The money does not come out of the ether – it comes out of tax payer pockets or borrowed from overseas. It may be treated as asset because it’s projected to make a return on paper – but it is real money, it hasn’t all been diverted to the project yet, and it does not mean that we can’t divert that money elsewhere. Even to roads”.

                    But NBN funding isn’t coming strictly from general revenue (taxation). The government are selling bonds (AIB’s), Commonwealth Securities (debt issuance), using funds from the BAF (ironically some of which is from the sale of Telstra) and using funds from the contingency reserve, to fund the build.

                    Doing it this way shouldn’t affect the annual budget relating to health, education or even roads. Whether there’s an NBN or not, the budgetary spending in these areas should not drastically change, if change at all.

                    So we can all make assumptions about taxpayers this or not making a profit until 2028 that, but in the end, as Mr Dalzell pointed out, the government are using, and the opposition are arguing against, internationally recognised accountancy standards, period.

                    • Harley
                      Posted 03/02/2012 at 10:53 am | Permalink |

                      “So we can all make assumptions about taxpayers this or not making a profit until 2028 that, but in the end, as Mr Dalzell pointed out, the government are using, and the opposition are arguing against, internationally recognised accountancy standards, period.”

                      I agree totally. And what you wrote is what the article should have said (in a nutshell).

      • Francis
        Posted 01/02/2012 at 4:48 pm | Permalink |

        Michael, it was John Howard in 2004 who first proposed building universal broadband, as a way of dealing with Telstra which now owned all the copper and was stifling regional upgrades except where a competitor built a DSLAM.

        Three major studies followed:
        - OPEL wireless (which couldn’t deliver the service within its headline budget);
        - then NBN FTTN (a $4.7 b proposal which became $11 billion to build, plus a $15-20b compensation payment to Telstra, which Telstra intended to spend building a competing FTTP network);
        - and finally NBN Mark II laying fibre to premises only where this would be cheaper than provisioning sufficient 12 Mbps wireless, which turned out (McKinsey, May 2010) to be a massive 93% of premises.

        This is not “petty fibre pork barrelling”, but intelligent analysis, paid for by us but being ignored in favour of politically-driven one-liners from Malcolm Turnbull, NBN-killer.

        As for the funding, Renai is right. The government is funding NBNCo to oversee construction, operation, maintenance and billing of universal infrastructure for a decade. A commercial return to the government is guaranteed even if the demand were to rise as slowly as the conservative forecasts. But even a simple extension of the historical growth curve blows these projections right out of the water. In fact, it should pay for its construction with wholesale revenues without needing to be sold off in a repeat of the copper fiasco. The universal fibre infrastructure should then remain a national asset, a guaranteed cash cow, and we will all have reliable broadband that scales to meet any future bandwidth growth.

        Unless the coalition genuinely catches up with the fact that this exceptional project – including its funding model – is easily the best way forward for Australia, it will certainly lose its third unloseable election over broadband and we will be stuck with a third Brown-Gillard-Rudd government after 2013.

    5. Posted 01/02/2012 at 4:09 pm | Permalink |

      Israel have announced their intention to build their own “NBN”…

      …they’re going with FTTH too…yet another country that’s doing it when Malcolm says nobody else is…

      • Francis
        Posted 01/02/2012 at 4:32 pm | Permalink |

        … as is New Zealand, after scrapping its short-sighted plan for FTTN (which Malcolm Turnbull had been parading) and instead going straight to FTTH.

        • iceyone
          Posted 01/02/2012 at 4:35 pm | Permalink |

          Exactly right!

          FTTN was good 15 years ago, now it’s as expensive as installing fiber!

          We wouldn’t be having this conversation if the previous government didn’t fail at telecommunications so badly.

    6. Justin
      Posted 01/02/2012 at 5:11 pm | Permalink |

      Doesn’t the $36.5b-$44.6b include the $11b payment to Telstra? If that’s the case, taking into account Tony’s rounding up of the worst case figure he’s out by at least $16.4b.

      • CMOTDibbler
        Posted 01/02/2012 at 5:44 pm | Permalink |

        Yep. It doesn’t include the $800m npv to Optus though. Even then, the total funding requirement for the NBNCo is nowhere near $50bn.

        The money that never seems to crop up in anyone’s figures is the interest the government will pay on the bonds issued to fund the equity investment in the NBNCo. That could be $10-15bn by the time the NBNCo starts paying dividends to the government, depending on the bond rate and how the government raises the money to pay the interest. That would take the government’s stake to $37.5-42.5bn. Still not $50bn.

        Maybe the opposition is adding the total funding requirement for the NBNCo and the interest on the bonds to get their $50bn. Maybe they’re just blowing hot air.

        • Michael
          Posted 01/02/2012 at 6:11 pm | Permalink |

          Even then, the total funding requirement for the NBNCo is nowhere near $50bn.

          you have to differentiate between the total gross project outlays which the Coalition and the Alliance for Affordable Broadband often refer to and the peak funding requirement that is cited in the article above.

          p.29 of NBNco’s business case summary:

          Capex: $36bln

          Telstra Agreements: $14bln

          adding both items gives gross project outlays of $50bln.

          on the other hand, the peak funding requirement is a totally different concept and takes into account the revenue profile of the NBN.

      • Posted 01/02/2012 at 5:54 pm | Permalink |

        Ignore that even for a moment.

        Malcolm’s plan has been costed independently (by Citigroup) at $16.9b…

        Even Malcolm agrees that FTTH will happen down the track, even if we go to FTTN first…

        We know FTTH will cost around $37.5b…that’s the current NBN plan…

        So, he wants us to spend $16.9b to step up to a plan – (by his own admission) – is an intermediary step, then spend AGAIN to upgrade to FTTH later.

        A small percentage of the network his $16.9b will build – (the transit network) – will be able to be reused, the rest will be obselete, so lets say we save $5b off the later cost of a FTTH upgrade. Lets say the cost of the upgrade is $32.5b – somewhere down the track.

        All those DSLAMs he proposes to put into those 80,000 nodes will be completely useless – that’s billions that won’t be able to be re-used. All the 80,000 nodes need to be powered too, so the per user cost of actually running his FTTN network is higher.

        This is all wasted money, compared to doing FTTH now, or any time in the future.

        So we have Malcolm’s plan at $16.9b, and the later upgrade at $32.5b. That’s $49.4b.

        $12b MORE than doing it right the first time.

        And the economic benefits lost by not having it, and the loss of competitiveness when all our trading partners actually DO do it.

        That’s LNP economics for you.

        More cost, less economic bonuses, and slipping further behind the rest of the world.

        • Michael
          Posted 01/02/2012 at 6:28 pm | Permalink |

          your numbers are all wrong.

          a huge chunk of that $17bln Citigroup figure is financial compensation to Telstra for hijacking their copper tails. the actual capex involved in building FTTN is only a small portion of that $17bln figure. also, if Telstra spins off the copper network into CANco, there is no need for the Government to pay compensation to Telstra.

          also, a more glaring error:

          you cannot add the cost of Telstra compensation to the FTTN figure and then deliberately ignore the $11bln cost of compensation under the current Telstra HoA when comparing to Labor’s FTTH proposal. that’s just silly.

          so, all your comparisons are invalid.

          • Posted 01/02/2012 at 6:40 pm | Permalink |

            It was going to cost a LOT more than $11b – (up to double) – to compensate Telstra with respect to an FTTN for NBN Mark 1.

            $11b is a bargain in comparison. Telstra also aren’t going to take the money and build a competing network, which was their aim under the NBN Mark 1 plan.

            Understand the history before you comment.

            • Michael
              Posted 01/02/2012 at 9:07 pm | Permalink |

              let me get this right.

              under NBN Mark I, where the Government would be building a national FTTN network and Telstra would overbuild the metro markets with FTTP and cherry pick away the most lucrative pockets of profit, Telstra would (according to your story) demand ~$20bln in compensation.

              whereas, under the current NBN Mark II, where Telstra has to sign a fixed network preference deal with NBNco and completely withdraw from the fixed-line sector, Telstra is happy with half the amount of mooted compensation required under NBN Mark I.

              that makes absolutely no sense whatsoever. what you are talking about is not actual history but Conroy fictional revisionism to justify Labor’s NBN.

              • nonny-moose
                Posted 02/02/2012 at 1:54 am | Permalink |

                the difference lies in the fact that under FTTN telstras copper would be cut outright at a certain distance from each home (somewhere between 300m and 500m away). Telstra would lose their control of that tail from the node point and have their ‘investment’ such as it was (in copper assets) stranded as the next so many metres from that node point to the exchange would need to be recovered and ultimately binned as they no longer have anything to connect to. the ‘just compensation’ required would have taken into account loss of earnings as well as the actual plant value.

                by contrast the NBN deal was for a LEASE. quite a long lease at that but the upshot is Telstra retain control. it is still their ducts; NBNco merely have acquired rights of way for that 11bn. if telstra wish to flog the hardware off down the track they can; and going by the ~20 bn figure for full compensation i suspect another 10 or so billion – putting the whole shebang in the 20BN fttn figure – is about the ballpark for the rest of the kit. under the lease terms Telstra still have earnings and retain the plant value.

                i dont know about you but to me despite the apparent lower dollar value for the deal that is a much more attractive a proposition to me were i Telstra than what would have been required to get just compensation under the FTTN model – dont forget Telstra would have been obliged to spend time in court nutting out fair value with the Government of the day – which even with their little army of lawyers would have cost several million bucks worth of billable hours.

                the two figures are not really comparable as they are talking about two different compensation cases entirely. in NBNs case Telstra doesnt withdraw entirely anyway – they merely become a fixed line reseller and the USO obligations become someone elses problem, line maintenance becomes someone elses problem and various other bits and pieces that NBNco take care of no longer become their problem. they can trim operating costs while still remaining in the market. getting PAID to shake off operating costs? what isnt to like there?

                were i Telstra it makes absolute sense. one defrays costs, gives up a whole lot less control of tangible assets than the alternative and in fact gets to charge a royalty for access over the lifetime of NBN. much more palatable than having to give access entirely and fight like cats for compensatory return. i know which of the two worlds id prefer to be in.

                • Michael (the other)
                  Posted 02/02/2012 at 7:11 am | Permalink |

                  the difference lies in the fact that under FTTN telstras copper would be cut outright at a certain distance from each home (somewhere between 300m and 500m away). Telstra would lose their control of that tail from the node point and have their ‘investment’ such as it was (in copper assets) stranded…

                  as opposed to the current situation where Telstra retains ownership and control of the uncut copper (running from the exchange all the way to the home) which is also completely stranded because all the copper wholesale customers have to be transferred over to NBNco under the fixed network preference deal?

                  in NBNs case Telstra doesnt withdraw entirely anyway – they merely become a fixed line reseller…

                  Telstra would also be a fixed-line reseller under NBN Mark I.

                  line maintenance becomes someone elses problem and various other bits and pieces that NBNco take care of no longer become their problem…

                  exactly the same situation under NBN Mark I.

                  they can trim operating costs while still remaining in the market.

                  under both NBN Mark I and II, Telstra will only earn retail margins from fixed-line operation just like every other access-seeker. the distinction you are attempting to make does not exist.

                  gives up a whole lot less control of tangible assets than the alternative…. much more palatable than having to give access entirely

                  it is completely meaningless to retain “control” or “ownership” over the entire length of copper in the ground if you are contractually barred from utilising the asset to generate revenue (as is the case under the fixed network preference deal). let’s face it, once the copper network is shutdown and wholesale customers migrated over to the newly-built fibre network, the copper network is shutdown for good. from a business perspective, it is not an irreversible process.

                  Senator Conroy’s “$20bln compensation” spouted in that Four Corners programme is completely apocryphal.

                  • Posted 02/02/2012 at 7:39 am | Permalink |

                    It is what Telstra wanted, and Telstra clearly stated that that’s what they would do with the money – build a competing, cherry picked network.

                    It is not apocryphal simply because it doesn’t suit your argument.

          • litapajar
            Posted 01/02/2012 at 9:25 pm | Permalink |

            i don’t thin $17 billion includes compensation to telstra. i have asked this question a million times when their costings were released. if there is compensation to be paid, then it is in addition to $17 billion.

    7. Alex
      Posted 01/02/2012 at 5:17 pm | Permalink |

      And not only Tony, Mal’s getting in on the act again too, with the faithful Telegraph there to report it.

      http://www.dailytelegraph.com.au/news/national/the-art-of-propaganda-100000-grants-offered-to-promote-national-broadband-network/story-e6freuzr-1226258792146

    8. Michael
      Posted 01/02/2012 at 5:24 pm | Permalink |

      some clarification:

      Tony Abbott is a Rhodes Scholar and read Politics, Philosophy and Economics (PPE) at Queen’s College, Oxford. (he knows what he is talking about.)

      if NBNco’s “costs” exceed “revenues”, the return on the NBN will be negative. (this is a very real risk that the Coalition is entitled to focus on.)

      by repeatedly calling the NBN a “white elephant”, Tony Abbott is implicitly rejecting NBNco’s projections in its so-called “business plan”.

      • Alex
        Posted 01/02/2012 at 5:31 pm | Permalink |

        All the more reason he should be ashamed of himself, for the lowly gutter politics he is employing, because he does know better.

    9. Asp
      Posted 01/02/2012 at 5:48 pm | Permalink |

      Would like to take up a few issues here that stuck out in your story…

      Firstly your comment “Real money is actually being spent by NBN Co right now — billions of dollars — and that money is the Federal Government’s money…” I find amazing because it’s not the Federal Government’s money, it’s ours – and I like to think that how the Federal Government spends it is creditable and accountable.

      Next, “…the NBN is expected to make a modest return on the Government’s investment, according to its business case available online here…” I can write a business case that will make a modest or a massive return – but just because that business case is accepted does not mean it’s correct. You state in your story that you what to break Abbott’s comments down into “real financial terms” – You do know the difference between a business case and a balance sheet don’t you?

      “So who’s right? Let’s throw the issue to an independent adjudicator” – How is the Parliamentary Library of Australia an independent adjudicator? Didn’t even know they were an industry expert?

      “However, that money is not diverting government funds away from other projects.” – Yes it is! If it were not used for the NBN it would be used on hospitals, roads, etc. Not suggesting how it should be spent – but it is divert funds from other projects.

      “It is funding which is being invested with the expectation of a return which will actually fuel other projects” Correct ONLY if it provides a Return On Investment that allows it to contribute – BUT IF IT DOES NOT then who funds the loss, because the project will be too large to let fail – who pays for it?

      “…it is likely that even if NBN Co does make a loss over the next decade period and beyond, that loss will not represent anywhere near the full cost of building the network — just that cost minus NBN Co’s revenue…” – clearly you are a true financial genius…the loss will actually be, in simple terms, the cost of building the network PLUS the ONGOING expense of running it minus NBN Co’s revenue. If it’s profitable the tax payer will have to continue to contribute.

      Finally – “Currently, early indications are that NBN Co is broadly on track with its project of rolling out a national fibre broadband network”. Your comments are conflicted with publications like the ABC [another Govt enterprise] which states (http://www.abc.net.au/news/2012-01-03/only-4000-homes-hooked-up-to-nbn/3756204) that figures from NBN Co itself show take-up was 4,000 households (of which only 2315 were connected to the actual fibre network) by the end of 2011 – well behind the initial target (As per the BUSINESS CASE you rely on) set by the Government of 35,000 households which was to be achieved by June last year.

      • Asp
        Posted 01/02/2012 at 5:51 pm | Permalink |

        Sorry – my comment in my 2nd last paragraph was meant to read ” If it’s NOT profitable the tax payer will have to continue to contribute.”

      • Posted 01/02/2012 at 6:03 pm | Permalink |

        Hi Asp,

        I’m sorry, but you didn’t address the issues rationally in your comment — you either didn’t read what I wrote or don’t understand the complexity of the debate. A good example of this is the way you referred to NBN Co’s take-up rates. I plainly linked to an article debunking the 35,000 figure.

        If you post similar comments in future I’ll need to remove them as they won’t be contributing to the debate — I don’t tolerate irrational debate on Delimiter any more.

        Cheers,

        Renai

        • Roberto
          Posted 01/02/2012 at 11:05 pm | Permalink |

          “If you post similar comments in future I’ll need to remove them as they won’t be contributing to the debate — I don’t tolerate irrational debate on Delimiter any more.”

          Crikey, I hope that was said tongue in cheek. Because if it wasn’t it sounds pretty scary – like “if you don’t agree with me you will not be heard”.

          • Posted 01/02/2012 at 11:51 pm | Permalink |

            There is a difference between disagreeing with someone and not addressing the debate.

            A simple example: If we were having a debate about what was the tastiest type of cheese, and someone came in and started strongly arguing that nobody should eat cheese because it was a foul substance, that would be an irrational debate.

            This is what has been happening for a while on Delimiter now. We’ve been trying to have debates about the merits of different types of technologies and the economics of supporting them, with specific reference to the NBN. Then people have been coming in and saying that Labor is just f*cked, or the Coalition is f*cked, or something similar. As with Asp in his posts here, they don’t address the issues which have been raised — they just deliberately ignore things or go off on illogical tangents.

            A number of readers have complained about it over time, so I’ve banned some of the worst offenders and will shortly be modifying Delimiter’s comments policy as well. Over the past few weeks the quality of the conversation has improved markedly.

            Delimiter is not a site for people to scream madly at each other. I want rational, civilised debate — using our minds, not our voices.

            If you don’t like that, go elsewhere ;)

            • Woolfe
              Posted 02/02/2012 at 10:46 am | Permalink |

              Hi Renai,

              I have been lurking around Delimiter for a while now. But I was struck by this comment. I really do understand what you are saying in regards to the arguments that are not constructive. But in ASP’s particualr case some of what he said did have merit, while other parts of his comments didn’t.

              You need to be very careful with censorship and banning. I like your site partially because of the extreme views that come up. Lots of logical thought out and Good arguments come out around issues, especially after someone has thrown up a ridiculous statement.

              Sometimes that which is obvious to some is not obvious to all, and the stupid comments often brings out info that is assumed to be known by all.

              Don’t get me wrong, I agree with the whole stopping people just rubbishing a comment for the sake of rubbishing without debate, but perhaps Banning and Censorship isn’t the only option.
              I am not an expert on these sort of web technologies, but would it not be possible to simply mark the comment as “Not Contributing to the argument” and have it hidden, but allow people to open it up and read it if they so choose. That way they can also see that it is just rubbish, which will of course make you guys look good, or if the argument is actually sound but has been blocked because you guys (god forbid) misinterpreted it, people can still see it and raise it as an issue.

              I don’t like censorship in these sort of communities. But I do understand the need to get rid of the “He said, she said” rubbish.

            • PeterA
              Posted 02/02/2012 at 12:31 pm | Permalink |

              I should probably start toning down my comments, I sometimes take an overly harsh angle.

              Need to post an article (or blog post) about this Renai!

      • Posted 01/02/2012 at 6:05 pm | Permalink |

        The low uptake – (approx 4000 users) – is not due to NBN Co being “slack” or anything like that. A large number of greenfield sites which were to be ready by now are not ready.

        Greenfield sites are NOT built by NBN Co – they are built by the developers of those greenfields sites.

        Spending the $37.5b on roads – (as Tony suggests) – as “money better spent” is nothing but FUD. Unless these roads are toll roads, that money is NEVER coming back.

        With the NBN, at least $24.00 per month will be returning per user. The amount of time it will take is difficult to accurately predict, but all those $24.00 per month installments will eventually total $37.5b.

        All the while, the roads haven’t recouped a cent.

        • Hubert Cumberdale
          Posted 01/02/2012 at 7:00 pm | Permalink |

          “With the NBN, at least $24.00 per month will be returning per user. The amount of time it will take is difficult to accurately predict, but all those $24.00 per month installments will eventually total $37.5b.”

          Yep. According to my rough spread sheet if everyone opted for a 12/1mbps connection NBNco will actually rake in $42 billion by 2028. The other scenario using their conservative numbers with just 60% takeup of their figures for the higher speeds it still amounts to $42 billion by 2028.

          “All the while, the roads haven’t recouped a cent.”

          Indeed.

        • Woolfe
          Posted 02/02/2012 at 10:54 am | Permalink |

          “All the while, the roads haven’t recouped a cent.”

          Thats not entirely true. Roads haven’t recouped a cent of direct income (except in the case of tolls).
          Roads provide the infrastructure for trade.

          So does the internet, but the reality is we can do the trading stuff without the internet(its just less convenient) but we can’t move the product without the roads.

          So the recoupment is hidden in the taxes etc paid by the companies.

          This highlights my concern about censorship, a comment like this also doesn’t add to the debate. Indeed it creates a straw man (albeit an obvious one that people will generally ignore) that draws people from the core debate. You can’t crush dissent without spilling over to real debate a little bit, because everyone makes mistakes at some point.

          • Posted 02/02/2012 at 10:59 am | Permalink |

            Narrow vision much?

            You should read this: http://en.wikipedia.org/wiki/Information_economy

            Test in the morning.

            • Woolfe
              Posted 02/02/2012 at 11:16 am | Permalink |

              “Narrow vision much?

              You should read this: http://en.wikipedia.org/wiki/Information_economy

              Test in the morning.”

              What? If anything that article highlights my point about the censorship issue. Information economy. Information IS the economy anything that detracts from that information is therefore bad. Ie Censorship.

              I happen to Agree with you guys on this article. My point I was making was that the censorship is bad. However I am arguing an issue in the wrong place, so I will stop now and will email you guys directly the feedback. As I said earlier, I like this site because of the great arguments, I don’t like the idea of censorship potentially affecting it, but I do understand the need to reduce the “he said she said” stuff.

              • Posted 02/02/2012 at 12:51 pm | Permalink |

                How is censorship involved with how the NBN is accounted?

                • Woolfe
                  Posted 02/02/2012 at 2:13 pm | Permalink |

                  Its not, hence my comment about taking it out of this discussion and into email.

                  Renai mentioned earlier that he is removing comments and banning users. I commented on that. And was continuing it in the reply to your comment. Apologies for the confusion, its a shame you aren’t a mind reader :P.
                  Renai, I too would like to see a post about this that we can talk about it.

                  That said, the statement of “All the while, the roads haven’t recouped a cent.” is disingenuous, as of course the roads are recouping cost. It is just done in a less direct manner (through taxes etc).

                  • Posted 02/02/2012 at 3:02 pm | Permalink |

                    “That said, the statement of “All the while, the roads haven’t recouped a cent.” is disingenuous, as of course the roads are recouping cost. It is just done in a less direct manner (through taxes etc).”

                    It is not disingenuous in any way.

                    The NBN recoups costs directly – (at least $24pcm per active user) – and the economic benefits its mere existence will provide.

                    Just like a road.

                    And unless a road is a toll road, it’s not getting any direct monetary return.

                    If you are building more and more roads, you are encourage more and more road usage – therefore adding more pollutants to the atmosphere.

                    And you know what they make bitumen out of? Oil. Non-renewable oil.

                    Doing something to discourage vehicular use – (by making the need to go on the road to achieve something less necessary) – you lower emissions.

                    Think outside the box.

                    • Woolfe
                      Posted 02/02/2012 at 5:45 pm | Permalink |

                      “The NBN recoups costs directly – (at least $24pcm per active user) – and the economic benefits its mere existence will provide.”

                      Agreed

                      “Just like a road.”

                      Agreed

                      “And unless a road is a toll road, it’s not getting any direct monetary return.”

                      Agreed

                      So then we agree, the roads ARE recouping there costs through the Economic benefits its mere existance provide.

                      “If you are building more and more roads, you are encourage more and more road usage – therefore adding more pollutants to the atmosphere.

                      And you know what they make bitumen out of? Oil. Non-renewable oil.

                      Doing something to discourage vehicular use – (by making the need to go on the road to achieve something less necessary) – you lower emissions.”

                      All very interesting points, that I happen to agree with to a degree, however they have no bearing on the fact that stating “All the while, the roads haven’t recouped a cent” is in fact not correct and disingenuous.

                      • Posted 02/02/2012 at 5:51 pm | Permalink |

                        Seriously?

                        There is a difference between “recoup” and “providing a benefit to the economy”…

                    • PeterA
                      Posted 02/02/2012 at 6:40 pm | Permalink |

                      Michael, sorry to be a pedant (I am so good at it sometimes)

                      bitumen I presume started its life in a carbon sink form.
                      You put it in a different location (glued it to the ground)

                      It only becomes a co2 issue when you start burning your roads. The non renew-ability only really comes into issue when there aren’t any easy to transition to alternatives.

                      With Petrol, we can’t easily start pouring vegetable oil into all of our cars. But we can *relatively* easily start pouring concrete instead of laying bitumen. The only wasted resources are the training and bitumen equipment. Much of which would probably be relatively easily retrofitted to a different road surface.

                      That pedantry aside, your point still stands.
                      NBN earns: from both columns
                      Direct (cost per month) and Indrect (benefits to taxation).
                      Roads only earn from the Indirect column.

                      So spending all your NBN money on Roads is dumb, unless as you say you actually spend them on Toll Roads. But see how long in government that policy will buy you.

                      • Woolfe
                        Posted 02/02/2012 at 6:55 pm | Permalink |

                        Pedantry and Semantics, that is what we are doing here.

                        I didn’t say we should spend the money on roads instead. I think the NBN is a great idea, I think it will make both direct and indirect profit.

                        But to say that roads don’t recoup their losses is simply not true. They do so indirectly through taxes and registration applied to those who use them.

                      • Posted 02/02/2012 at 7:01 pm | Permalink |

                        *blink*

                        So the process of refining crude oil into bitumen, produces, what? Zero emissions?

                      • Noddy
                        Posted 02/02/2012 at 9:37 pm | Permalink |

                        Are you suggesting building more roads will make more people buy cars? Not enough to cover costs. Or are you suggesting they will hike rego yet again to cover these new rds?

                      • Posted 03/02/2012 at 9:36 am | Permalink |

                        No, I said it would encourage more vehicular use.

                      • Michael
                        Posted 03/02/2012 at 10:18 am | Permalink |

                        ever occur to you roads are built to meet pre-existing demand (i.e. to alleviate existing traffic congestion)?

                        until scientists find a way of stuffing physical goods down the internet pipes and invent teleportation for people transport*, roads will always be one of the most vital infrastructure in society.

                        * people don’t just drive to go to work. most people are nomadic, social animals and don’t like being confined in the same physical space for long periods unless you weigh 500kg.

      • litapajar
        Posted 01/02/2012 at 9:35 pm | Permalink |

        ASP, think about your budgeting – buying a plasma TV is an expense but buying shares is an investment. so, govt spending on NBN equals buying shares. therefore, govt is not counting NBN funding as an expenditure but as an investment that bring returns in the future. how much? well, its a share market, but given the certainity provided by telstra and optus deals, i think quite a bit.

        so, you can’t complain when the govt makes an investment with your money.

    10. Posted 01/02/2012 at 7:02 pm | Permalink |

      Solid read Renai.

      I honestly think Tony Abbott is handling this type of really strong rebuttal very poorly. If Malcom Turnbull can turn up here and make a counter-post, surely Tony can pull one off. Its one thing for the Coalition to be an opposition to everything, but sadly in Telecommunications / IT, they dont provide a solid alternative.

      Have you asked TA / MT for a comment on your post Renai?

    11. Michael
      Posted 01/02/2012 at 7:52 pm | Permalink |

      I’m not convinced a FTTN is viable because of the poor condition of much of Telstra’s copper infrastructure – do I assume right that it would be required under FTTN? We’re talking about infrastructure that in many established city areas is very old, and I would be surprised if Telstra is keeping it in “good condition” given the impending decommission – if I was running the business, I wouldn’t be investing in maintenance.

      • Posted 01/02/2012 at 8:00 pm | Permalink |

        You are correct that FTTN requires the continuation of the use of the existing copper. The condition of the copper network as a whole is largely unknown, and is a significant factor in the performance/viability of any FTTN proposal.

        Many phone lines are not viable even for existing ADSL/ADSL2 services, let alone the VDSL services that would be applied in a FTTN solution.

        While my own phone line supports ADSL2 up to only 3.8mbps reliably, whenever is rains heavily, it only supports 0.0mbps.

        The condition of the copper is a MASSIVE unknown for any FTTN proposal. That the copper network will continue to deteriorate is a given – it’s not going to “heal” itself.

        • Michael (the other)
          Posted 01/02/2012 at 9:25 pm | Permalink |

          the condition of the copper network is no worse than that in other countries which have deployed VDSL, and is almost certainly good enough for FTTN.

          also, go read Michael Malone’s Senate testimony in 2010:

          — iiNet did a survey of its ADSL customers which found that average connection speed is 12Mbit. (this is as good, if not better, than overseas copper networks);

          — Michael Malone also specifically stated that, in comparison to overseas networks which he has seen, Telstra do a pretty good job of maintaining the copper tails.

          • Posted 01/02/2012 at 11:22 pm | Permalink |

            Telstra do not “maintain” their copper tails. They “fix them” when they completely fail. I’ve been working with xDSL tails for over a decade, and I’ve seen what happens.

            When was the last time your phone line was ripped out and replaced as part of a Telstra maintenance program?

            • Michael (the other)
              Posted 01/02/2012 at 11:29 pm | Permalink |

              a few months ago… i was out of internet for a few days.

              • Posted 02/02/2012 at 7:33 am | Permalink |

                Yes, as I said – they fixed it when it was “broken”, there is no progressive preventative “maintenance”.

              • PeterA
                Posted 02/02/2012 at 2:37 pm | Permalink |

                My cousin has been complaining for the better part of 24 months to get his phone line fixed.

                Problem is, every time a telstra tech shows up the line is crystal clear.

                Every time he has trouble it takes him ~2 months to convince someone to have a look.

                They show up; run a test declare the problem someone elses and leave.

                I believe he went to the ombudsman 6 months ago; amazingly that still hasn’t resolved the issue.
                (I did hear last week that he managed to convince TPG to send another Telstra tech out; we’ll see what happens!)

      • Michael (the other)
        Posted 01/02/2012 at 9:16 pm | Permalink |

        you may not be convinced about the technical viability of FTTN, but:

        — the Rudd Government was convinced enough to run a FTTN tender;

        — the G9/Terria consortium was convinced enough to submit a highly-detailed FTTN SAU to the ACCC for consideration and approval;

        — the Report by the Panel of Experts did not question the technical viability of FTTN;

        — Mike Quigley flew back to Australia to sell Telstra’s FTTN proposal to politicians in Canberra on behalf of Telstra.

        • Noddy
          Posted 02/02/2012 at 12:28 am | Permalink |

          That was many years ago and at the time it was that best option. Now FTTN is a stop gap with a limited life time before it would need to replaced by a faster technology. Would you paint you house with paint that you know will need repainting with quality paint in a years time if you could just use that same paint now? Why spend 16 billion on FTTN, well not spend it on FTTN, sit and wait for someone else to build FTTN, if it will be obsolete before it’s completed? Why would Telco want to waste their own money doing it? I guess if the government paid them to they would take the money. But I doubt you’ll see Telstra put it in at their own cost. They aren’t stupid, they know it’s a waste of money, they would have done it already if it wasn’t.

    12. ungulate
      Posted 01/02/2012 at 8:05 pm | Permalink |

      Its interesting that Abbott makes the lie that the NBN competes with road funding.

      The NBN is ultimately paid for by its users.

      We could make the Pacific Highway user pays. The technology is available off the shelf. Indeed we could do this with every road. And it would solve the funding problem over night. Curiously that would make roads no different to the NBN. The government would still have to borrow money up front to build them but it would be an investment.

      Is Abbott going to advocate user pays for roads? You bet your life he won’t.

      Is Abbott being intellectually dishonest? Very much so.

      Does he know better? Probably.

    13. Arran
      Posted 01/02/2012 at 10:00 pm | Permalink |

      Tony Abbot is just a rabbit :)

    14. Psychaotix
      Posted 01/02/2012 at 10:59 pm | Permalink |

      You know, I like the comparison with a Plasma/LCD TV. That’s one I’ve not heard of before.

      Now, before anyone questions my political leaning, I lean neither Liberal or Labor. Instead, I vote on policies actually delivered, which means I’m one of those swinging voters. I also don’t have a technical background, I don’t work in the tech industry, and I do pay my taxes.

      I’ve never understood why people say that the NBN will cost money, when it’s stated that it expects to generate a 7% return on investment when it’s in full operation. By my definition, that makes it an investment, much as spending money on shares are. In addition, the Telstra and Optus deals mean that the NBN is guaranteed customers, which, to me, guarantees NBNCo the ROI it expects.

      I do agree with Tony on one point, and that point is it’s better to let the market do it, but I also believe that if the market fails to deliver, as it has with telecoms, then it’s up to the government to act and provide the necessary infrastructure.

      I’m in the situation where my ADSL is reliable, IF it’s dry. I lose ADSL completely when it’s wet, which leaves me with no internet whatsoever. So, I purchased a 3g dongle via Internode. Whoops, no 3g signal because I’m in a black spot. To ME, this is what the NBN will fix. It will replace the aging infrastructure in my area with something newer, hopefully fibre, but more likely Fixed wireless or Sattelite. I also live perhaps 45 mins from Adelaide, and just 3 minutes from a major town (Which is ADSL2 enabled) so I’m not what you’d call a remote or rural person.

      • Michael (the other)
        Posted 01/02/2012 at 11:52 pm | Permalink |

        I’ve never understood why people say that the NBN will cost money, when it’s stated that it expects to generate a 7% return on investment when it’s in full operation.

        this is because not everybody agrees with Mike Quigley’s belief/contention/assertion (or whatever you will) that the NBN will generate 7% return. you have to understand that, just because Mike Quigley says X equals Y does not mean other people (including the Leader of the Opposition) have to take everything he says at face value and agree with him.

        In addition, the Telstra and Optus deals mean that the NBN is guaranteed customers, which, to me, guarantees NBNCo the ROI it expects.

        revenue (or ROI) = # of users x ARPU

        the Telstra/Optus deals “guarantee” a certain number of fixed-line subscribers for NBNco (# of users), but, crucially, does not guarantee NBNco will achieve the required ARPU to earn the targeted ROI.

        • Noddy
          Posted 02/02/2012 at 12:32 am | Permalink |

          Well, those people who say that the NBN won’t make 7% ROI would at least get some respect if they gave reasons why they won’t. There have been hundreds of pages of documentation writen outlining the business plan and how they plan to get their return. In opposition we have… “Because I say they won’t”. No study, no reasons given. Just opposition with no facts, no substance, no reasons why the targets won’t be met.

        • ozimarco
          Posted 02/02/2012 at 12:47 am | Permalink |

          Well, let us take the worst case scenario and assume that the NBN does not make one dollar of profit and even manages to lose some money.

          Even in that case, you still end up with a first class ubiquitous communications network that will benefit Australians for many decades. It will enable savings to be made in many areas of government and service delivery. The network will make it easier for business to play on the international scene resulting in improved GDP. How can all this be painted as a white elephant and gigantic waste of money? Have you no vision at all?

    15. DinoTerrific
      Posted 02/02/2012 at 12:09 pm | Permalink |

      Arts Minister Simon Crean said the opposition was not content with attacking broadband but was going after artists.

      “You only have to look at the submissions to the National Cultural Policy discussion paper to see that artists and those in the creative industries understand the significance of the NBN for reaching new audiences and encouraging innovation,” he said.

      “It’s only the Coalition who doesn’t understand this. The Coalition’s cultural policy is to roll back high-speed broadband, stifle innovation, suppress creativity and send artists back to the Dark Ages.”




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