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Analysis, Telecommunications - Written by Renai LeMay on Friday, June 15, 2012 12:08 - 235 Comments
NBN: Sorry Mr Hockey, you’re still wrong
analysis Yesterday Shadow Treasurer Joe Hockey issued an extensive statement attempting to show that comments he had made about 4G mobile broadband having the potential to be “far superior” to the National Broadband Network’s fibre had been taken out of context. Unfortunately, he only succeeded in digging himself a bigger hole.
Those who have not been following the debate this week can find Delimiter’s original article quoting Hockey’s comments in Tasmania here, and Hockey’s extensive response in full here. In essence, in a radio interview in Tasmania last week, Hockey had argued that 4G had the potential to be “far superior” to the NBN, along with other claims such as the idea that it could cost Australians up to $1,000 to be connected to the NBN, and that some Tasmanians receiving replacement NBN hardware could be left behind in the rollout.
At the core of Hockey’s new NBN statement yesterday was the assertion that he had been taken out of context.
He argued that Delimiter’s original article reporting his comments in Tasmania had made a “deliberate distortion” of the word ‘capacity’, falsely associating it with the technical term of bandwidth rather than with other aspects of a broadband connection, such as value for money, convenience, nearness of availability/deployment and “numerous other attributes”. In this sense, Hockey argued, mobile broadband offered mobility, portability and convenience for end users, facets which would, he implied not be available through fixed-line broadband connections such as fibre. He suggested that it was these aspects of mobile broadband which was behind the current huge take-up figures of this style of broadband, compared with the flat growth in subscriber numbers being experienced by fixed broadband.
Hockey is correct in that mobile broadband does offer a benefit to Australians that fixed broadband does not; mobility. By its very nature, mobile broadband though 3G/4G networks allows users to leave their premises and go wherever they want. Fixed broadband does not offer this feature; by its very nature, it is fixed. We hold these truths to be self-evident.
However, with respect to other aspects of his argument, Hockey is unfortunately incorrect.
Firstly, is a well-known fact that mobile broadband offers much worse value for money than fixed broadband. A simple comparison of Telstra’s mobile broadband plans shows that they top out at 15GB of download quota for $79.95 a month. In comparison, Telstra offers 500GB ADSL/HFC cable plans for $89.95 per month; a download quota 33 times the size, for only a small amount more. And Telstra’s fixed broadband plans are far from the cheapest in the market; Dodo, for example, currently offers an ADSL broadband plan with unlimited downloads, for $39.95 a month; literally half that of Telstra’s top-end mobile broadband plan.
Hockey is correct that mobile broadband options can be more convenient and available to Australian broadband users in 2012; there are some places you can’t get cheaper and more reliable fixed broadband. We refer to these as ‘blackspots’, and readers regularly complain about the issue.
However, as the NBN rollout progresses and meets its target of 100 percent penetration of Australian premises across the nation, this will increasingly become less true over the next 7-8 years. With almost ubiquitous fibre to the home broadband around Australia and the gaps plugged by wireless and satellite, it would make very little sense for most users to use mobile broadband when they are close to any residential or business; given that they can achieve faster speeds, with greater quota included, at a lower cost, by connecting to their nearest NBN connection instead. Why reach for a hammer, when there’s a high-powered drill already plugged in everywhere you go?
This does not diminish the case for Australians to take up mobile broadband further; in fact, Australians are indeed currently taking up mobile broadband in record numbers. But, as Telstra chief executive David Thodey and others have repeatedly stated, most who do so are also already buying a fixed broadband connection, and plan to continue to do so. Fixed to mobile substitution is relatively low in Australia; people want their cake and to eat it too. The big game for telcos like Telstra and Optus is in selling bundles of both. My own household pays for both ADSL2+ fixed broadband at home, as well as 3G connections for two smartphones and an iPad, and I do not expect this pattern of consumption to change.
As Informa telecoms analyst Tony Brown points out in a detailed analysis of Hockey’s comments this week: “True, there may currently be a very small number of households that might prefer a mobile to a fixed broadband connection, but are these households really going to be willing to pay the kind of prices for LTE mobile data services that operators are going to be charging in the future, with high prices for very small data caps and hefty additional usage charges?” I don’t think so.
Hockey’s other comments are also still inaccurate.
Citing “hard data” from the US rollout of fibre by Verizon, Hockey suggested that it could cost up to $1,000 for Australians to wire their houses up for the NBN. “This is verified by industry reports of Telstra’s experience in South Brisbane, which suggest it is taking two technicians half a day to finalise the cutover from copper to fibre,” he said.
Now, this claim with respect to the NBN is a long-running one. It was first raised by The Australian newspaper during the 2010 Federal Election campaign and hinges on the idea that NBN Co is only providing a connection to buildings, while connections (typically Ethernet cable, but usually also an internal Wi-Fi connection) inside those buildings will need to be rolled out at a cost to the building owner or resident. To be honest, as someone who has had Ethernet cable running down their hall for a decade at a cost of $30, I can’t believe that this is still a debate, but let’s go back over it again anyway.
The rollout of Ethernet cable inside buildings has absolutely nothing to do with the NBN. In fact, many Australian premises already have internal Ethernet cable wired throughout their premises simply to provide internal exit points for the current generation of ADSL and HFC cable broadband connections — and even 3G/4G mobile broadband connections and fibre where it already exists or even the previous generation of expensive corporate solutions such as Frame Relay.
When we talk about connecting to the NBN, what this really means for the overwhelming majority of Australians is either connecting their existing router to the internal Ethernet port found on NBN Co’s network termination devices inside a premise, or buying a new router that will be able to connect to it, as many existing consumer routers (particularly ADSL routers) won’t have the correct routing functionality or ports. This will come at a cost of between $100 and $300, depending on how high-end you want to go. For most people, their internal wiring won’t change at all; only their router will change, if that.
If there is a need or a desire to run new internal Ethernet cables within a premise for the NBN, this can be done by running a few Ethernet cables down the hall to rooms where the cables are needed (as many Australians do right now) at a cost of around $30, or by wiring up rooms by running cables through the walls, typically with the help of an electrical contractor, at a cost of a few hundred dollars.
If you had a large house, and were determined to get Ethernet cable termination points in every room of the house and run through every wall, this cost could conceivably be more. But in that case, would you really be complaining that this cost should be subsidised by the government? I don’t think so. Like the rollout of electrical cables and home plumbing, the deployment of internal Ethernet is a matter for the building owner, not an external provider like NBN Co.
It’s also worth pointing out that this cost won’t change if the Coalition comes into power and enacts its rival NBN policy. The deployment of internal Ethernet cables into Australian premises will be needed irrespective of whether home broadband is provided by Fibre to the Home, Fibre to the Node, ADSL, HFC cable or even 4G mobile broadband. In this sense, it makes even less sense for Hockey to be complaining about it. Not only is the Shadow Treasurer wrong on this issue; but even if he’s right, his criticism applies equally to the Coalition’s own policy. Or is the Shadow Treasurer suggesting the Coalition will subsidise my next Cat6 rollout and gigabit Ethernet switch? It is surely welcome to.
Hockey’s third contention is that Tasmanian towns such as Midway Point, Smithton and Scottsdale will be left behind in terms of the NBN because the early rollout of the NBN fibre in those areas was deployed with different network termination units than on the mainland. These devices will be replaced progressively through the end of 2012; but Telstra has stated that it cannot offer a commercial NBN service to customers in these towns until the equipment is replaced.
This is an easy one. Firstly, residents in these towns can buy 100Mbps NBN broadband from a range of other ISPs right now. iiNet, Internode, Exetel … the list goes on. It’s no big deal that they can’t get Telstra services just yet. What this means is that they are ahead of the rest of Australia in being able to access high-speed broadband. Vastly ahead. These are areas in rural Tasmania able to get 100Mbps fibre broadband.
I live in urban Sydney and our area isn’t even on the NBN’s three-year rollout plan, while these bushbashers are able to get the NBN right now. For Hockey to suggest that these areas are somehow behind is nothing short of ridiculous; compared with most of Australia, they are overwhelmingly ahead. The replacement hardware which NBN Co is going to provide these poor hard-done-by souls with will eventually unlock speeds up to 1Gbps. At that point, many Australians, including many of those a stone’s throw from the Sydney CBD, will still not have fibre connections at all. In this sense, I find it hard to feel sorry for those living in rural Tasmania.
Lastly, Hockey claimed that Delimiter’s article falsely implied to that the Coalition backs a wireless-only model of broadband for Australia. This claim is patently false. Delimiter has extensively covered the Coalition’s evolving NBN policy over time, as detailed in articles here, here, here, here, here and here, to pick a handful out of dozens. To suggest that we are unaware that the Coalition’s rival NBN policy contains a mix of technologies is simply ludicrous. Place a call to your Liberal colleague Malcolm Turnbull, Mr Hockey. We suggest that Mr Turnbull is highly aware of this fact. He can barely breathe without us reporting on it.
In addition, Hockey claimed that the Coalition will meet the objective of fast broadband to Australians “sooner” and “at a less exorbitant cost to taxpayers”.
Unfortunately, there is little evidence so far for this claim, as the Coalition’s own NBN policy is so far uncosted. As Delimiter has extensively documented, the NBN is not expected to cost the Federal Government money; it is currently expected (based on financial projections) to make a return on its investment in the long term of between 5.3 percent and 8.8 percent on that investment — from $1.93 billion in the worst case to $3.92 billion in the best case.
In contrast, the Coalition has not yet detailed the costs involved in its own policy, which features a scaled down approach to the NBN, focusing on the likely separation of Telstra, upgrading current HFC cable infrastructure and targeted fibre to the node rollouts, as well as, potentially, satellite and wireless use in rural areas. However, a recent analysis by Citigroup found that the Coalition’s policy would cost $16.7 billion. The Citigroup report didn’t mention what financial return, if any, the Coalition’s proposal was slated to bring in on its own investment.
What this means is that under the information currently available, the Coalition’s own NBN policy would cost the Government money, while Labor’s NBN policy is slated to make a return on its investment. The Coalition has not yet presented any evidence for why this would not be the case.
To sum up, while I myself and the Delimiter community highly respect Joe Hockey for his engagement on this important issue, it is also important to recognise that any discussion of Government policy should be based on facts and evidence and not on misleading information and omission. While Shadow Communications Spokesperson Malcolm Turnbull has shown a strong understanding of the nuances of telco policy in recent times, exceeding the understanding of Stephen Conroy before he became Communications Minister, the rest of the Coalition front bench has not; and its statements with respect to the NBN have been characterised by their misleading nature.
I have one final message for Mr Hockey: I understand that it is difficult for politicians to be across multiple, highly complex policy areas simultaneously. And we appreciate your efforts to do so. In engaging on this issue, you have gone beyond the call of duty and your portfolio. However, it is inappropriate for a Federal MP who is the nation’s current alternative Treasurer to extrapolate complicated matters of national policy from the fact that they use an iPad. Consumer technology is a wonderful thing, but the development of national infrastructure is a fundamentally different matter; and a senior legislator confuses the two at their peril.
Furthermore, by continuing to perpetuate misleading information about important policy matters, you are contributing to what has in recent years become a steady decline in the quality of the national debate about such matters, and adding to an ongoing trend of bringing Australia’s political class into ill repute. When even entry-level IT professionals in Australia’s technology sector can prove politicians’ comments about telecommunications technology to be inaccurate (and do so daily in Delimiter’s comments section), our great democracy is in trouble indeed.
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