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Opinion, Telecommunications - Written by Renai LeMay on Thursday, July 19, 2012 11:49 - 168 Comments
Dreaming of the perfect NBN policy
opinion In an ideal world, the perfect National Broadband Network policy would be a mix of the policies espoused by both Labor and the Coalition, taking the best ideas from both sides and ditching the bad ones. It would address Australia’s short-term needs while still investing in the future. Here’s how it would work.
Over the past few years, as I’ve been covering and commenting on the National Broadband Network policy development process and rollout, I’ve repeatedly been asked what sort of deployment model I would follow if I was in charge of setting telecommunications policy in Australia. Would I back Labor’s comprehensive, decade-long, predominantly fibre to the home infrastructure rollout? Or, would I favour the Coalition’s more minimalistic approach, which will see more infrastructure quickly re-used and a focus on helping the commercial market to solve its own problems?
I’ve given it a great deal of thought over that time, and come to the conclusion that I would attempt to utilise the best points which both sides of politics have contributed to the NBN debate, while discarding those features of each sides’ policies which I see as weak.
The first thing I would do, if I were Communications Minister, is legislate to force Optus and Telstra to connect their HFC cable installations to individual residences and business premises in multi-dwelling unit buildings (MDUs), if either owners or renters requested it. And I would provide a modest financial package to help the telcos justify the additional cost.
I have several friends in Sydney and Melbourne who are already enjoying the 100Mbps broadband speeds which Labor’s NBN plan promises to bring to Australia. They can access them as they live, like a huge proportion of Australia does, in areas served by the HFC cable rollouts pursued by both Telstra and Optus in the earlier years of this decade.
I too, live in these areas and would like to access these speeds. However, unlike my friends, I live in a rented apartment in Sydney’s inner suburbs, and although both Telstra and Optus have HFC cable running down our street, they won’t connect it to our premises because to do so, I have been told many times, they would have to get the permission of the building owner to connect up the entire block of apartments, rather than just the one I live in. And of course, getting notoriously tight-fisted apartment block owners to fund a half dozen apartments’ to be connected to HFC cable is just not a realistic proposition.
However, with legislation enacted to force Telstra, Optus, and MDU owners to come to the table on this one for individual residents, and a small financial incentive, on a per premise basis, to sweeten the package for them, this wouldn’t be a problem. Suddenly, hundreds of thousands of Australians could get access to dramatically faster broadband speeds — for a fraction of the investment and much sooner than the planned NBN rollout. This aspect of my plan would come from the Coalition side of the fence, seeing this HFC infrastructure re-used, at least in the medium-term — say, the next five years or so.
My next step would be to target broadband blackspots. As a technology journalist I frequently receive complaints about residents or business owners in certain areas not being able to receive broadband at all. Before Telstra and its rivals rolled out their 3G networks, there was often just no broadband at all in some areas of Australia — not unless you wanted to pay several thousand dollars a month, in which case Telstra could certainly arrange something.
With the rollout of 3G networks, the game has changed. Now many Australians can get access to wireless broadband, but not fixed broadband. The issue they face here, in the short to medium term, is primarily related to cost. To access the same level of downloads they would want (and many Australians are signed up to plans up to 100GB on fixed broadband), they will pay an order of magnitude more than they would on fixed broadband plans. To resolve this issue, I would provide a direct government subsidy to support these users who can receive 3G wireless, but not fixed, broadband, and who need to purchase higher quota plans. This aspect also comes from the Coalition’s side of the fence.
In areas where fibre has already been deployed, such as in South Brisbane and some greenfields estates, I would likely legislate to compulsorily acquire that infrastructure under the Constitution and make it a part of the long-term NBN. It’s just too much hassle dealing with the greenfields companies and Telstra in these kind of situations — and I think most retail ISPs and end users are frustrated with the ongoing stand-offs in these areas.
You can see with these first steps that no infrastructure rollout is required — merely legislative change and government support for uncommercial areas of the telecommunications market. Yet these are areas which could see instant quick wins, which the current Labor Government is ignoring. Now we get to the infrastructure — and here is where Labor’s NBN plan generally shines.
We know from NBN Co’s technical testimony on the matter, and research I’ve conducted myself, that current and planned satellites over Australia will just not cut the mustard in being able to provide for Australia’s satellite broadband needs, for the small portion of the country which can’t access any other form of broadband. Consequently, I would implement NBN Co’s satellite plan immediately. I would, in the short-term, provide subsidised access to other commercial satellites as per NBN Co’s interim satellite project, giving many Australians access to up to 6Mbps speeds instantly.
Then I would progress the plan to launch two NBN Co-owned satellites to deliver long-term speeds of up to 12Mbps to rural and remote Australians. There is absolutely no question that this is worth doing, and that no commercial organisation is going to do it. This is something which Australia needs and should go ahead with. As with the interim plan, NBN Co would provide access to these satellite services only on a wholesale model, with retail ISPs to deal with the actual customers.
Concurrently, given that the majority of Australia’s metropolitan areas are already covered by broadband (ADSL2+, HFC cable, 3G/4G) which will be broadly sufficient for their needs for the next few years, I would immediately focus my efforts on, as NBN Co currently is, deploying competitive backhaul fibre infrastructure to areas such as Geraldton in WA, Darwin in the NT, Broken Hill, and so on. I would also build another fibre cable across Bass Strait to Tasmania.
The deployment of this infrastructure, as we have already seen, would immediately stimulate investment by retail ISPs such as iiNet in those areas, boosting the availability of fast broadband through ADSL2+ and helping to bring prices in line with city areas through providing competition to Telstra’s existing monopoly backhaul lines. NBN Co would sell access to these lines to retail ISPs.
Now we get to the sticky part: The part which everyone argues about. All of these are interim measures. How, you might ask, will I address the long-term replacement of Telstra’s copper access network?
Now, bear in mind, up until this point, I have focused primarily on interim measures. All of the steps I have outlined so far in this article have been aimed at ensuring that all Australians will have access to a basic level of broadband services over the next five to seven years. All I have done so far is raise the bar in the medium term to address many of the outstanding issues which continue to plague Australia’s telecommunications environment.
In addition, so far I have not really addressed the situation with regards to long-term competition in the telecommunications sector. In fact, aside from stimulating rural competition via competitive backhaul, so far I have largely left the market structure of the sector intact, with a few large players — Telstra, Optus, iiNet, AAPT and Vodafone — continuing to dominate.
My long-term plan for Australia’s telecommunications needs is broadly based on Labor’s NBN policy, but with a few flourishes of my own, and some of the Coalition’s.
Firstly, there is no doubt that the fibre replacement of Telstra’s copper telephony network in Australia must happen over the next decade or so. The copper is reaching the limit of its useful life, and must be replaced to provide for future needs. And the current structure of NBN Co’s contract with Telstra for that replacement is a good one. Telstra has agreed to be compensated for the replacement of its assets, and NBN Co gets access to Telstra’s facilities and a guaranteed burst of customers onto its new fibre network.
In addition, as my other moves will have addressed many of Australia’s short to medium-term broadband problems and the NBN proposal has long been projected to make a return on its investment, there really is no need to consider fibre to the node as an alternative strategy to fibre to the home. A decade to replace Australia’s copper network is not a long time for this kind of infrastructure deployment, and the long-term profit to be made by the NBN sweetens the deal and makes FTTN unnecessary as an option. Labor has definitely done enough to make its case for FTTH at this point.
However, unlike the current NBN plan, I would focus on deploying fibre first to those areas where Australia has the highest population density: Major city, urban and inner suburban areas where a lot of people live and where NBN Co can get the quickest uptake and return on its investment. Then I would extend that fibre outwards gradually to the core areas of smaller, regional and rural cities and the outer areas of the major cities over a decade-long period.
Why would I do this? Firstly, it would guarantee an influx of income to NBN Co, helping to address concerns about it being perceived as a government slush fund. But that’s just a perception thing. The real reason is that there is just more demand for higher-level speeds in these areas, and it’s where you can get the biggest bang for your buck faster. There are more high-tech businesses in these areas, more early adopter consumers who will use the NBN’s capacity more fully, lots of people crammed into apartment blocks to soak up the bandwidth, and so on. This is where the demand for better broadband truly lies.
If you live in the back of beyond somewhere like Broken Hill (as I did for the majority of my childhood), then by no means should you expect to receive these kind of services at the same time as others in major cities get them. That’s life in the bush. Change comes slowly there. If you want high-speed change and access to the latest services, move to the city. That’s the reality of modern life globally. Why spend more to roll out to the bush first, for less immediate return, to areas where there is less demand? This ‘outside-in’ aspect of Labor’s plan was always political in nature — to keep the independents happy after the 2010 Federal Election. It’s a flawed approach.
I would also modify the NBN rollout to focus it along the lines of the 14 points of interconnect model strongly pushed by Internode founder Simon Hackett over the past several years. The ludicrous 121 POI model mandated by the Australian Competition and Consumer Commission has already led to a decline in competition in Australia’s telecommunications sector, and we don’t need new wholesalers to sit between NBN Co and retail ISPs. What we need is the ability for small ISPs to compete with larger ones equally on the NBN’s fibre infrastructure. And that means less PoIs. Sure, this may somewhat strand the infrastructure of duopolists Telstra and Optus. Who cares? They’ll still do pretty well out of the whole arrangement.
Speaking of Optus, I would can NBN Co’s deal with Optus. The $800 million arrangement gives Optus an unfair advantage over rivals like TPG and iiNet, and is unnecessary. All of Optus’ customers will eventually move onto the NBN eventually; there’s no need to pay the company for that. The deal has been unsavoury from the start.
Lastly, yes, I would proceed with fixed wireless in some rural and regional areas where the population density simply makes it uneconomical at this point to deploy fibre. This is something which basically everyone agrees on at this point, and such a wireless deployment could proceed concurrently with the fibre and satellite deployments, again targeting areas outside the planned fibre footprint of highest density and then need. Of course, in these areas I would also make sure existing ADSL broadband services were still made available ad infinitum, taking those under the NBN Co’s wing long-term if necessary.
As NBN Co has done, I would also set up a policy where communities or individuals could pay themselves to have the NBN’s fibre extended from core city areas to their own locations, if the fibre wasn’t going to be extended out that way eventually. This just makes basic sense. But I wouldn’t let those efforts hamstring the mainstream rollout.
With respect to the long-term future of the HFC cable networks operated by Telstra and Optus, I would leave them be and let Telstra and Optus continue to provide services over them. The customers on those networks will have, by the time the NBN is fully rolled out, more than have compensated both telcos for the cost of building the networks several decades before, and perhaps their continued existence will help keep the NBN itself honest, with some degree of infrastructure competition. However, I anticipate that the modest number of Australians on the HFC cable networks would eventually mostly shift to the much more powerful NBN eventually anyway, off their own bat.
As a final flourish, in the extreme long-term, as NBN Co is a government entity, I would ensure once the network has reached its initial 93 percent target for fibre coverage across Australia following its decade-long rollout, that any profits from the network’s operation were ploughed into extending it further, replacing wireless and satellite services with ubiquitous fibre where possible.
Should NBN Co become a commercial entity in the long-term, being sold off to the private market? Quite possibly. But that’s a matter for policy makers 15 to 20 years in the future — I would not presume to know what the right decision is there. However, I would set long-term legislative guards on NBN Co to ensure that that decision was not made lightly.
With the policy outlined above, I hope I have demonstrated that there are elements to both Labor’s and the Coalition’s NBN policies that are worthwhile, and would come into play in a perfect world. Labor’s NBN policy is extremely visionary in the long-term, but doesn’t really address many of Australia’s broadband problems over the short to medium-term. In comparison, the Coalition’s own policy has some great short to medium-term wins, but doesn’t satisfactorily address the long-term issues around the necessary upgrade of Australia’s customer access network.
Of course, I will never be elected Communications Minister, and this policy will never be enacted. Australia will likely end up with a policy slanted towards either the Coalition or Labor instead. But that’s the thing about perfect plans — they only exist in an idealised world. In the real world, unfortunately we have to deal with an imperfect reality.
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