Correction: NBN prices will not be higher

92

analysis In several radio interviews this week, Shadow Communications Minister Malcolm Turnbull stated that the National Broadband Network project would cause consumer broadband prices to rise higher than those currently on the market. However, unfortunately this statement was factually incorrect.

To illustrate why, firstly, let’s go through what Turnbull said. According to transcripts available on Turnbull’s website, Turnbull said the following on 2GB in an interview with Ben Fordham on Wednesday:

” … Australians are waking up to how much this is going to cost them – not just as taxpayers but also it’s going to be more expensive as a consumer. You see this is the penny that hasn’t quite dropped. I think most people recognise that this is a very, very expensive project. But what they haven’t quite – the penny hasn’t quite fully dropped that this is going to be expensive in terms of the usage charges.”

“Now what’s going to happen here is because there is no competition, because this is a government monopoly and because they are spending so much money so they’re overcapitalising it, inevitably prices are going to be high.”

In a separate interview on the same day with 2UE’s Paul Murray, Turnbull said the following: “What we do know is that it’s going to cost a bomb, and it’s not going to make broadband access any cheaper. It’s going to make it more expensive.”

The Coalition has publicly stated its opinion that broadband prices will be higher under the NBN than the current ADSL-dominated broadband market repeatedly over the past six months. In September, Liberal MP Paul Fletcher stated that new NBN pricing released by iiNet at the time was higher than existing ADSL prices. And several months earlier, Turnbull stated that early pricing released by Internode for services on the NBN demonstrated the project would drive consumer broadband prices higher.

However, unfortunately the Coalition’s statements on this matter have been factually incorrect.

Almost all of Australia’s major ISPs released their first tranche of NBN pricing over the closing months of 2011, and in almost all cases, the prices are directly comparable to current pricing available over Telstra’s copper network (ADSL) or the HFC cable networks operated by Telstra and Optus.

To illustrate this fact, let’s examine the NBN prices of Optus, and compare them with the telco’s existing ADSL broadband prices. In naked DSL, Optus currently offers three plans, at $59.99, $69.99 and $79.99 monthly price points, and with 120GB, 150GB and 500GB of data quota included. And in naked NBN, Optus offers exactly the same price points and download quotas.

In bundled DSL, Optus currently offers five plans, at $79, $99, $109, $129 and $149 price points, and with 120GB, 500GB and terabyte download quotas, with varying amounts of call charges included — usually unlimited ‘standard’ local and national telephone calls within Australia, to both landlines and mobile phones. And in bundled NBN, Optus offers many of the same price points and quotas — except sometimes they’re cheaper. The company’s $79 plan with 120 GB of data has morphed into a $64.94 plan (with, admittedly slightly lesser calling value). The $109 bundled plan with 500GB of data and unlimited calls has been copied straight across, and so has the $129 plan with a terabyte of data and unlimited calls.

It should be clear that virtually every single aspect of Optus’ NBN pricing plans represents better value than the telco’s current ADSL plans — and for exactly the same price. Optus doesn’t currently actively promote its HFC cable offering, so it’s tough to get an idea of what its prices are there. But if you compare its ADSL broadband plans to its NBN broadband plans, it seems clear that the plans are virtually identical.

It’s a similar case with Australia’s second-largest provider of ADSL broadband services, iiNet.

If you sign up for a naked DSL broadband plan through iiNet on its own network, (which comes with a bundled Internet telephony phone line), you’ll get a total of 100GB of quota (50GB on- and 50GB off-peak) for $69.95 per month. A similar plan with a bundled traditional telephone line and 100GB of on- and off-peak quota will cost you a total of $79.90 per month. If you’re not using iiNet’s DSLAM infrastructure in exchanges, you’ll pay a bit more — or the same, but with less download quota.

iiNet has two NBN plans which are comparable to this. The first comes with speeds of 12Mbps and 100GB of on- and off-peak quota, for $69.90 a month with an included Internet telephony line. Then iiNet has a 25Mbps plan with the same quota and telephone line for $74.90 a month. In short, like Optus, iiNet’s NBN plans are almost exactly the same as its ADSL plans. However, the NBN fibre technology is more reliable, has better guaranteed speeds and lower latency (responsiveness) than the current copper network.

Still not convinced? Let’s look at a another major provider, Internode, which was recently bought by iiNet, but whose prices so far remain independent. Internode currently offers a 300GB ADSL plan with a bundled telephone line for $99.90 a month. The top speeds possible on this plan are limited to 24Mbps, due to the limitations of the copper network, and most people will be getting less than 16Mbps. But for $94.95 a month, on Internode’s NBN plans, you can get a 100Mbps connection with the same 300GB monthly download quota, plus a bundled internet telephony line. Yup. A broadband plan four times faster, using more reliable technology, for $5 a month cheaper. That’s the NBN.

Now there are some anomalies in NBN pricing so far which may give the Coalition some basis for its pricing claims. For example, cut-rate ISP Exetel has priced its NBN plans significantly higher than its ADSL plans. In another example, when you get to really high-end plans — 100Mbps plans with a terabyte of download quota — pricing can shoot up in some cases.

However, these cases are not the rule.

Further analysis reveals that Exetel is still offering low-end NBN plans starting at $34.50, and its prices don’t start to get expensive compared with its ADSL pricing until you start to get to the point where you’re downloading more than 100GB of data per month. Exetel has acknowledged it’s not targeting big-downloading customers, so we’re not really surprised by its lack of competitiveness at the top end.

There is also the fact that Exetel has a miniscule share of Australia’s broadband market compared with Optus and iiNet, which are the second and third-largest providers of broadband in Australia. The prices offered by Optus, iiNet (and its subsidiary Internode) are, by definition, mainstream price points which the majority of Australians will be buying services at. And those prices are even more mundane and normal when you look at the mid-range plans (between $50 and $70 a month) bought by most Australians.

Two other major Australian broadband providers, Telstra and TPG, are yet to release NBN pricing. If both exhibit radically different pricing structures from Optus and iiNet, I will be more than happy to revisit this topic at that future date. However, I would not expect Telstra’s NBN pricing to be radically different from its current broadband pricing, which is already at the pricey end of the market. TPG’s pricing has historically been at the discount end of the market, and I would expect this trend to continue.

Lastly there is one other important fact which needs to be taken into account.

NBN Co has lodged a document with the Australian Competition and Consumer Commission called a ‘Special Access Undertaking’. This document, among many other commitments, states that NBN Co will maintain prices for its key wholesale prices at the current levels for five years. In addition, the company will limit future increases to be less than the rate of inflation for 30 years. In short, in real terms, NBN Co’s wholesale prices will remain fairly stable for the next 30 years.

Taking this binding commitment into account alongside the fact that current mainstream NBN prices are directly comparable, often for a better service or even slightly cheaper, than current ADSL pricing, it is factually incorrect for the Coalition to state that consumer NBN prices will be higher than current broadband prices. And if prices were to increase, given the fact that NBN Co’s prices will remain the same, that price increase is not the NBN’s fault. That blame could be laid at the door of the retail ISPs.

With all this in mind, I would hope that the Coalition would refrain from making this claim in public in future. Or, if it does make this claim, I would hope that it would provide some evidence to make its case. This debate is not a matter of opinion. This debate is about objective fact.

Image credit: Enrico Corno, royalty free

92 COMMENTS

  1. *sigh*

    The sad fact of the matter is that only IT people tend to read Delimiter, and so your well written message will probably not reach the ignorant masses who just hear the sound bites without any real understanding of what is really going on. Preaching to the converted, as they say.

    I have too many highly educated (but non-IT) friends who simply don’t get it and are against the NBN for all sorts of spurious reasons which completely miss the point.

    I’d be interested to see some kind of survey on the opinions about the NBN of the general population broken down by generation (ie Boomer vs GenX vs GenY etc) and by industry they work in.

    Either way, as much as I will loathe doing so, I think I might well be voting Labor for the first time in my life at the next federal election :(

    • Unfortunately as usual Renai is loose on the facts again. Selecting a few products here and there and making a comparision is not irrefutable FACT that Turnbull is wrong. Lets have some alternative looks at products from others.

      For starters, Bigpond has a $29.90 month account as does TPG, and Dodo has accounts for $39.90. None of these accounts will be avaiable for the average internet consumer as the wholesale price alone is almost as much as these prices.

      There are a large number of people who’s internet connectivity is less than 5Gbytes a month and these products are more than ample for the types of services they use.

      • SO wireless is good enough for the country as a whole but not for the small fry users that only need 5 gig a month?

        • Rather than comparing a number of plans you are cherry picking those where the NBN is higher and ignoring the rest. Even going as far as comparing 25Mb plans to ADSL. The average speed for ADSL2 is less than 12Mb. Looking at the plans they are average on par or lower. Seems you just want to pick the few that are more expensive. Those NBN “naked” plans you are claiming from Internode include a VOIP service with your existing phone number for dial in, hardly naked.

          On the $29 dollar plans. TW charge more than NBN for ports on their DSLAMs, they also charge for backhaul, yet they still manage a $29 dollar plan. I guess they make it up in other areas. How about seeing what the plans are when they are priced rather than claiming non disclosed plans are more expensive?

  2. Never let the facts get in the way of the Opposition trying to score political points.

    Turnbull just needs to weigh up whether the political points he’s scoring now will outweigh the loss of credibility that comes when the general public realise he’s been telling porkies.

    Alternatively, perhaps he’s hoping that he’s get into power by then, and be able to take the credit for “lowering Labor’s obscene NBN pricing”, or something like that!

  3. Hey everyone, just some brief context to this story:

    We have informed Turnbull’s office that we will be correcting the record every time he claims NBN prices are higher. I am tired of this claim being made in public when there is no evidence for it.

    We have also committed to publishing a right of reply from Turnbull, providing he provides evidence for the NBN pricing claim.

    We are basing this approach on the reader response to this NY Times article: Should The Times Be a Truth Vigilante?. A number of Delimiter readers have expressed their support for this approach directly to me after it was published, and expressed surprise that it wasn’t being followed in Australia.

    It’s not a partisan approach, however — if Conroy or anyone else in the Labor camp makes a claim in public which appears to be factually incorrect, we’ll be pointing that out in articles too. You can see this approach integrated in this article on Woolworths’ decision to sell the Dick Smith chain of stores:

    “Woolworths claimed that Dick Smith staff, customers and suppliers didn’t need to worry about the changes, with business to continue as usual for the chain in the time being. However, it appears this statement is factually inaccurate. In the same media release, the company paradoxically stated that it would be closing up to 100 “underperforming” Dick Smith stores to be closed within the next two years, and affected staff to be offered redeployment elsewhere in the wider Woolworths group.”

    Cheers,

    Renai
    Editor + Publisher, Delimiter

    • { we will be correcting the record }

      Renai, just correcting your statement above in relation to Exetel’s NBN pricing vs their ADSL2+ pricing… you failed to factor-in the requirement for a copper line to actually deliver the ADSL2+ service, which adds $20/mth to Exetel’s ADSL2+ pricing.

      This line cost is already part or the NBN pricing, which means that Exetel’s NBN prices *are* in fact lower for a superior service (NBN-B-20 @ 25Mbps Down/5 Mbps Up), than their ADSL2+ pricing. (OT-20 + phone)

      Both plans include a VoIP service with DID at no extra charge. (people need to remember that once the NBN arrives, all phone services will be VoIP, even if their ISP charges them extra for it.)

      The other ISP’s plans that you mentioned may in fact be higher overall, if they do not include the cost of a copper line to deliver them.

  4. Did we pay more when we moved from Dial up to ADSL? Yes
    Did we pay more when we moved from ADSL to ADSL2+ ?Yes

    this is the first time we have had a technology without a big price increase

    Also no one is looking at business customers
    in almost all cases 100/40 is a lot cheaper and faster then most business grade services (if you ignore any SLA concerns)

    They should look at south Brisbane exchange to what happens if the private section has it’s way.
    we will never see true fixed line infrastructure Competition in this country.
    NBN is the right and only choice we have

    • Yeah, tell me about it. I wrote this to someone that was complaining about it being a waste for “home” users:

      It’s to the premise, not just the home. Meaning there will be plenty of business that will take up the higher capacity bandwidth. Plus there are a lot of business running out of homes these days. Currently for $1400 a month we get 30/30 Midband Ethernet with 500GB included download from Exetel (which in reality is only 15/15). This is utterly hopeless when compared to the 100/40 NBN with 600GB include for $114.95 (Internode). Admittedly our current plan is a business plan, but from my experience there isn’t much difference (especially with Exetel). Oh and just so you know, speed increases go up by the hundreds of dollars, maxing out at 40/40! Really who wants to pay $1850 for something that has less speed and allowable quota than the current NBN in regional areas.

      • Yes, I see too many articles, and ppl bandying about the FTTH acronym. NBN delivers that yes, but it’s just a subset of what it is. They should be using the FTTP acronym, which properly covers businesses, industry, schools, government buildings like local councils, council libraries, community halls, shopping centers.

      • Not sure how wide it’s been advertised, but I received it ‘FYI’ as a TPG home customer.

        Business plan (ie: SLA’d) 100/100 fibre to the premises @ $1000/month with unlimited data. Setup costs on top of course, and I believe a limited area supported.

        Way over the top for a home user or even SOHO, but could be useful for comparison

  5. it really really shits and disappoints me when Turnbull sinks to this level.
    It utter BS and he knows it.

    He completely ignores the Telstra-Retarded customers like me who are stuck on the cheap and nasty BS RIM afflicted connections.
    We pay a premium for low download limits, poor connection speeds and are FORCED to pay for a telephone connection I don’t want (ie no “Naked” ability) or need.

    With the NBN I’ll be at least $10 a month better off and will have an order of magnitude faster connection and download limit.

    Fuck you Turnbull, stop barking to Abbotts whine and use that head that I know is full of half decent grey-matter.
    Make me want to even CONSIDER voting for you bastards.

  6. Pity the writer forgot to bring the perpetual wireless and satellite subsidies into the equation..

    Yes that is right the people on fibre will have to perpetually subsidise those people on satellite and wireless so they also can get the 1 terrabyte plans for $130 a month…

    The people on fibre also have to subsidise the copper network which in wireless/satellite areas is being maintained until at least 2022… The more copper that is lost in urban areas, the higher the cost to maintain in regional/rural…

    Let us not also forget the constant upgrades required to the wireless/satellite areas so that supply can keep up with demand.. It is ironic that the LTE wireless network will be obsolete technology by the time it is built in 2015, when LTE Advanced will be released, then by 2020 5G will no doubt be released..

    And satellites only have pretty short life spans as well…At least compared to fibre…

    If you are going to estimates costs, it makes sense to look at the whole picture, not just one segment of the NBN…

    • “Pity the writer forgot to bring the perpetual wireless and satellite subsidies into the equation..”

      They are already in the equation. The subsidy has been incorporated into the wholesale pricing and the RSP’s have based their pricing on this. And it’s still cheaper.

      • Frank, if we were going to settle for two-thirds of our people having a future-proof all-purpose comms link, we would need need government intervention. This is in fact the unsatisfactory situation we have now.

        The best we could ever expect of corporations would be for maybe 85% to see fibre and high speed wireless within fifty years.

        By sharing the cost of the most expensive 15% of services across the other 85%, we are delivering it this decade to everyone. Even selfish city dwellers (who make posts like yours) get the benefits of lower costs of domestic food production and lowered congestion of roads due to UBIQUITOUS broadband.

        The NBN is keenly wanted by millions of us in regional and rural Australia, which is precisely why three regional electorates fell to independents in the 2010 election, which should have gone to the coalition.

        Unless some pragmatic heads in the coalition rein in this idiotic Abbott-Turnbull broadband attitude, it is almost inevitable that the 2013 election will produce another hung result, risking another Green-Labor government.

    • That’s the entire point – to create open, and equal access to all Australians.

      If you don’t want to contribute to these “subsidys”, don’t buy an NBN connection. Nobody will force you to get one.

        • You will find that Telstra mutually agreed to customer migration (and the closure of the superseded and dilapidated copper network) then had an almost unanimous shareholder vote supporting the agreement.

          So forced?

          • yea, with a nice multi-billion dollar bribe by the Labor Government!

            Don Conroy made them an offer they couldn’t resist…

            as for emotive terms such as “superceded” and “delapidated”, let me assure you: ours is not the sole remaining copper network in operation.

            heck, even Japan, which has the closest thing to universal fiber, is still serving half its population with copper.

          • Forced and bribed (ironically, emotive terms) were actually mutually agreed to and just compensation.

            As the Editor has said, this is a discussion based on facts, not opinions.

            So factually, because Japan still has a copper network, how does that prove our’s, not dilapidated (with an i) or not superseded?

            You believe fibre hasn’t superseded copper and new copper should be laid throughout the world instead? Even the Coalition are planning on supplying new fibre to greenfields, rather than new copper.

            You also believe that the copper throughout Australia is tip top and not in the state of dilapidation in any way?

            Really Michael.

        • Simply get a wireless connection then?

          Turnbull seems to be a pretty big fan of wireless, that should be all you need.

    • “If you are going to estimates costs, it makes sense to look at the whole picture, not just one segment of the NBN…”

      Did you even read the article. Not once did Renai mention costs, it was about comparing existing retail ADSL prices with existing NBN retail prices.

      • “Did you even read the article. Not once did Renai mention costs, it was about comparing existing retail ADSL prices with existing NBN retail prices.”

        What is the point in that? I thought Turnbull was talking about future prices, not current prices…

        We do not honestly think the NBN wholesale price can be cheaper then a broadband price where the main asset used (the copper) has been in place for decades and has been fully depreciated and paid off years ago…

        If you want an NBN be prepared to pay more for it, like when the copper network was being rapidly expanded by PMG/Telecom prices were much much higher then we pay today… Nothing wrong with prices being higher if you want a better product. Why delude ourselves into thinking otherwise…Otherwise when reality finally hits people will be very angry…

        As for the wireless/satellite costs already being factored into the wholesale pricing structure, I would be surprised if it has been done correctly, unless they think peak speeds of 12mbps and a busy time speed of 500kbps for wireless and 200kbps for satellite will be adequate for the next twenty years and once those networks are built will not need to be upgraded. I just look at the number of times Telstra has upgraded NextG since it’s release.. They have gone through at least four iterations of modems in that short time.. (5 years is it?)

        • hey Frank,

          “If you want an NBN be prepared to pay more for it,”

          Be very careful here. Do you have any evidence for your claim that people will be paying more for the NBN than their current ADSL broadband plans? Because this is a discussion about fact, not about opinion.

          Cheers,

          Renai

          • Frank is 100 per cent correct.

            when Malcolm Turnbull says that broadband will be more expensive under the NBN, he’s not talking about the current retail NBN prices posted by the various ISPs. these are transitional prices.

            rather, he is standing back and looking at the NBN project as a whole and focusing on the underlying costs which will have to be recovered by NBNco over the long run.

            current wholesaling pricing offered by NBNco is transitional and does not reflect NBNco’s underlying costs. clearly, the folks running the shop are smart enough to realise that initial wholesale pricing must be low enough to allow ISPs to offer retail NBN packages which are similar in pricing to current ADSL products. otherwise, there would be a political uproar and public backlash to Labor’s super-expensive NBN project.

            this is a fact, and not an opinion — NBNco’s SAU clearly states that they are currently deliberately under-recovering costs.

            when Malcolm Turnbull is evaluating the long-run impact of this multi-billion dollar project on broadband affordability, he must look through the noise (e.g. current wholesale discounting below actual cost, CVC rebates, etc) and focus on the underlying costs of the project itself. this underlying cost is NOT reflected in current retail NBN pricing.

            this is why Simon Hackett describes current NBN pricing as theoretical and continues to exhort the Federal Government to directly absorb the cost of building the NBN into the Federal Budget.

          • Interesting post. I haven’t seen Turnbull make any of those points himself.

            Can you highlight where in NBN Co’s SAU that it mentions transitional costs, and also some evidence of Hackett’s statements on the matter?

            Cheers

            Renai

          • Can you highlight where in NBN Co’s SAU that it mentions transitional costs

            I’m taking about transitional pricing, not transitional costs.

            I’m describing current wholesale pricing as transitional (my term), in the sense that current pricing does not allow them to recover their actual, underlying costs.

            this is a fact that can be gleaned from p.34 of NBNco’s SAU discussion paper:

            A “regulatory revenue” is calculated each year which essentially allows NBN Co to earn a return on its RAB and cover its depreciation, opex and taxation expenses. This is consistent with the approach taken in most other utility industries, and allows an expected economic profit of zero in each year.

            Initially, NBN Co will be commercially unable to earn revenues that match its allowed regulatory revenues, which can be considered as an under-recovery of its initial costs. These under-recovered costs are rolled forward each year in a separate regulatory “account” (Initial Cost Recovery Account, or ICRA) and have a capital charge applied to the balance each year. Thus, the initial under-recovery is capitalised, and essentially forms part of the overall regulatory asset base on which NBN Co needs to earn a return over time.

            in very simple terms, what NBNco is saying is this:

            1) our annual cost is $15;

            2) to break even in terms of zero economic profit, we require $15 in annual revenue;

            3) current wholesale pricing configuration only brings in $10 in revenue;

            4) we will keep a running total of the annual losses ($5) for an indefinite period and carry them forward for future recovery;

            in the future, NBNco’s expanded revenue cap would allow it to recover not just their ongoing annual cost of $15, but also accumulated losses from previous periods.

            which brings us back to this:

            Q: why do we have accumulated losses in the first place?

            A: because NBNco is currently pricing below cost.

            this is what allows ISPs to offer retail NBN packages which are competitive with current ADSL products.

            and also some evidence of Hackett’s statements on the matter?

            this is why Simon Hackett describes current NBN pricing as theoretical

            from one of your own articles on delimiter!

            and continues to exhort the Federal Government to directly absorb the cost of building the NBN into the Federal Budget.

            first or second page of the powerpoint presentation from his most recent Commsday address.

          • Michael,

            I want to thank you for bringing this to my attention. I didn’t know about this aspect of it, and it’s really interesting to see it laid out this way. This is exactly the kind of informed discussion I wanted to provide with this and other articles.

            However, I don’t think this is a smoking gun. Could it not be that volume of services in subsequent years — rather than price rises on those individual services — could aid in that cost catch-up that you’re talking about?

            It appears to me that NBN Co would be unable to make a 30-year commitment to pricing if it truly did need to catch up via price increases as you suggest.

            Cheers,

            Renai

          • Could it not be that volume of services in subsequent years — rather than price rises on those individual services — could aid in that cost catch-up that you’re talking about?

            at an abstract level, revenue equals unit price multiplied by volume. clearly, either increases in the unit price or volume will both lead to higher revenue.

            so, it is mathematically possible for total revenue to rise while unit prices (such as the various AVC and CVC charges) remain constant if you get sufficient volume growth (or migration to higher AVC tiers).

            now, returning to Malcolm Turnbull’s assertion that broadband user charges will be higher under the NBN

            this statement can be interpreted the following ways:

            1) average spend per user will have to increase under the NBN — this is correct since NBNco’s own business plan projects sharply rising ARPU over time;

            2) unit charges will have to increase under the NBN — as discussed above, this is a possibility but not a logical necessity for NBNco to achieve its targeted revenue.

            now, NBNco is entitled to argue that it will be able to grow revenue to the required levels without raising unit prices.

            however, bear in mind, when we are talking about the NBN, we are talking about a speculative venture which faces significant uncertainty surrounding both revenue and costs:

            1) NBNco admits in its SAU discussion paper that it faces significant demand uncertainty;

            2) the Caliburn Greenhill review of NBNco’s business plan raises specific question marks over the fundamental assumption that consumers are willing to pay more and more for broadband over time (i.e. higher payments for wholesale network service alone, not additional value-added services), when they have been accustomed to increasingly generous data quotas for the same retail price point over the past decade;

            3) in addition to the many examples (NZ, South Korea, Japan, US) quoted by Malcolm Turnbull in his various speeches on lacklustre demand for superfast broadband, your other article today on Paul Fletcher and UK broadband policy highlighted Ofcom data which showed around 50% of UK households have access to superfast services, but only 5% subscribe to them. if replicated in Australia, this worldwide trend in consumer behaviour is obviously detrimental to NBNco’s business model.

            hence, there are clearly strong and reasonable grounds for Malcolm Turnbull to adopt the view that basic unit charges under the NBN will have to rise in order for NBNco to achieve its revenue targets. in other words, NBNco will have to force consumers to spend more by raising basic charges, if higher spend through substantial uptake of premium broadband does not happen voluntarily.

            so, when Malcolm Turnbull says user charges will rise under the NBN, he is merely expressing his view on the economics of the NBN. more importantly, none of Malcolm’s criticisms about the demand (or revenue) challenges surrounding the NBN have been addressed by the official proponents of the NBN.

            the McKinsey study was essentially a cost study for 90% FTTP with scant attention paid to demand side factors. similarly, NBNco’s business plan merely illustrated the revenue profile mathematically required to generate the desired range of ROI, but crucially did not rigorously substantiate why such a revenue profile is realistic or achievable. finally, Conroy’s recent defence of Labor’s NBN before the National Press Club mostly focused on the technological differences between FTTN and FTTP, and once more failed to rebut the various demand or revenue-side concerns raised by Turnbull.

          • “NBNco admits in its SAU discussion paper that it faces significant demand uncertainty”

            And this is what you base your Fear Uncertainty and Doubt upon? Then fear not…
            Being “uncertain” can mean many things…but to assume that it could mean that people won’t use the NBN is patently silly. There are only 2 possibilities that I can think of (considering that fiber is replacing all copper eventually)…
            1. That demand for all modern telecommunications declines in this country (not gonna bet on that)
            2. That people decide to use 3rd party wireless instead (and as any half competent engineer can tell you, that’s impossible as far as replacing the amount of traffic that occurs on fixed)

            But those are absolutes…what about likely market trends?
            The NBN is less expensive, faster, and more reliable for consumers and businesses…why wouldn’t it be in high demand?

            Mind you, the NBN is performing it’s due diligence and discussing all possible contigencies. Even if there is only a .000001% chance, they are bound to mention any possible downside, no matter how incredibly unlikely that is.

          • @Chas

            “And this is what you base your Fear Uncertainty and Doubt upon? ”

            That’s a bit rich. Michael is not promoting fear, uncertainty, or doubt. He is entering into appropriate debate.

            The fact is, not everyone is right all the time. Not everyone knows everything. It’s OK for not everything about the NBN to be good, the best, right, perfect, etc.

            Even when someone is wrong – it may just be that it’s a different point of view (and not wrong per se).

          • Made up numbers.

            It cost $1000/month to run a network.
            It cost $10/user/month to run the run.

            If I only have two user it cost me $1020/month to run my network if I only charge $20/month to those two customer I’m running an operation loss on my network. Now I have two options
            a) increase my charges to the two customers I already have.
            b) increase my number of customers.

            You can get away with a) in niche markets or captive markets otherwise competitors trying to do b) will kill you. NBN is being restricted from doing a) by other means not least of which is the expectation and policy aim that prices will be the same (pseudo competition) .

            Now once you have a 1000 customers both your fixed cost and cost per a customer to run the business are being recovered but you don’t get to start making a profit yet. Every extra customer beyond those 1000 brings in $10/month from which you repay your capital costs and accumulated interest on capital costs and recover your operational lose(with accumulated interest) from previous years.

            Right now NBN is at the 2 customer level, it will likely hit the 1000 customer level once significant parts of the network get completed and customers get mass migrated by Telstra and Optus and most likely won’t reach the 1000+ level until near completion.

            Where you can run into trouble is
            Is never reaching that 1000+ customer level.
            upon reaching that 1000+ customer level your accumulated debt is too high that your operational “profits” fail to meet to your accumulated debt obligations.

            If you run into problems you can then go back and do start doing a) at your much larger customer base.
            You do risk reducing that customer base and even with no fixed line competition there is still some of that risk.

            NBN does have other mechanism of doing a) than just putting up prices across the board and it is something that has happened and number of times in the history of communications.

            Higher speed tires cost more money and over time people will move to higher speed tires with high probability. Like most things with past behaviour to judge future expectations.

            Many years ago I had dial up internet, for the duration of dial up I payed the roughly the same amount of money but adjusted for inflation cost dropped, with increases in value. The I had the option of ADSL (256k) I payed more for this, but over time in the cost dropped and value increased, Repeat with ADSL 1.5k and ADSL 1+ (8mb) and ADSL2. Those in NBN area already have this choice of paying more their higher speed tiers(100/40) and in the future 10years, 20years down the track there is the option of more higher speed tires(1000mb services ect..).

            Most of the arguments with Telstra of access pricing is Telstra saying we are only a 1000 customer business with debt to repay and everyone else say they are a 1000+ business with their debts repayed.

            Just once I would like to see the CLP(or any opposition party to be honest) actually hold the government to account instead just saying no and commenting from the sidelines saying we would have done it different. The CLP with the minority government have had the opportunity to do just that but have been just as much a failure as they constantly claim labour to be.

          • the Citigroup report estimates that by 2013, NBNco will have spent $10bln.

            the overwhelming portion of that expenditure are not shared costs, but costs incurred as a result of pushing fibre to individual households and are directly allocable to the individual premises.

            this is obvious as the biggest cost (and most labour-intensive) component of building the NBN is replacing the last-mile copper. the cost of backhaul, which is shared over a portion of subscribers, is relatively small in comparison to the cost of building the access network. this is why FTTN networks can be built very cheaply as you are just extending the fibre backhaul deeper into the access network.

            unlike head office costs and other overheads, the cost incurred by laying fibre in one area produces zero operating leverage, in the sense that it cannot be shared or amortised over another area. the cost incurred in installing fibre in one particular area must be recovered from that area, in the sense that if you want to service premises in a different area with fibre, you will separately incur additional installation costs for every new premise serviced.

            it is this non-shared and directly allocable cost of pushing fibre to each individual premise (which comprises the lion’s share of the cost of building the NBN) that is being under-recovered on an individual basis from each premise by NBNco. this is why profitability within NBNco’s financial model is largely driven by rising ARPU.

          • “1) our annual cost is $15”

            That should read our INITIAL annual cost is $15, which will decrease over time as take-up increases.

            “4) we will keep a running total of the annual losses ($5) for an indefinite period and carry them forward for future recovery”

            This is only very slightly true…the indefinite part. The crossover point won’t be known for a little while yet, but most expect it near the 7 year mark.

          • BTW, this still has nothing to do with the whole point of the article…the cost to the user will remain at or below ADSL2+, and I see absolutely no reason for that to change, certainly not because the NBN is using a government investment to start their business…both will make a profit, and the efficiency will be much better than it was with private enterprise running it (though the profits won’t be).

          • +1 Chas.

            This is the point lost on those bogged down by economics. Governments provide services for us, their constituents, normally which offer no return on the investment.

            But unlike these money sapping (but of course needed) services, the also needed NBN will offer both a modest return while supplying equivalently priced, but improved, future ready services.

          • Yeah, spot on.

            The revenue under expenses is, to put it bluntly, because of limited volume rather than price.

            According to their projections, their prices decrease over time – but volume increases, therefore increasing revenue.

          • Nice selective quoting there Michael. They are talking about the initial years while revenue is less than expenses and being able to carry foward those loses into subsequent years. This is the how virtually every multiple year project works. While in development they cannot operate at a profit. It would be stupid not to be able to carry over loses to later years. Now the next part you didn’t post where it talks about subsequent years when revenue exceeds costs.

             As NBN Co’s actual revenues increase, and eventually exceed the allowed regulatory revenue, the initial unrecovered costs will be reduced over time until they are fully recovered, and the ICRA is reduced to a zero value.
             At that point in time, the allowed regulatory revenue each year would represent a revenue cap on NBN Co’s operations, constraining its ability to earn revenues in excess of its underlying economic cost base. NBN Co would then have similar cost-recovery characteristics to other established regulated utility operators.

        • “What is the point in that? I thought Turnbull was talking about future prices, not current prices…”

          Did you read this part of the article?
          Doesn’t it say that the prices are fixed for 5 years and that any increase for the next 30 years will be less than CPI.
          “This document, among many other commitments, states that NBN Co will maintain prices for its key wholesale prices at the current levels for five years. In addition, the company will limit future increases to be less than the rate of inflation for 30 years. In short, in real terms, NBN Co’s wholesale prices will remain fairly stable for the next 30 years.”

    • Too right Frank, here’s the exact clause…

      “Wireless broadband makes economic sense and places rural and regional Australia at the frontier of current technologies. To ensure prices to end users in rural and regional Australia are comparable to those for similar services in metropolitan areas, the operator(s) of these wireless broadband networks will be required to provide a service over the network at a price comparable to similar DSL services in metropolitan areas. The requirement will apply for the life of the contract (expected to be fifteen years)”.

      … from the “Coalition’s broadband policy”.

  7. I am on a Westnet ADSL1 business plan (via Telstra Wholesale CMUX, which does not have ADSL2+ installed) in a regional area, so no other providers other than Telstra Wholesale.

    I pay $129.95 per month for 100GB/100GB ADSL1 – which in reality due to Telstra backhaul congestion is lucky to provide speeds in excess of 1Mbps/0.3Mbps (even though I sync at 7.6 Mbps). Try operating a business on that.

    Westnet Fibre NBN Business plan – for the exact same $129.95 price – 500GB/500GB, 100/40 Mbps speed.

    I come from a long line of liberal voters, but unless MT and the Libs stop their bulls*&t re the NBN I won’t be voting for them.

  8. Just to put an alternate data point out there…

    I’m on Optus HFC paying $45/mth for a 50+70GB plan with speeds of 20/0.5 mbps. There is no exact plan match with iiNet, but as far as I can see I will have to pay more even for the base plan which is slower (download) and much less data.

    • is that $45 for your total telco spend? do you have a ‘line rental’ you are obligated to pay as well to get that price? (not familiar with Optus HFC offerings atm but that is a common feature in the market these days….)

        • Well that makes a bit of a difference…

          I’m on Telstra cable, I get ~21/1 speeds, with 25GB of quota (enough for me, believe it or not).

          My “broadband” plan costs me $40 a month, because I get significant discounts due to having a phone line, etc.

          Of course, we almost never use that phone line (about 99.9% incoming / 0.1% outgoing calls) due to using VoIP, so it’s basically part of the broadband cost, which pushes us up to ~$65 a month.

          I’d be more than happy with the NBN pricing advertised so far, and the speeds are comparable / superior to what I get on cable.

          • But I’m going to have to pay for my phone connection anyway (yes, I want a separate non-VOIP phone). There is no indication “line rental” costs are going away with the NBN. So I’m just saying I haven’t yet found an equivalent NBN plan to what I have now at the same cost (from any of the published prices) even taking bundling into account. Perhaps Optus will offer a straight transfer when the time comes.

          • Callum you will only get a VOIP phone on the NBN, no matter who your ISP is.
            It is possible you are not comparing all your current services (and price) to your possible future services (and price).

  9. Lets compare current Optus plans.

    Naked NBN 25/5 speed 50+70Gb $60
    Phone + NBN 25/5 speed 50+70Gb (Plus $30 of calls) $65

    Naked (via Cable or ADSL2+) 50+70Gb $60
    With phone (via Cable or ADSl2+ ) 50+70Gb ( Plus $30 worth of calls) $65

    Anyone else seeing a pattern here?

      • And we can extend that to higher speeds where the comparison gets really interesting.

        NBN 100/40 with 600 GB of data – $115/m (Internode). If you only want 30GB data allowance a month (which is enough for some people), its down to $75/m

        Cable 100/2 with 500 GB data – $130/m (Bigpond).

        DSL 100/40….. – oh.
        Cable 100/40…. – ah
        25 Mbps upstream? heck even 5 Mbps upstream on copper or cable? – erm….bugger.

  10. Let’s not forget to think holistically about the NBN. I know this article is about the pricing of the NBN, but even if you put pricing as a con toward the NBN (which as this article suggests it is not), the benefits far outweigh the cons. To get upset about the potential costs of the NBN, you’d have to forget all of the benefits. Taking something out of context is never useful.

    Let’s not forget to mention the more rural areas, even those who will get fibre, not just the wireless or satellite serviced areas. Without the NBN, they’ll inevitable pay a lot more broadband access, especially into the future. The only thing I will concede, is that in a competitive urban market, prices probably would end up being less (quality may be another story), but not forgetting the NBN’s goal of wide reach, a government project like this is the ONLY way forward. That in itself should almost put an end to any debate over the NBN. The only leg left to stand on is that of the technologically ignorant – those people who debate the value faster internet can deliver.

  11. Don’t know about you guys but I am sick to death of the media in this country allowing the Coalition to spread absolute fraud about the NBN. Its not a ‘distortion’ and its not a single ‘lie’ – you can only describe it as an ongoing fraud perpetrated on the Australian people. Aided and abetted by the Conservative media in this country.

    Its disgusting

  12. Great article, just one problem. I pay $60/m for 200Gb data on Adam Internet is SA, no peak or offpeak crap. This is a naked account, so don’t have to pay for line rental and get $50 worth of local and national calls. I don’t see any other DSL companies competing with that, let alone the NBN.

    If Adam can bring NBN pricing the same as this deal, I will be happy, but they won’t be able to because the wholesale price will be to high.

    In my opinion, the copper should stay, so it can compete with fibre.

    Nuff said….

  13. Turnbull falls back to price. Always. Because it’s the only thing the Libs can actually do.

    Under-fund infrastructure.

  14. Daniel,

    The problem is that Copper can never compete with fibre technologically and using ADSL will always be a lucky dip. Also every person who does not use the NBN pushes up prices on ADSL and vice versa. You can not seriously think that there is enough market room for them both, either way one of them will lose and by all rights it should be copper.

    AdamEzyChoice Fibre 25 4GB 4GB $45
    AdamEzyChoice Fibre 25 20GB 20GB $50
    AdamEzyChoice Fibre 25 100GB 100GB $60
    AdamEzyChoice Fibre 25 250GB 250GB $90
    AdamEzyChoice Fibre 25 500GB 500GB $120
    AdamEzyChoice Fibre 25 1000GB 1000GB $150

    Also IInet (A premium ISP) has a plan for your price range.

    100 + 100 / 12/1 Mbps – $59.95
    or
    100 + 100 25/5 Mbps – $64.95

    No real directly comparable plan with Adam the closest is the 200g plans with 2x the average ADSL2+ speed and 40GB more data. Although if you can handle less data you can get a higher speed for the same price.

    So frankly the price difference is not huge, and the only reason Adam has such cheap prices is because it cherry picks the best locations at the moment in which to provide services to. Unlike the NBN which must provide ubiquitous access. So do you want to pay more on for the same copper service because some people migrate off it but the maintenance cost is the same? Good luck with getting Telstra to maintain that. Or would you rather the NBN not be built and everyone be stuck on lucky dip satellite/Wireless/ADSL/ADSL2+.

    Lets not forget these are early pricing as the roll out continues competitors will be more interested in expanding market share and of course one way to do this will be through price decreases.

  15. Also I would like to correct my previous comment, Adam plans are not 40GB more data on the NBN. I do not know why I misread it as 160GB.

    Also it should be iiNet.

    And technically Adam NBN offering are about 2x the down link of average ADSL2+ but 5x the up link.

  16. What I find frustrating is, those who even with a clear plan outlined, still refuse to accept, hey, maybe this might just work after all, leaving their fingers snugly in their ears and refusing to listen.

    Seems some are in so deep in their opposition that they will never even consider, success.

    I agree with you though, that it is basic… modest ROI = affordability + small profit = full repayment of build, over a period of time, simple.

    Again as the editor has said, this is a discussion based on fact not opinion. So, the numbers are all there, please refute them with actuals not opinions.

  17. More Liberal spin, you know it initially costs money to build things. From what i’ve seen there are already some generous NBN plans in the short time of its existence. You need to spend money to get things done for our future, the children’s future. We are now living in the IT age like it or not, if you think it is meaningless when fibre rolls past your door just decline to connect to it and stay on your backwards connection.

  18. “It is lunacy to beleive that the NBN is going to be cheaper or on par. You can’t make up money”

    I understand your confusion…but it really does make sense if you look at all of the issues.

    1. Maintenance and replacement of the copper costs a huge amount of money already, which will be drastically reduced with fibre (maintenance costs on fibre are a fraction of copper).

    2. Profit margins for the NBN will be VASTLY less than Telstra shareholders require for the copper…

    3. As any professional investor will tell you, Capital Expenditures are almost never the problem…Opex is. Because of it’s structure, Opex for the NBN will be much smaller than Telstra’s Opex.

  19. you have a right to your own opinions, but you dont have a right to your own facts.

    “(if you went by the numbers it’s already a failure)”

    citation please?

  20. “If the government were honest about the true cost and stated a legitimate necessity then it would be far less of a hot topic. However, it is spinning the cost and making up the necessity. Government rarely is in front of the market and the NBN is no exception.”

    The ‘true’ cost has been analyzed by government and non government implementation studies. Please consider what you are saying before you start talking out your less intelligent end (I hope).

    Estimated total cost – ~$35.9 billion
    Government investment ~$26 billion
    Percent of Total tax revenue – <1% (assuming the full value is transferred in just one year, which it will not be.

    Now lets move to the needs.

    1. New estates are often subjected to internet hell, me being in one such example. Telstra refuses to bother connecting even decent ADSL 1 services. They can not give me a straight answer either.

    2. Rural communities often have either no access to broadband of lackluster satellite if the yare lucky.

    3. ADSL 2+ when available is a veritable lucky dip. you do not get what you pay for, you get what you get and you pay the same. Why should someone who gets 1Mbps pay the same as someone who gets 24Mbps?

    Price

    NBN since it is a GBE does not need a big ROI (7%) this is because it was devised to fill in a community gap (those with good broadband and those without). FTTP seems the most reasonable way to achieve this and maintain ubiquitous and fair speeds for all. Furthermore the NBN has limited itself to not increase prices for 5 years and beyond that to limit price increases to half on inflation at maximum with this possible rises not being accumalative, basically they don't increase prices one year they can't call in the amount the next year.

    FTTN will not deliver this.

    Mass Wireless will not deliver this.

    FTTC is almost completely pointless as you still need converters at the end of the fiber so why not go all the way and do away with those nodes?

    The Liberals are complete morons.

    Please stop and think before posting, if you don't your the lunatic.

  21. It should hardly be surprising that many liberal supporters are against the NBN. After all, it is about infrastructure.
    Look that the previous government’s track record on infrastructure. Better still, look at most privatised business. The first thing to suffer in these businesses is infrastructure. In South Australia, electricity prices go up every time there is a need for improvements or repair on the network. Why? Because most of the profit must go to shareholders.

  22. The ‘true’ cost has been analyzed by government and non government implementation studies.

    Louis is entitled to retain a healthy dose of skepticism about the accuracy and reliability of these government-commissioned “studies”.

    to give you one very glaring example of the speculative and flimsy nature of these “studies”: the McKinsey study argued that NBNco would be able to earn the 7% ROI while competing head-on with Telstra’s copper network by gradually leeching customers away. somewhere along the way, after this political project was handed over to Mike Quigley, it was decided that NBNco needed to spend billions of dollars to bribe Telstra into shutting down the copper and transferring all of its wholesale customers to the NBN (i.e. the fixed network preference deal). this is a massive about-face.

    Percent of Total tax revenue – <1% (assuming the full value is transferred in just one year, which it will not be.

    the total tax take is around $300bln odd. so, we’re looking at closer to 10% than 1%. mind you, given the anticipated blow-out in the Federal Budget relative to forecasts, Swannie is already busy trying to find further cuts in expenditure. so, the precise dollar amount of the NBN cost that can be absorbed in the Federal Budget is exactly zero.

    New estates are often subjected to internet hell, me being in one such example. Telstra refuses to bother connecting even decent ADSL 1 services. They can not give me a straight answer either. Rural communities often have either no access to broadband of lackluster satellite if the yare lucky.

    neither of these concerns you raise regarding new estates or rural broadband access by themselves justify building FTTP. they justify implementing some form of universal mandate for access to minimum broadband speeds, and can be achieved simply by upgrading backhaul and building new nodes.

    NBN since it is a GBE does not need a big ROI (7%)

    none of the policy statements by the Shareholder Ministers actually specify a maximum cap on the ROI that NBNco can earn. instead, refer to pg.36 of NBNco’s SAU discussion paper:

    As part of the Long Term Revenue Constraint Mechanism, NBN Co defines its maximum rate of return by estimating the weighted-average cost of capital (WACC) of an efficient commercial firm. Given the 30 year SAU term, this estimate is not set for the whole period, but allowed to change to reflect the potential for changing conditions over that time period… for different phases of NBN Co’s development to reflect NBN Co’s assessment as to how risk and financial structures will evolve.

    part of the initial political spiel was that a private firm building the NBN would require double-digit returns during the construction phase due to the higher risks involved, but the Federal Government can underwrite this early-stage risk and allow NBNco to only earn a single-digit return. of course, none of this political rhetoric was actually translated into binding policy statements. conversely, the contents of NBNco’s SAU discussion paper directly contradicts the early political rhetoric used to justify the feasibility of Labor’s NBN.

    FTTP seems the most reasonable way to achieve this and maintain ubiquitous and fair speeds for all.

    it may well be the responsibility of the government to ensure that there is adequate basic infrastructure to meet the average needs of the average taxpayer, but it is certainly not the responsibility of the government to provide super-expensive infrastructure to satisfy the wants of power users or enthusiasts. there is simply no generalised application for households that requires 100mbit.

    despite the widespread availability of cheap, subsidised fibre for almost a decade in Japan, almost half of Japanese households still choose to subscribe to ADSL. just to illustrate what a huge white elephant the Japanese FTTP network is — average monthly downloads in Japan is only 9GB/mth, which clearly suggests that the capacity of their fibre network is massively under-utilised.

    Furthermore the NBN has limited itself to not increase prices for 5 years and beyond that to limit price increases to half on inflation at maximum with this possible rises not being accumalative, basically they don’t increase prices one year they can’t call in the amount the next year.

    all these “commitments” are meaningless when their business model is completely flawed and their financial projections are fundamentally unrealistic, as highlighted by overseas experience and the Caliburn Greenhill report.

    • So what you are saying Michael is we have, NBNCo/McKinsey’s, at worst flimsy, and at best on the money analysis, vs nothing but unfounded fear, uncertainty and doubt, shaken (not stirred) with a heaped spoon of bullshit and lovingly blended with oodles of ultra conservatism.

    • “the total tax take is around $300bln odd. so, we’re looking at closer to 10% than 1%.”
      Erm – that tax take is $300 bln per year, compared to roughly 30 bln over 10 years, or 3 bln per year – which is 1% in my book.
      Another comparison – Australians spend over $17 bln per year, out of discretionary income, gambling. If we can afford to do that as a nation, we can afford $3bln per year for communications infrastructure.

  23. Lets cut the crap and describe whats this pricing is really about. Internet prices tend to drop substantially over time. $60 for 120GB HFC/ADSL at 20mbit today compares to $70 for 10GB at 0.6mbit 10 years ago. The NBN on the other hand will never drop in price. Its price will move with inflation. It has to use the city customers to over pay and eventually subsidise the country folk. This is why in 10 years time HFC will end up miles cheaper than NBN – this is of course why the NBN is so adament that they buy and shut down all other networks.

  24. I apologise you are right if it was payed for by just one years revenue it would be close to 10%. However payed for as it will be over the lifetime of the construction project it will be ~1% of tax revenue.

    This does not even include the efficiency increases and GDP increases that this infrastructure will assist with.

    As for those talking about HFC. HFC penetration is very low. Add this to the fact that ISP have to maintain only a small number of people on the network to maintain decent speeds and you see why Telstra and Optus stopped their rollouts to the tune of billions of dollars wasted. New flash HFC was intended for Pay – TV, not internet.

    Furthermore Fibre optics has the following benefits over copper which no-one has yet to contradict.

    * You pay for what you get, if you pay for 50 Mbps it is likely that you will get it, subject to ISP’s contention ratios.
    * Copper cost much much to maintain than fiber does. Telstra sees this and barely maintains their network, they only fix it if it breaks. So over time speeds slows down considerably.
    * Copper uses much more power than fibre as you actually need to convert light signals from the fiber backhaul to electrical signals needed to run down the copper wire.
    * Again many people cannot gain access to any kind of decent speed. You may be happy if you personally can get 10Mbps on fixed wired broadband with low latency but the average for Australia is far below below this.
    * Private enterprise will not fix the above point.
    * The FTTN model that the Liberals are spouting only ever had one proponent, New Zealand and half way through completion they decided to ditch it for FTTP at a massive cost to the consumer.
    * Also who builds infrastructure for what you need now since when you built it it may need upgrading. The FTTH network allows for future demand and for scalability for future demand. This project will set Australia’s broadband needs for 50+ years to come.
    * If we never built infrastructure for the future than many of project we have implemented would not exist. For example the telephone system, at the time most people would not have seen a need, now it is considered a vital influence in our lives. The telephone system has increased productivity in immeasurable amounts. Now the internet with its transmission of data is becoming a huge part of our lives.

    ‘the total tax take is around $300bln odd. so, we’re looking at closer to 10% than 1%. mind you, given the anticipated blow-out in the Federal Budget relative to forecasts, Swannie is already busy trying to find further cuts in expenditure. so, the precise dollar amount of the NBN cost that can be absorbed in the Federal Budget is exactly zero.’

    Anticipated by whom? you and the Liberal party?

    ‘despite the widespread availability of cheap, subsidised fibre for almost a decade in Japan, almost half of Japanese households still choose to subscribe to ADSL. just to illustrate what a huge white elephant the Japanese FTTP network is — average monthly downloads in Japan is only 9GB/mth, which clearly suggests that the capacity of their fibre network is massively under-utilised.’

    Conjecture, all I can see is that in 2009 roughly 50% of homes used fiber optics. Do you have proof the other 50% are on ADSL, or do yo uassume. How about those who do not subscribe to the internet. Did you factor in the point that Japan has been in severe deflation for over a decade (since early 1990’s so almost two decades in fact). Furthermore the Japanese market consumes more data locally than say Australia because of the language and cultural barriers. All of these are factors that make your example quite poor.

    ‘neither of these concerns you raise regarding new estates or rural broadband access by themselves justify building FTTP. they justify implementing some form of universal mandate for access to minimum broadband speeds, and can be achieved simply by upgrading backhaul and building new nodes.’

    This is where you seem to be journeying into mythical land. To guarantee anything on the copper network you would have to build many more nodes which by themselves will cost billions as the main cost in improving any network is labour. Furthermore you would have to guarantee the qaulity of existing copper wires. The problem is that the copper is this country is in such varying degrees of disrepair and the quality that was first used for the copper is inadeqaute to increase speeds mcuh further beyond ADSL2+ speed.

    So are you saying that nobody want or needs more than ADSL2+ ever? Furthermore do you know how fast the best ADSL2+ speeds drop off? So what speed would you mandate as a ‘minimum’? what do you say to those who only get the minimum while someone else the next street over get full speed but they pay the same? If I only payed in proportion to the speed I got and you who got betetr speeds payed the rest would you be happy? since that is fair.

    • This does not even include the efficiency increases and GDP increases that this infrastructure will assist with.

      even the Labor Government admits that this project will yield a sub-standard return (if not an outright lo
      ss). who’s to say an alternative deployment of the capital to be invested in this project at standard returns won’t produce even greater “efficiency and GDP increases” even after factoring in indirect benefits along with higher direct returns?

      HFC penetration is very low. Add this to the fact that ISP have to maintain only a small number of people on the network to maintain decent speeds and you see why Telstra and Optus stopped their rollouts to the tune of billions of dollars wasted. New flash HFC was intended for Pay – TV, not internet.

      first of all, HFC plays a huge part in superfast broadband provision in many overseas countries. HFC is used extensively even in South Korea which is held up as the internet gold standard. secondly, HFC passes 1 out of every 3 households in Australia — that is not low by any stretch of the imagination! Telstra and Optus are actually making further investments in their network and upgrading to 100Mbit. it is possible to increase the available pool of bandwidth by node-splitting.

      Copper cost much much to maintain than fiber does. Telstra sees this and barely maintains their network, they only fix it if it breaks. So over time speeds slows down considerably.

      according to an iiNet survey submitted to a 2010 Senate hearing, the average connection speed of their subscribers is 11-12Mbit. please supply rigorous statistical evidence for your claim that “average speeds have slowed down considerably over time”. bear in mind, when Telstra performs maintenance repairs on copper lines by replacing certain faulty segments, bandwidth performance normally improves.

      Copper uses much more power than fibre as you actually need to convert light signals from the fiber backhaul to electrical signals needed to run down the copper wire.

      and the light signal terminating at the NTU does not need to be converted into an electrical signal?

      Again many people cannot gain access to any kind of decent speed. You may be happy if you personally can get 10Mbps on fixed wired broadband with low latency but the average for Australia is far below below this.

      once more, an iiNet survey submitted by Michael Malone to a Senate hearing in 2010 revealed that the average connection speed of their subscribers is 11-12Mbit. please supply rigorous statistical evidence to back up your assertion and refute the solid data from the iiNet survey.

      The FTTN model that the Liberals are spouting only ever had one proponent, New Zealand and half way through completion they decided to ditch it for FTTP at a massive cost to the consumer.

      FTTN is extensively deployed in a plethora of major overseas telco markets. in fact, FTTN deployment is much more common and extensive than FTTP deployment. NZ is not ditching FTTN — NZ’s FTTN build uses Chorus cabinets that are upgradeable to FTTP simply by swapping out the cards. it has always been NZ’s plan to first build FTTN, and then to upgrade to FTTP where desired. if NZ was “ditching” FTTN, they would trash the Chorus cabinets and redesign the network topology with brand new FTTP cabinets located in different places.

      Also who builds infrastructure for what you need now since when you built it it may need upgrading. The FTTH network allows for future demand and for scalability for future demand. This project will set Australia’s broadband needs for 50+ years to come.

      over-investing is a sure road to bankruptcy. if you have ever worked in a corporation, you will know that businesses only invest in the minimum that is required at the least cost. this is because investing means tying up precious capital, and capital has an opportunity cost. also, FTTN is upgradeable to FTTP — there are many technology vendors selling these dual-purpose cabinets.

      IIf we never built infrastructure for the future than many of project we have implemented would not exist. For example the telephone system, at the time most people would not have seen a need, now it is considered a vital influence in our lives. The telephone system has increased productivity in immeasurable amounts. Now the internet with its transmission of data is becoming a huge part of our lives.

      yes.. and? we already have telephone and internet. there’s a concept called diminishing marginal utility. the initial increments in bandwidth from dial-up to ISDN speeds produce a big jump in value to consumers. each increment after that from ISDN to T1, and T1 to ADSL2 produce smaller and smaller increments in value to consumers. think about it — what are the most important tasks performed over the internet? email, reading the news, job searching, booking tickets, online shopping, blogging, social networking… all these high value activities can be performed using ADSL. not everybody is downloading uncompressed blu-rays over the internet or partaking in distributed computing projects and are prepared to pay extra for the ability to do so.

      Anticipated by whom? you and the Liberal party?

      in case you missed the news, Federal Treasury updated their budget forecasts and informed Swannie that his projected surplus is as imaginary as NBN profitability. so, Swannie held a grand press conference to reassure all his loyal subjects that his mob is serious about bringing the budget back into surplus and will be bending over backwards to find more expenditure cuts.

      Conjecture, all I can see is that in 2009 roughly 50% of homes used fiber optics. Do you have proof the other 50% are on ADSL, or do yo uassume. How about those who do not subscribe to the internet.

      it is a market share statistic. go read the McKinsey study — there’s a pretty chart in there illustrating that almost half of Japanese households who subscribe to broadband are on ADSL.

      Furthermore the Japanese market consumes more data locally than say Australia because of the language and cultural barriers.

      huh? we are talking about investment in the local access network, and not international transit.

      To guarantee anything on the copper network you would have to build many more nodes which by themselves will cost billions as the main cost in improving any network is labour.

      FTTP costs at least 3 to 4 times more than FTTN because it involves replacing the entire last mile access network. replacing the latter component is the labour-intensive task. nodes are not “labour-intensive” — they are just static cabinets sitting by the side of the road that connect the upgraded fibre backhaul with the cut-over copper tails.

      Furthermore you would have to guarantee the qaulity of existing copper wires. The problem is that the copper is this country is in such varying degrees of disrepair and the quality that was first used for the copper is inadeqaute to increase speeds mcuh further beyond ADSL2+ speed.

      again, i refer you to the iiNet survey of their subscribers’ average connection speeds. the fact is the condition of our copper network is no worse than that of many other countries that have successfully implemented FTTN/VDSL. in fact, Michael Malone actually praises Telstra’s maintenance of the condition of the copper network in that 2010 Senate testimony!

      So are you saying that nobody want or needs more than ADSL2+ ever?

      i’m saying implementation of FTTN/VDSL will see a general improvement in speeds. only a few years ago, Mike Quigley was actually doing the rounds in Canberra spruiking the benefits of Alcatel’s FTTN equipment. the only justification for building FTTP is if you believe the minimum requirement is 100Mbit. FTTP installations, and fibre technology in general, has been around for over a decade at least, and no generalised household application requiring 100Mbit has ever emerged. instead, we are seeing rapid improvements in bandwidth efficiency and optimisation. real productivity is not about producing more by using more expensive inputs, it’s about making more out of the same or less inputs. that’s how real wealth is generated.

      So what speed would you mandate as a ‘minimum’?

      Malcolm Turnbull is talking about an initial minimum of 12Mbit, and then stepping it up to 24Mbit. to put things in context, the mandated minimum of the FCC in the US and Ofcom in UK is somewhere in the 2-5Mbit range!

      what do you say to those who only get the minimum while someone else the next street over get full speed but they pay the same? If I only payed in proportion to the speed I got and you who got betetr speeds payed the rest would you be happy? since that is fair.

      well, buddy, i pay as much local, state and federal taxes as anybody else. how is it fair that the State Government builds train stations, bus stops, tram stops, etc closer to some people’s houses than mine using my taxes? other people can just wake up 15mins before the train ride and walk across the street to the station to catch their train. i have to wake up 1hour prior, drive to the station, fight traffic, find parking, incur a parking fee… welcome to the real world where nothing is perfect. if you are not happy with your internet speed, terminate your subscription.

      • according to an iiNet survey submitted to a 2010 Senate hearing, the average connection speed of their subscribers is 11-12Mbit. please supply rigorous statistical evidence for your claim that “average speeds have slowed down considerably over time”. bear in mind, when Telstra performs maintenance repairs on copper lines by replacing certain faulty segments, bandwidth performance normally improves.

        This really does depend on your source. According to Ookla (similar to speedtest.net) the average Australian (not just limited to iiNet speed in Australia was 6.4 Mbps.

        The Akamai 2010 Q3 tudy found the following:

        Average connection speed: 2.9Mbps
        Peak connection speed: 12 Mbps
        Percentage above 5Mbps: 12%
        Percentage above 2Mbps: 51%
        Percentage below 256Kbps: 4%

        ‘even the Labor Government admits that this project will yield a sub-standard return (if not an outright lo
        ss). who’s to say an alternative deployment of the capital to be invested in this project at standard returns won’t produce even greater “efficiency and GDP increases” even after factoring in indirect benefits along with higher direct returns?’

        Responses to the McKinsey report which was actually reviewed the NBN rather favourably.

        According to a statement from Optus CEO, Paul O’Sullivan, the release of the study was a major win for competition in Australia’s telco market.

        “It’s long been our view that the NBN is economically viable and the release of today’s detailed study confirms this,” he said. “Most importantly the study has found that access to the network will be available to all Australians at a price they can afford, which is essential to the healthy take-up of services on the new network.”

        iiNet CPO, Greg Bader, said the study was a strong step in the right direction The proposed increase of fibre optic cabling footprint from 90 to 93 per cent was a welcome surprise.

        “The NBN guys aren’t silly and they know this thing needs to be priced sensibly,” he said. “The very clear message to come out of the report was the need for a wholesale model, equitable access for everybody and that’s fantastic.

        “The slight increase in the footprint is fantastic, the reiteration they’ll target underserved areas first is also great so from what we’ve read it all looks positive.”

        http://www.arnnet.com.au/article/345742/industry_pundits_welcome_mckinsey_study/#closeme

        This is just some of the points that the report highlighted.

        * The NBN will deliver world class broadband infrastructure.
        * The $43 billion total capital cost of the NBN is a conservative estimate and there are opportunities to significantly reduce the build cost.

        * The peak investment required by Government is estimated at $26 billion by the end of year 7, of which $18.3 billion will be required over the next four years.

        * Government should retain full ownership of the NBN until the rollout is complete to ensure that its policy objectives are met, including its competition objectives.

        * The fibre component of the NBN should be extended from 90-93 per cent and cover the 1.3 million new premises expected to be built by 2017-18

        * Entry level wholesale prices on the fibre should be set at about $30-35 per month for basic broadband 20Mbps plus voice service, to drive affordable retail prices and value for money for consumers.

        * Fibre to the premise is widely accepted as the optimal future proof technology with wireless broadband a complementary rather than a substitute technology.

        * Next generation wireless and satellite services will deliver peak speeds of at least 12Mbps. Satellite services will deliver average data rates which are more than 20 times higher than most users of these technologies experience today and much higher than average DSL usage today.

        * The study estimates estimates NBN Co will be earnings positive by year six and able to pay significant distributions on its equity following completion of the rollout

        * The Government can expect a return on its equity investment sufficient to fully cover its cost of funds.

        All of these points are very important some of these are important points that the NBN should follow or else they are points that are saying this investment is fully viable and productive and best of all in line with international advances. Totally against what you claim to reference and what you spout.

        ‘i’m saying implementation of FTTN/VDSL will see a general improvement in speeds. only a few years ago, Mike Quigley was actually doing the rounds in Canberra spruiking the benefits of Alcatel’s FTTN equipment. the only justification for building FTTP is if you believe the minimum requirement is 100Mbit. FTTP installations, and fibre technology in general, has been around for over a decade at least, and no generalised household application requiring 100Mbit has ever emerged. instead, we are seeing rapid improvements in bandwidth efficiency and optimisation. real productivity is not about producing more by using more expensive inputs, it’s about making more out of the same or less inputs. that’s how real wealth is generated.’

        Yes and no, Firstly yes FTTN would be an upgrade to what many people currently have. However stating that FTTN will be more than enough for the forseeable future and that efficiency increases will take care of the rest is ludicrous. If that is truly how things worked we would still be on 28k dialup, or 56k or 1.5Mbps ISDN or ADSL1 or ADSL2 and we wouldn’t even be having a discussion bout superceeding ADSL2+.

        Furthermore new applications for the Internet are only developed in those who can develop them are convinced that people will have enough bandwidth to support these applications so they can be marketed commercially.

        Furthermore to your idea that FTTN is a great stepping stone for FTTN this idea is downright wrong. While it is true that some of the equipment especially the actual fibre can be reused in an eventual conversion to FTTN many billions of dollars of wasted infrastructure namely the many nodes you would need can not and should not be reused for FTTN.

        Furthermore you are talking out your less intelligent end when you say FTTN will cost 3/4 times less than FTTH. Citigroup estimated the cost at around $17 billion.

        http://www.zdnet.com.au/citi-prices-turnbull-broadband-plan-at-17b-339325988.htm

        ‘over-investing is a sure road to bankruptcy. if you have ever worked in a corporation, you will know that businesses only invest in the minimum that is required at the least cost. this is because investing means tying up precious capital, and capital has an opportunity cost. also, FTTN is upgradeable to FTTP — there are many technology vendors selling these dual-purpose cabinets.’

        This is why government intervention is required. You are right no corporation will do this because the prices they would have to charge would not produce a high enough ROI. This is why the NBN steps in and provides the national economic and social benefits of adequate broadband coverage to 100% of Australia.

        Related to this you claim faster speeds will have less utility than initial access to the service. I ask you was it hard to come up with this obvious statement, buddy? The question that must be asked is that is the cost of rolling out the network worth the savings experienced + the ability to create new apps for this new capability + increased business reliance of data communication possibilities + social benefits + small business improvements + rural community benefits + E – health possibilities + Increased agriculture output due to smart farm management made possible and many more as of yet unthought of ideas (atleast unthought of by me). You can just say tthis wont bring as much of a benefit as he original implementation and call it a day.

        • This really does depend on your source. According to Ookla (similar to speedtest.net) the average Australian (not just limited to iiNet speed in Australia was 6.4 Mbps. The Akamai 2010 Q3 tudy found the following

          the iiNet study is actually assessing underlying line quality — i.e. for ADSL2+ subscribers using ADSL2+ modems, what is the average connection speed? the other “studies” you quote are looking at average connection speeds across all internet users and the result is obviously biased downwards by users of dial-up, ISDN, ADSL1, etc.

          also, you still have not produced evidence for your claim that “average speeds have slowed down considerably over time”.

          All of these points are very important some of these are important points that the NBN should follow or else they are points that are saying this investment is fully viable and productive and best of all in line with international advances. Totally against what you claim to reference and what you spout.

          this is the original context of the discussion:

          your statement: This does not even include the efficiency increases and GDP increases that this infrastructure will assist with.

          my response: even the Labor Government admits that this project will yield a sub-standard return (if not an outright loss). who’s to say an alternative deployment of the capital to be invested in this project at standard returns won’t produce even greater “efficiency and GDP increases” even after factoring in indirect benefits along with higher direct returns?

          none of the junk you copied and pasted from Arnnet (which basically regurgitated the Executive Summary of the McKinsey Study) addresses the points I made in my response.

          firstly, the McKinsey study does not even attempt to measure the direct and indirect benefits of building the NBN. it’s merely a cost study for 90% FTTP commissioned by the Federal Government to rubberstamp Kevin Rudd’s face-saving decision to build FTTP following the collapse of the FTTN tender. secondly, as I pointed out, the fact that the NBN produces positive benefits is not, by itself, sufficient to validate the decision to build it. you have to compare the NBN benefits against the benefits that would arise from an alternative deployment of capital. for example, if I were to splurge $3000 on a top-end gaming laptop, this would undoubtedly bring joy and benefits to me. but, whether this is a wise decision depends on the comparative benefits that would arise if i were spend the $3000 on other goods.

          However stating that FTTN will be more than enough for the forseeable future and that efficiency increases will take care of the rest is ludicrous. If that is truly how things worked we would still be on 28k dialup, or 56k or 1.5Mbps ISDN or ADSL1 or ADSL2 and we wouldn’t even be having a discussion bout superceeding ADSL2+.

          in that case, why is it in major overseas telco markets where consumers have the choice of both regular broadband and superfast broadband, the vast majority of consumers prefer to subscribe to ADSL-like speeds? why do almost half of Japanese households subscribe to ADSL when there has been 100Mbit fibre running past their residence for the past decade? why has Verizon halted the roll-out of FTTH after just reaching ~10% of their national fixed-line footprint? why has a senior Telstra executive expressed major disappointment over lacklustre take-up of superfast broadband over HFC in Australia?

          Furthermore new applications for the Internet are only developed in those who can develop them are convinced that people will have enough bandwidth to support these applications so they can be marketed commercially.

          where are these applications in Japan and South Korea? why is average download only 9GB/mth in Japan and 26GB/mth in South Korea after having had superfast broadband for over a decade?

          Furthermore to your idea that FTTN is a great stepping stone for FTTN this idea is downright wrong. While it is true that some of the equipment especially the actual fibre can be reused in an eventual conversion to FTTN many billions of dollars of wasted infrastructure namely the many nodes you would need can not and should not be reused for FTTN.

          this a fundamental misunderstanding that keeps being rehashed over and over again. you have to realise the expenditure on labour to replace the last mile access network (FTTP) far overwhelms the cost of FTTN cabinets. the supposed “waste” of abandoning the FTTN cabinets (which are potentially reusable) when you transition to FTTP is more than offset by the medium term interest savings on tens of billions of dollars of capital that would otherwise be tied up in the (pre-mature) labour-intensive task of rebuilding the access network.

          Furthermore you are talking out your less intelligent end when you say FTTN will cost 3/4 times less than FTTH. Citigroup estimated the cost at around $17 billion.

          it’s obvious you haven’t even read the Citigroup report — that $17bln figure actually includes $4.7bln for greenfields FTTH and $3.3bln for fixed wireless.

          This is why government intervention is required. You are right no corporation will do this because the prices they would have to charge would not produce a high enough ROI. This is why the NBN steps in and provides the national economic and social benefits of adequate broadband coverage to 100% of Australia.

          you still have not produced evidence that the direct loss from a sub-standard return (7% ROI) on the $XXbln NBN investment is sufficiently offset by indirect benefits that have never been quantified. also, as pointed out above, this by itself is insufficient to justify the NBN. you would then have to compare the alternative direct and indirect economic benefits that would be derived from an alternative deployment of the capital.

          Related to this you claim faster speeds will have less utility than initial access to the service. I ask you was it hard to come up with this obvious statement, buddy?

          it’s not hard, but it’s a much ignored point by those who like to argue that in 20 years time, we will all need 50Gbps pipes for residential use.

          The question that must be asked is that is the cost of rolling out the network worth the savings experienced + the ability to create new apps for this new capability + increased business reliance of data communication possibilities + social benefits + small business improvements + rural community benefits + E – health possibilities + Increased agriculture output due to smart farm management made possible and many more as of yet unthought of ideas (atleast unthought of by me). You can just say tthis wont bring as much of a benefit as he original implementation and call it a day.

          the burden of proof or the onus is on those who propose gambling billions of dollars of taxpayers’ risk exposure to show that the benefits outweigh the costs. and this has yet to be done. it’s funny that according to Labor’s own policy, infrastructure projects which are comparatively tiny in scale to the NBN have to be subjected to rigorous cost benefit analyses, but the largest infrastructure project in the history of the nation is cursorily exempted.

          • @ Michael.

            “The burden of proof or the onus is on those who propose gambling billions of dollars of taxpayers’ risk exposure to show that the benefits outweigh the costs. and this has yet to be done. it’s funny that according to Labor’s own policy, infrastructure projects which are comparatively tiny in scale to the NBN have to be subjected to rigorous cost benefit analyses, but the largest infrastructure project in the history of the nation is cursorily exempted”.

            Gambling? More emotive embellishment I see. But no, governments can (unfortunately in some, but not this instance) do as they wish, once voted into power. As such there is no onus whatsoever, just because those who oppose for the sake of opposing say.

          • “in that case, why is it in major overseas telco markets where consumers have the choice of both regular broadband and superfast broadband, the vast majority of consumers prefer to subscribe to ADSL-like speeds? why do almost half of Japanese households subscribe to ADSL when there has been 100Mbit fibre running past their residence for the past decade?”

            Michael – you really need to drop the misleading Japanese argument – it doesn’t fit the facts, which is what this article was originally all about. Your takeup data is at least 2 years out of date, and fibre has not been running past all their doors for a decade, you just made that up.

            http://www.wik.org/fileadmin/Konferenzbeitraege/2011/Fibre_Network/Takita.pdf seems to have the latest FTTH/ADSL data.

            FACT: P4 shows FTTH subscriptions growing strongly, ADSL dying, and market share of FTTH almost double market share of ADSL. HFC subscriptions are also growing as people seek more performance than ADSL can provide – if you add the FTTH and CATV figures together to get some equivalence to the eventual Australian situaiton where the HFC networks are closed, then high-speed subscribers have over 70% of the market in 2010.

            FACT: Page 11, indicates ADSL is essentially ubiquitous (~98% coverage by eye), Page 13 indicates FTTH covers roughly 88% of the Japanese market in 2009/2010.
            NTT data (http://www.itu.int/wsis/stocktaking/docs/activities/1287049219/Tsuji_Akematsu.pdf, page 3) indicates they think they covered ~89% of Japanese households with FTTH in 2007 – this doesn’t include any other FTTH networks as deployed by power companies, so coverage is likely higher, and the Takita report, based on OECD 2010 data, is likely to report data from 2008/09 to be included in the 2010 OECD report.

            FACT: A significant chunk of residual ADSL subscribers will be those in outlying areas that only have ADSL but not fibre – those in the last ~10% of the country. They subscribe to ADSL because they have no choice.

            OPINION: I doubt NTT and other carriers would blanket the country to likely 90+% FTTH by now, if they didn’t think there was a good case for takeup.

          • certainly interesting developments since 2008. however, bear in mind, FTTH in Japan is massively subsidised so that it is competitive in price to ADSL to encourage uptake.

            from “Explaining International Broadband Leadership” published by ITIF:

            In Japan, the government owns more than 30 percent of Japan’s incumbent telecommunications provider NTT. The government’s adoption of a policy to establish a nationwide fiber network, along with its threat of breaking up NTT, contributed to the company’s ongoing investment in fiber-optic networks in Japan.

            The South Korean and Japanese governments have also used regulations to ensure that broadband providers to keep prices extremely low.

            Two reasons why Japan’s NTT has invested so aggressively in fiber deployment ahead of consumer demand may be because first, it sees this as its civic duty and second, the equity markets do not “punish” NTT the way they would companies in the United States. In addition, NTT was able to invest in fiber as aggressively as it did, in part because it used profits from its mobile division, NTT DoCoMo. (cross-subsidisation)

            The Japanese government provided similar incentives to Japanese companies to invest in broadband, including more recently in high-speed FTTH. The government allowed providers to depreciate during the first year about one-third of the cost of the broadband capital investments, as opposed to the usual depreciation schedule of up to 22 years for telecommunications equipment. In addition, the government reduced fixed asset taxes for designated network equipment.

            Thanks to the ubiquity of both fiber and DSL in Japan, consumers have a wealth of high-speed options, the “slowest” of which is ADSL, from 1 Mbps to 50 Mbps, followed VDSL at advertised speeds of 30, 50, and 100 Mbps. But given the fact that FTTH costs about the same as these two options (around $40)*** and provides advertised speeds of 100 Mbps, it is not surprising that most subscribers in Japan are opting for FTTH services.

            compare this to NBNco’s business model, where rising ARPU is driven by consumers paying more and more for faster and faster broadband services. Japanese consumers pay the same for a speed upgrade. this is precisely the point Malcolm Turnbull is making — which is that telcos worldwide are unable to extract a premium for superfast services, but NBNco’s entire profit model is built around extracting a market premium!

            *** the Takita presentation you link to suggests that FTTH is actually cheaper than DSL in some instances.

          • i.e. for ADSL2+ subscribers using ADSL2+ modems, what is the average connection speed? the other “studies” you quote are looking at average connection speeds across all internet users and the result is obviously biased downwards by users of dial-up, ISDN, ADSL1, etc.

            So we should out of hand discount everyone on RIMS/CMUX/Satellite/Wireless/Dial – up because they make for an inconvenient case? Hell give me ADSL2+ and I will be much happier than I am, the fact is this country’s infrastructurue is because of Telstra a shambles. That is why the NBN which is government owned can achieve the social aim of ubiquitous access to acceptable broadband.

            also, you still have not produced evidence for your claim that “average speeds have slowed down considerably over time”.

            Is it simple reasoning. Copper degrades over time degrading the qaulity of service, Telstra does not replace said copper untilk it fails, there is a stretch of time between it degrading and it failing. Furthermore Telstra still uses I believe 2 x 4 Mbps backhaul links to some RIMs (I Have a strong suspicion my RIM has one of these). This is why as more users access some RIm cabinets congestion affect them and why degraded networks will slowly degrade until the yfail. Yes when they fail and are replace theoretically the speed should jump up again, but how long will that take until it is of sufficient concern for Telstra?

            ‘even the Labor Government admits that this project will yield a sub-standard return (if not an outright loss). who’s to say an alternative deployment of the capital to be invested in this project at standard returns won’t produce even greater “efficiency and GDP increases” even after factoring in indirect benefits along with higher direct returns?’

            As you point out the McKinsey study point out in its executive summary that the NBN is fully viable and will be a able to fully reimburse the government of its entire loan. How pray tell would they do this without profit? Regardless if the profit is 5%/7%/10% as in the NBN’s prediction is that they will produce an ROI of 5.3% (worse case) to 8.8% (best case). Please show me where Labor admits they will run at a aloss (actual link would be nice).

            Efficiency gains will come from businesses that can transfer larger volumes of data to be stored, analyzed and acted upon. The more data that can be transferred the more efficient these process can be. I will give you one example. Farms stand to gain from being able to transfer extensive data bout their farm to outside consultants who can then determine the best use of resources on the farm.

            http://www.une.edu.au/smart/nbnsmart.php

            Now as to an alternative technology providing better value and higher efficiency. This is such a general statement that cannot really be argued against because it has no specifics. What alternative technology? We basically really only have two choices at the end of the day the NBN and whatever Liberal is offering. Assuming you mean FTTN.

            * FTTN is not readily convertable to FTTH. billions will be lost is s aid conversion.
            * FTTN will allow for lower speeds than FTTH, thus theoretically allow for lower gains to efficiency, their is perhaps a cap currently as to how fast you will need to get to not gain any more efficiency gains. Neither of us can know where this point is, anything more in conjecture.

            ‘none of the junk you copied and pasted from Arnnet (which basically regurgitated the Executive Summary of the McKinsey Study) addresses the points I made in my response.
            firstly, the McKinsey study does not even attempt to measure the direct and indirect benefits of building the NBN. it’s merely a cost study for 90% FTTP commissioned by the Federal Government to rubberstamp Kevin Rudd’s face-saving decision to build FTTP following the collapse of the FTTN tender. secondly, as I pointed out, the fact that the NBN produces positive benefits is not, by itself, sufficient to validate the decision to build it. you have to compare the NBN benefits against the benefits that would arise from an alternative deployment of capital. for example, if I were to splurge $3000 on a top-end gaming laptop, this would undoubtedly bring joy and benefits to me. but, whether this is a wise decision depends on the comparative benefits that would arise if i were spend the $3000 on other goods.’

            Why did the FTTN tender collapse? Because it was simply bad policy and a panel of experts decided thus.Measuring the direct and indirect benefits of the NBN is no small task, unless you expect the McKinsey report to predict exactly what new applications will be developed to work with greater access to very fast broadband.Again you are merely regurgitating a point I made. I previously said that how do you compare the cost that will eventually be payed back in full to the potential benefits some of which are yet unthought of. I will give you an example of some potential gains.

            * GDP gains (the problem with GDP gains is that it is hard to quantify exactly how much this iwll benefit the economy, do you have any idea? No I doubt you do because that would require some serious ability to predict the unpredictable.)
            * Health benefits from technology such as remote monitoring, a social and economic gain. Less strain of doctors and less time wasted by face to face meetings. This technology is being tested in Armidale (I believe on the NBN’s wireless option)
            * Social equity benefits, reduction in the digital divide.
            * Not thought of applications.
            How exactly do you qauntify much of this as much of it is a social aim and benefit.

            ‘in that case, why is it in major overseas telco markets where consumers have the choice of both regular broadband and superfast broadband, the vast majority of consumers prefer to subscribe to ADSL-like speeds? why do almost half of Japanese households subscribe to ADSL when there has been 100Mbit fibre running past their residence for the past decade? why has Verizon halted the roll-out of FTTH after just reaching ~10% of their national fixed-line footprint? why has a senior Telstra executive expressed major disappointment over lacklustre take-up of superfast broadband over HFC in Australia?’

            FTTP, often called FTTH in Japan, was first introduced in 1999, and did not become a large player until 2001. In 2003-2004, FTTH grew at a remarkable rate, while DSL’s growth slowed. 10.5 million FTTH connections are reported as of September 2007 in Japan.[4] Currently, many people are switching from DSL to FTTH, the use of DSL is decreasing, with the peak of DSL usage being March 2006. On September 17, 2008, Ministry of Internal Affairs and Communications reported that for the first time, the number of FTTH connections (13.08 million connections) eclipsed that of DSL (12.29 million connections) and became the biggest means of broadband connection in Japan at 45% of total compared to that of DSL at 42%. In the report, the number of FTTH connections grew by 929,681 during the period of March to June 2008 while the number of DSL connections declined by 420,706 during the same period

            ‘So it appears that because it is a choice take up rate in Japan would be much slower than in Australia. However as you can see by the above excerpt FTTH usage has grown explosively.With DSL services rapidly shrinking. In Australia our change will be much more dramatic because the cutover will be forced, you can argue this is a bad thing but if like Renai says the price will be similar why should people not be happy enough to be transferred to a higher quality network? The reason why many may not change is simple technical ineptitude and not understanding nor wishing to think about the potential benefits of FTTH. Some people may not need the FTTH speeds currently (i never disagreed here) but I reiterate this network is not only for today, considering it won’t be complete until 2021 the network is being built for decades to come. It is stupid to delay it any further and wait for when the actual need arises because you will have to wait 8 years while there is a pressing need.

            where are these applications in Japan and South Korea? why is average download only 9GB/mth in Japan and 26GB/mth in South Korea after having had superfast broadband for over a decade?’

            I pointed out that most content Japan and South Korea consume is domestic, thus shrinking the viable pool of content. While English speaking countries can distribute to other English speaking countries. Furthermore Japans average download is still 50% higher than Australia, nothing to sneeze at especially considering my above point. Furthermore the problem with averages is that it include both the extremely small users and the extremely large users, a more detailed breakdown would be nice.

            How many use more than 5GB/20GB/50GB/100GB/200GB etc.

            Furthermore to your idea that FTTN is a great stepping stone for FTTN this idea is downright wrong. While it is true that some of the equipment especially the actual fibre can be reused in an eventual conversion to FTTN many billions of dollars of wasted infrastructure namely the many nodes you would need can not and should not be reused for FTTN.

            ‘this a fundamental misunderstanding that keeps being rehashed over and over again. you have to realise the expenditure on labour to replace the last mile access network (FTTP) far overwhelms the cost of FTTN cabinets. the supposed “waste” of abandoning the FTTN cabinets (which are potentially reusable) when you transition to FTTP is more than offset by the medium term interest savings on tens of billions of dollars of capital that would otherwise be tied up in the (pre-mature) labour-intensive task of rebuilding the access network.
            Furthermore you are talking out your less intelligent end when you say FTTN will cost 3/4 times less than FTTH. Citigroup estimated the cost at around $17 billion.’

            While I reiterate some of the technology will be reusable not all of it will. There will still be billions of wasted investment. Furthermore the medium term savings really are not savings and the government is funding this through bonds. This is not taking away from other projects at all. You cant magically cancel the NBN and spend that money on roads as MT claims. Also reusing those cabinets as far as I am aware would require a massive redesign on the network against the current model. But while even if the actual cabinets can be reused is it not true that some of the technology within would need to be replaced?

            ‘it’s obvious you haven’t even read the Citigroup report — that $17bln figure actually includes $4.7bln for greenfields FTTH and $3.3bln for fixed wireless.’

            Actually I have both of which are apart of the Coalitions governments plans I presume. Unless you are saying to just include the FTTN the government claims. So now we are just upgrading some parts to FTTn and saying screw the rest?

            ‘you still have not produced evidence that the direct loss from a sub-standard return (7% ROI) on the $XXbln NBN investment is sufficiently offset by indirect benefits that have never been quantified. also, as pointed out above, this by itself is insufficient to justify the NBN. you would then have to compare the alternative direct and indirect economic benefits that would be derived from an alternative deployment of the capital.’

            What direct loss pray tell? And how do you suppose I qauntify indirect benefits of an unspecified alternate technology? How about this you define the potential benefits of your alternative technology with the costs. Please include social benefits and also quantify these if possible.

            ‘it’s not hard, but it’s a much ignored point by those who like to argue that in 20 years time, we will all need 50Gbps pipes for residential use.’

            I have never argued this, straw man argument.

            the burden of proof or the onus is on those who propose gambling billions of dollars of taxpayers’ risk exposure to show that the benefits outweigh the costs. and this has yet to be done. it’s funny that according to Labor’s own policy, infrastructure projects which are comparatively tiny in scale to the NBN have to be subjected to rigorous cost benefit analyses, but the largest infrastructure project in the history of the nation is cursorily exempted.

            two points here, you are spouting the benefits of a yet identified alternative technology rollout and you are doing exactly what you are accusing other of doing. Please feel free to speak less generally and more specifically and detail a comprehensive Cost to benefits discussion about your alternative technology.

            After this please outline as many countries as you can that have performed a CBA. I believe the various research having been conducted explicitly the McKinsey study show that this is in line with many countries own FTTH deployment and is fully viable.

      • *over-investing is a sure road to bankruptcy.

        a govt? really? i mean i could understand if we were in Europe and having this discussion, but we are not in the european condition; and in any case i cant see how 1% of the tax take over 30 y or % over 15 is going to push us to the point where a bankruptcy would be the solution to get things in order. on paper it looks expensive because it is a big infrastructure project when looked at in terms of a 4 year election cycle. but the terms are 30 years and that is the light to look at it in and to be calling bankruptcy as a possible outcome here is just chicken little to the Nth degree.

        *why is average download only 9GB/mth in Japan and 26GB/mth in South Korea after having had superfast broadband for over a decade?

        asides from what Paul said, id suggest it is quite likely a cultural thing, owing to the language barrier. South Korea in particular will be consuming most of their own webpages, media and broadcasts etc, same with japan. English is a very broad internet language in that it is second language for many and produces much much more media – ever compared the size of the German film industry to Hollywood? its that sort of magnitude difference in the amount of materiel on offer.

        i think western consumption habits will differ and so i dont see their experience as necessarily being indicative. i know the US market for cable and DSL having been ‘unlimited’ for so many years there can be some quite high consumption there, and while some services do wear caps these days i wouldnt be surprised to see their fibre use being similar. it would be interesting to know usage on capped fibre plans in the US to compare.

        *expenditure on labour to replace the last mile access network (FTTP) far overwhelms the cost of FTTN cabinets.

        granted, but that expenditure is a 1 in 40 year cost rather than a shortly recurring one. if you delay the project labour cost will still be there, as the same amount of KM need to be dug, or laid thru telstra ducts. in the – i rate it highly likely – event the FTTN footprint is not amenable to upgrade to FTTP you are paying for one tranche of work that will be done ~400m from homes give or take some, and then a second tranche later to finally take out the copper and lay fibre. given that most everyone accepts that FTTP is the next step beyond FTTN that expenditure overwhelming FTTN costs is inevitable anyway.

        if there is an expenditure problem i see it is that work done for FTTN that will fairly shortly be replaced by what Labor is going about building at the moment anyway. inserting an extra step and extra complexity and extra costs just in the name of short term outlook ‘its cheaper!’ seems retrograde to me. the cabinets are indeed potentially reusable but you are talking about hundreds if not thousands of sites across a city where its much much easier to bring lines together at ten or so exchange buildings instead.

        again fibre can do 20 km runs, so that sort of thing is more than feasible. those node items are likely to be a one shot short term use for the majority of them. some will be amenable to reuse but i suspect most will not and again that is cost going nowhere. i know people scream about NBN costs but lets be honest here theres plenty you can also see in the alternative, and i dont see them as recoverable.

        *it’s obvious you haven’t even read the Citigroup report — that $17bln figure actually includes $4.7bln for greenfields FTTH and $3.3bln for fixed wireless.

        fair enough. whats the wireless, sattelite and greenfields portion of NBNcos costs, those should be cut out for fair comparison against the Coalition plan for apples to apples, right? (insofar as apples to apples is possible with hypotheticals).

        *it’s not hard, but it’s a much ignored point by those who like to argue that in 20 years time, we will all need 50Gbps pipes for residential use.

        we may not NEED it but at this point all i know is i bloody well WANT it! :D now thats a mark to shoot for!

        *which is that telcos worldwide are unable to extract a premium for superfast services, but NBNco’s entire profit model is built around extracting a market premium!

        the thing is NBNco have set the point where they can make profit from rather conservative assumptions. so far the takeup rate for faster than 12/1 services appears to be higher than that conservative expectation – which would indicate they are indeed extracting premium (from those wanting anything at 25/5 and faster). granted, its early days but if that continues to be the case as the rollout continues then their expectation of being able to extract premium would seem to be a valid one. it will be worth watching for further data on the takeup figures.

        • so far the takeup rate for faster than 12/1 services appears to be higher than that conservative expectation – which would indicate they are indeed extracting premium (from those wanting anything at 25/5 and faster).

          just one technical point:

          for the sake of argument, say the take-up of NBN services in an ADSL exchange area is 10%. and of that 10% of the population which are NBN subscribers, 50% subscribe to faster than 12Mbit, the relevant metric to calculate premium speed take-up for the population is:

          0.10 x 0.5 = 0.05 (or 5%).

          this is because 90% of the population are happy with 12Mbit ADSL, so they decline an NBN connection. of the 10% that do take up NBN, only 50% take up faster than 12Mbit.

          • just one technical point:
            for the sake of argument, say the take-up of NBN services in an ADSL exchange area is 10%. and of that 10% of the population which are NBN subscribers, 50% subscribe to faster than 12Mbit, the relevant metric to calculate premium speed take-up for the population is:
            0.10 x 0.5 = 0.05 (or 5%).
            this is because 90% of the population are happy with 12Mbit ADSL, so they decline an NBN connection. of the 10% that do take up NBN, only 50% take up faster than 12Mbit.

            So now you claim to speak for a majority of Australians? The amount of BS you spot is truly atrocious. The NBN has made its profit estimates from a truly conservative estimate in order to give itself some leeway. Experience thus far sow that more people will be choosing higher speed tiers.

            Furthermore you conveniently argue that 50% of people will not want it so it is unneccesary, are you aware that I think it is either 25% of that or 50% of that will be voice only users. I cannot off the top of my head remember the exact percentage. Also let us remember that many people do not want to think about these things as such do not worry themselves with migrating over until they have to. Furthermore the countries largest ISP has yet to come out with their plans. Also people still have contracts to deal with, with in many cases 2 year contracts being very popular.

            Let ot forget that the migration to fiber will be forced and why not since it will eliminate maintenance cost’s on an inferior medium and make it much easier for NBN to provide a cheap and reasonably priced service.

            Also are you aware that Exetel recently slashes their prices even further? This only shows that the NBN world will provide for many retail companies to form different niches such as the cheap but low quota market with decent speeds.

            Stop assuming you know peoples mindsets, you don’t you are fooling yourself.

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