Turnbull rejects Labor’s NBN subsidy claims

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malcolm-turnbull

news Shadow Communications Minister Malcolm Turnbull has strongly denied claims by Labor MPs that the Coalition’s rival National Broadband Network policy would see those in rural areas pay more to access NBN infrastructure, stating that the Coalition would maintain the so-called “cross-subsidy”.

In April the Coalition published its long-awaited rival NBN policy. The policy promises Australians download speeds of between 25Mbps and 100Mbps by the end of 2016 and 50Mbps to 100Mbps by the end of 2019, at a projected reduced total cost of $29.5 billion. Unlike Labor’s NBN project, it will make extensive use of fibre to the node technology (where fibre is rolled out to neighbourhood ‘nodes’ and much of the existing copper network is maintained), but will also utilise fibre to the premises, satellite and fixed wireless solutions in some areas. Like Labor’s own policy, a core feature of the policy is that every Australian will see some upgrade to their infrastructure.

Since the release of the policy, the Coalition has come under continued and sustained fire from Labor MPs, especially Communications Minister Stephen Conroy, with the policy’s critics slamming what many see as a lack of long-term vision in upgrading Australia’s communications infrastructure. One key criticism which has been levelled at the policy is the claim that it will abolish what is termed in financial terms the ‘cross-subsidy’, which sees access fees from users in metropolitan areas used to keep prices down in rural and regional areas.

This aspect of telecommunications policy effectively means that those living in rural areas would pay the same amount to access the NBN infrastructure, despite the fact that it costs significantly more to provide telecommunications services in rural areas, compared with those same services being delivered in major cities.

Currently, there are some government guarantees in place — such as the Universal Service Obligation regulations — in place to ensure that rural Australians are able to access basic telecommunications services. However, in many rural locations throughout Australia, retail ISPs such as iiNet have remained unwilling to invest in those areas due to the high cost of backbone links back to the cities, which are often operated under monopoly conditions by the nation’s largest telco Telstra. Some ISPs also maintain different price bands for rural and remote areas, compared with cheaper prices in major cities.

In a statement published late last week on his website, Turnbull pointed out that Labor MPs, election candidates and even independent MPs such as Tony Windsor, who prefer Labor’ NBN policy over the Coalition’s, had mentioned this cross-subsidy feature as a key point of differentiation between the policies.

“You will pay the same for an NBN service no matter where you live in Australia … Because what we put in place is a cross subsidy,” Conroy told ABC radio earlier this month. “People in Sydney, Melbourne and Brisbane pay a little bit more so that everybody around Australia pays the same price.  And what Malcolm Turnbull and Tony Abbott have done is said, ‘we don’t believe in that — We will abolish the cross subsidy’.”

In a separate press conference in Sydney in early May, Conroy said: “Tony Abbott has said he will make sure that they end the cross-subsidy, end the single pricing that we have introduced, and that will mean people in regional and rural Australia will pay more than people in the suburbs and cities of Australia’s major towns.”

However, in reaction to these claims, Turnbull pointed out that the Coalition’s policy document (PDF)actually maintains the concept of a cross-subsidy, as it will see NBN Co set uniform national wholesale price caps. The policy document states:

“Any uniform national wholesale prices in an NBN Co undertaking accepted by the ACCC will become uniform national wholesale price caps for directly comparable products.  Network operators including NBN Co could freely offer wholesale prices for products (or product elements) that are below this cap.”

Because of this feature of the policy, Turnbull stated, there would be “a very large subsidy” provided to rural and remote areas, and the cost of retail broadband plans would not reflect the actual cost of provisioning telecommunications infrastructure to those areas.

” … to create the impression that rural Internet users will somehow be ‘worse off’ under the Coalition is just wrong,” said Turnbull. They will not be paying any more than they would have under Labor’s plan – and because the Coalition will invest capital in the NBN more prudently, our modelling shows that the average user will be saving $300 a year by 2021 under our plan. So rural users will be paying much less under the Coalition in the medium to long term.”

“Senator Conroy should stop lying about the Coalition policy and apologise to rural users of the NBN for creating a false sense of alarm,” said Turnbull.

opinion/analysis
Hmm. To be honest, I’m not really sure where Labor has gotten this cross-subsidy claim from.

Sure, at a formal level, it appears as though the Coalition is not planning to adhere as rigidly to setting the same uniform pricing nationally as Labor would under its NBN policy. In addition, the Coalition’s policy on this issue does contain a vast amount less detail than Labor’s policy, and the Coalition’s view on this represents little more than a few paragraphs broadly promising to maintain uniform wholesale pricing caps and to drive down pricing on several key NBN wholesale products in the long term.

However, this doesn’t mean that there is no cross-subsidy aspect to the Coalition’s policy. There clearly is, in the sense that NBN Co will be directly deploying infrastructure and setting prices in rural and regional areas in a way that would be unsustainable without it being subsidised. The lower costs of deploying and operating infrastructure in city areas will clearly subsidise rural areas.

The main modification which the Coalition appears to have made reflects the fact that in some city areas, competition (such as through Telstra’s HFC cable network) may mean that it may make sense for NBN Co to cut prices to match other market offerings. Will this mean that some wholesale prices may be different in the cities compared with regional areas? Yes, but because the Coalition is applying caps in this area, it’s clear that this shouldn’t mean much in a practical sense. Those in rural areas are not going to get the raw end of the deal.

It seems pretty clear that one of the Coalition’s core aims with the deployment of its own NBN policy will be to reduce overall broadband pricing across the board. You can see this in the section of its policy mentioned by Turnbull, which mentions the fact that the Coalition would, in the absence of an existing agreement with the competition regulator, force NBN Co to reduce its “product element pricing” over the next 10 years to achieve “an inflation-adjusted fall of 10 percent” in the combined wholesale prices of two key NBN products — its entry level broadband product, and the most widely purchased bundled broadband and telephone package.

I’ve spoken to a spokesperson from the office of Communications Minister Stephen Conroy about this issue. It’s my belief that while Labor does have a point — the Coalition is going to modify the way NBN Co does national wholesale pricing and the way the cross-subsidy works — this point also doesn’t reflect the complexity of the debate here. Cross-subsidy will still take place under the Coalition’s rival policy — it just won’t look precisely the same as it does under Labor’s vision.

Note: The opinion/analysis section of this article was modified after publication to reflect a better understanding of the situation on the part of the writer.

Image credit: Office of Malcolm Turnbull

114 COMMENTS

  1. One second here if you have infrastructure competition the total amount of customers on the NBN is greatly reduced and if you have fewer customers how can you cross subsidise effectively?

    Right now Cable HFC runs past 30%of the population in the cities if 1/3 of those to which it is available take it up that is 10% less customers on FttN in the most profitable areas. That is assuming that there are no new network components built with the money that Telstra is getting from the Government they would surely be eyeing off new brownfields sites as prime candidates for a FttH network with almost new pit and pipe rollout would be cheap this new network could cover 20%-30% as well meaning that by the time that the NBN is finished around 50% of homes could have access to faster alternatives this would be a disaster for NBNCo if even 1/3 of customers choose FttH or HFC the cross subsidy model breaks down.

    If this breaks it means that there will have to be higher prices or the Coalition will risk the NBN investment to land squarely on their bottom line but maybe this is what they want they can blame Labor and then bitch for a while and carry on calling it a white elephant they were saddled with.

    • ‘if you have infrastructure competition the total amount of customers on the NBN is greatly reduced’.

      Exactly, so it seems that Mr Turnbull is trying to face in two directions at once while saying completely different things.

      To the regional areas, he seems to be pretending (or at least attempting to claim) that there will be no additional costs and charges for their service.

      While to urban areas, he seems to be saying wink-wink, you’ll get cheaper access than the others because of competition causing local price cutting.

      He can’t have it both ways. The facts show that regional people will not be paying the same charges under the Coalition plan, and he should be called out on this.

      • “Exactly, so it seems that Mr Turnbull is trying to face in two directions at once while saying completely different things.”

        Question: Who does this remind us of?

        Answer: Tony Abbott, his answers change depending on whos arse he is trying to lick at that particular time.

      • To both of you, the wholesale pricing on the NBN Labor or Coalition is not set by the NBN Co, it is set by the ACCC to ensure wholesale pricing parity is fair to all residence end users and RSP’s.

        • Coalition are breaking this model allowing for lower prices where competition is allowed the ONLY way to maintain the price in the regions is by direct subsidies NOT cross subsidies.

          • The Coalition cannot break this ACCC model, the NBN Co irrespective that it is of Labor or Coalition making is the owner of monopoly fixed line infrastructure and as such comes under ACCC jurisdiction on pricing and access.

          • Key point: Monopoly.

            This network is not going to be a monopoly. That is why people talk about infrastructure competition.

            Labor is making an infrastructure monopoly. The coalition is not.

          • I will copy the pertinent section on this from the Coalition Policy Page 10 under Infrastructure competition.

            “The owners/operators of new high speed Broadband access networks will, however, be required to make them available to access seekers on a non-discriminatory terms at wholesale prices for reference products equivalent to NBN Co wholesale caps (or similar price commitments agreed to by the NBN Co and the ACCC).”

            In other words if operators decide to rollout their own infrastructure the wholesale pricing and access will be the same as if it is the Government owned NBN Co FTTH or FTTN, that is it is price set and controlled by the ACCC.

          • “In other words if operators decide to rollout their own infrastructure the wholesale pricing and access will be the same as if it is the Government owned NBN Co FTTH or FTTN, that is it is price set and controlled by the ACCC.”

            Seems odd to me that “infrastructure competition” means that any network they build will have government mandated wholesale pricing…Why would any company bother building one?

            Heck, Telstra and Optus gave up after only ~30% of Australia with their HFC’s, and they were able to charge what they liked!

          • “Why would any company bother building one?”

            Indeed, as I have mentioned elsewhere, but like many statements in the Coalition policy it sounds good because in this case it in theory espouses the great Liberal value of ‘competition’.

            :)

          • The failure of that competition is what brought on the NBN in the first place ;o)

            What makes them/you think it will happen this time around?

        • ACCC sets the max wholesale price; has no control over min price. If the price is not economically viable (i.e. they could not recover it from the urban areas) they will not build it.

          • Exactly; the competition wont exist in the Rural areas (no profit there!) and will only exist in the inner city.

            Since the competitors wont be cross-subsidising the bush; they will charge lower prices.

            Therefore City gets cheaper prices than the Bush.

            Even worse; the bush has to pay even more because everyone in the city will be using the cheaper competitor networks!

          • I think you are confused, the ACCC doesn’t set a ‘min or max price’, it sets the same wholesale price at different speed tiers for all RSP’s.

            How the RSP’s then market their NBN product is up to them, there will be plan price differences like there is now but that has nothing to with the NBN price parity wholesale pricing set by the ACCC.

    • In reply to the first comment; yes, I’ve been saying this for months. You can’t offer an inferior product and expect it to have the same demand (on this case, uptake) all other things being equal. You can’t sell fewer products and maintain the same profitability, unless you increase sale pricing to cover the shortfall. You can’t have higher operating costs and maintain the same profitability without increasing prices to cover the shortfall. You can’t increase prices for the same product without reducing demand. You can’t operate in a market with more competition (providing a similar product at a similar price) and retain market share.

      So if you can’t maintain the same demand and profitability with an inferior product at a higher price with more competition, and the inferiority of the product is fixed and the increased competition is a foregone conclusion and the increased pricing is necessary to offset reduced demand and increased operational costs, what you have is a massive shortfall in profitability and an unsustainable business model. In the context of a governed owned near-monopoly incumbent supplier of telecommunications infrastructure for the majority of the country, what you have is a problem too big to be allowed to fail. The only realistic solution is sinking government funds (ie taxpayer money) to prop up (subsidise) your failing infrastructure. Indefinitely.

      Forget about the technical aspects of the NBN, forget about the politicising and point scoring, forget about the pedantic nitpicking from both sides. The fact is the LNP NBN plan does not stackup economically – it is a fiscal disaster. It will cost Australians for decades. And for what? For a communications network that is inferior, that will at best be delivered a year or two before the FTTH plan (which has been shown to be a dubious claim), that will shave a mere 900million from the total CAPEX of a $44bn project.

      • @TrevorX

        Great post, but just one thing.

        It’s $900 million off total government funding. Not CAPEX. The CAPEX difference is approx. $17 billion.

        • You are, of course, absolutely correct. I’m not sure why I wrote that as I am very much aware of the fact – might have been distracted by small children climbing over me while I punched that out on my phone :-\ Apologies for the error and thanks for picking it up :-)

      • > In reply to the first comment; yes, I’ve been saying this for months. You can’t offer an inferior product and expect it to have the same demand (on this case, uptake) all other things being equal.
        > Forget about the technical aspects of the NBN, forget about the politicising and point scoring, forget about the pedantic nitpicking from both sides.

        How do you define an inferior product? If we forget the technical aspects, then it is on what it delivers. Labor have predicted with their NBN, only 70% of premises passed by fibre will connect and of those 50% will be at 12Mbps. Compare this with the Coalition plan where the minimum speed will be 25Mbps (rising to 50Mbps in 2019). If we look at the top end, then the Coalition’s fibre connection at ~$3000 looks like very reasonable value when compared with Labor’s $150/month ($1800/year) wholesale AVC charge. Less than 5% are predicted to connect at 1Gbps in 2028 under Labor’s plan. It is hard to call this revolutionary.

        • How do you define an inferior product? If we forget the technical aspects, then it is on what it delivers. Labor have predicted with their NBN, only 70% of premises passed by fibre will connect and of those 50% will be at 12Mbps. Compare this with the Coalition plan where the minimum speed will be 25Mbps (rising to 50Mbps in 2019). If we look at the top end, then the Coalition’s fibre connection at ~$3000 looks like very reasonable value when compared with Labor’s $150/month ($1800/year) wholesale AVC charge. Less than 5% are predicted to connect at 1Gbps in 2028 under Labor’s plan. It is hard to call this revolutionary.

          The AVC isn’t a set price (it is set at each teir, and fixed at that price for 5 years, then linked to having increases at less than 50% of CPI). The $150 is for a 1000/400 connection, it’s only $38 for a 100/40. For a 25/5 (closest to the LBN) it’s $27 a month. Are you suggesting that the Liberal one will be lower than $27 a month, be fixed for 5 years and then be linked to =<50% of CPI?

          The "70% of premises passed by fibre will connect and of those 50% will be at 12Mbps" isn't a set thing mandated by the government, it was an (incorrect) estimation by NBNCo on what they thought demand would be. The were wrong with both the number taking it up and at what teir people would actually take. That's actually a good thing, it means their revenue will actually be better than what they thought it would be…

        • Once again you jump straight to the $150/month AVC cost without considering ongoing accessing charges and also that that is the intial price point and will fall over time to compare to FTTHoD and think that, because the installation costs in isolation work out less than the ongoing charges for a 1Gbps connection for a fixed period that somehow the LBN is magically going to offer a cheaper 1Gbps option.

          How about you actually chart the TCO and get back to us? Because I think you’ll find the TCO of a 1Gbps connection, if you’re so inclinded, will actually be less under the Labor NBN, but we can’t no for sure because we have absolutely no idea how much the ongoing costs for a FTTH connection will be under the LBN, but I can you this: they won’t be zero.

        • “How do you define an inferior product? If we forget the technical aspects, then it is on what it delivers.”

          Michael are you actually that stupid? It doesn’t matter how you want to paraphrase someone, that doesn’t change what was said. Clearly my initial statement referred to market demand for the relevant alternatives, and within that context the market will of course compare numerous aspects of those alternatives, including technical ones. I don’t care what side of the political fence you sit on, any rational person comparing two alternative products on features alone will opt for the one that does the job better. FTTH is substantially faster today. It will be orders of magnitude faster in the future. Those are immutable facts. From the perspective of consumers, forgetting political allegiance and the NBN debate and even pricing, FTTH is incomparably superior, and yes those are technical differences.

          But that technical comparison is irrelevant to my later statement (which, you will notice, follows the earlier comparison of product features, not precedes it) where I wished to exclude technical comparisons. At this point I’m talking about comparisons in the broader context of the NBN debate. The earlier comparison would have been one performed by a simplified market in a simplified and limited economic model. It is not affected by or relevant to my statement calling for exclusion of technical comparisons in the broader debate.

          I’m really not sure how else to explain this – it is a fairly simple logical process. I can only hope that you did indeed understand and were simply trolling, because at least then there’s a logical explanation for your supposed lack of comprehension.

      • You are looking at steady state operations. That is not the case for NBN (or any business really).

        You have to take into account the capital required to start up the business (production / division etc). If capital requirements are lower then profitability can be lower than someone who has higher capital requirements.

        If you puch it into an NPV / IRR calculator, just watch it change when you alter the CAPEX alone, it is staggering.

  2. “force NBN Co to reduce its “product element pricing” over the next 10 years to achieve “an inflation-adjusted fall of 10 percent” in the combined wholesale prices of two key NBN products”

    Do you know that by limiting increases to half of CPI alone the Labor NBN “inflation adjusted fall” is more than 13% over 10 years without any of the other reductions promised in the plan?

  3. “Hmm. To be honest, I’m not really sure where Labor has gotten this cross-subsidy claim from.”

    I suspect Conroy is simply using Turnbull’s past and repeated attacks on the NBN cross subsidy against him:

    http://www.arnnet.com.au/article/397531/conroy_compares_nbn_cross-subsidy_postage_stamps_atms/

    “One of the issues Shadow Communications Minister, Malcolm Turnbull, continues to attack is national wholesale pricing for the NBN. This is a cross-subsidy approach implemented by the Government where metropolitain areas will be charged more on a wholesale level so the NBN would be more affordable to rural and remote areas.

    NBN Co will charge ISPs $20 per megabit (Mbps) per month at each of the 120 points of interconnect (PoI) across Australia and $24 for access per customer on a 12Mbps download and 1Mbps upload connection.

    But Turnbull saw this as unjustly punishing metropolitan areas.”

    http://www.zdnet.com/fcc-fail-casts-doubts-on-libs-nbn-subsidy-plan-7000001838/

    “rather than establish a monopoly and seek to overcharge the cities to subsidise the bush, we will ensure that support for the bush comes from a clearly defined subsidy, so that everybody knows the actual cost of ensuring equality of access”.

    MT only has himself to blame on this one.

  4. In addition, Turnbull has repeatedly stated the Coalition’s preference for supporting infrastructure-based competition for the NBN where possible — presumably through maintaining, at least, the existing HFC cable network operated by Telstra

    He’s also promised to open up the HFC networks (both Telstra and Optus) to allow competition there. But with all this “Open competitive infrastructure” who exactly will will the USO (or whatever it will be called by then) apply to? If it’s Telstra, then it’s only “open competitive infrastructure” in name only? If it’s not just Telstra, who do you go to to make sure you can get connected?

    • The USO has nothing whatever to do with broadband, it is all about providing a telephony service.

      • “The USO has nothing whatever to do with broadband, it is all about providing a telephony service.”

        Not exactly true.

        As people get switched over to the the NBN, NBNCo assumes USO from Telstra as the copper gets switched off. That’s part of the deal done with Telstra (http://www.telstra.com.au/abouttelstra/download/document/Explanatory-Memorandum.pdf)

        So how will that actually work under the LBN where the copper doesn’t get switched off and people don’t get transferred over?

        • It doesn’t matter what the infrastructure is, voice on PSTN, voice on NBN FTTH or voice on FTTN, the USO obligation will pass to the owner/s of the infrastructure.

          You need to get out of the mindset that the USO can only be provided by one owner or operator because that’s the way it has been done in the past due to the history and domination of the PMG/Telecom/Telstra PSTN copper based monopoly.

    • Apart from the Telstra HFC competition factor, M.T has also indicated Taxpayer subsidies up to 50% of cost fro private Greenfield operators, which will also be applicable for brownfields builds, which they can choose to Sell to the LBN or operate as private networks competing with the NBN. Greenfields and cherry picked easy to do high value areas, I have wondered about the physical run, whether the pits and ducts that NBN has paid Telstra Billions to lease for 30 years will suddenly become open access to permit this, or whether Opticomm, iiNet etc will run off the power poles a la Optus HFC.

      With their stated intentions and desire for “transparent” subsidies (except those hidden in health and education and Rural budgets), there literally are many questions to be asked, especially about the actual cost to the taxpayer both short and long term

  5. I disagreed with Turnbull on this on Twitter and I disagree here Renai.

    There is no CROSS-subsidy in the Coalition plan. There is a GOVERNMENT subsidy (in perpetuity) to NBNCo./other operators to ensure a BASE price on the LOWEST tier of the NBN- what the Coalition document calls the “most basic package”. That means ANYTHING above this, is not subject to this subsidy and is therefore fair game for pricing. For example the 50/20 package. Even perhaps the 25/5 package (as technically NBNCo’s most basic package is 12/1 and the Coalition has not indicated it will change this, though it will likely after 2016).

    There is a HUGE different between the 2 models. One ensures all tiers are the same price no matter where you live (or on what technology), in perpetuity, by forcing the monopoly provider to shuffle revenue around to ensure it. One ensures the most BASIC price is the same no matter where you live, in perpetuity, by, as far as I can see, paying the NBNCo. OR another operator directly, the difference to keep the basic package the same, but does nothing about higher packages.

    The Coalition subsidy WILL create a digital divide by not ensuring the wholesale prices of ALL tiers are the same. There is no question about that.

    • But wont that make it a more expensive system for the taxpayer than the current “user pays” NBN?!!

      (The question is rhetorical, I already know the LBN is actually a more expensive plan than the NBN ;o))

      • I think the capitals are more emphasis than shouting. (atleast that is how I read it).

        He should use italics or bold. (I know I do; it mirrors the way I talk!)

        • @Peter A. That’s exactly what I was doing

          Italics and bold piss me off because they take so many extra tags to do it and break the typing up. I don’t yell at anyone on the internet with caps. I yell with exclamation marks.

          I think I’ve been through this before….about 5 times….

  6. “this point also doesn’t reflect the complexity of the debate here”

    Since when do you expect politicians to adequately debate complex issues? Anyways, this is hardly possible in the 5 minute grabs offered my MSM.

  7. All I see happening is that rural customers will be paying the cap price and metro customers will end up paying less than the cap. Thus, rural customers will be at a disadvantage.

    • Yes, but the difference will be paid for by a taxpayer gift..er..subsidy to “equalise” the difference for the bushies.

  8. In reality it’s all a storm in a teacup, it doesn’t matter how it is achieved, the outcome is that in either a Labor or Coalition NBN residents in regional and rural areas will pay the same for a BB plan as capital city residences.

    • The difference is who pays for it. In the case of the LBN, it’s the taxpayer, for the NBN, it’s the users of the system.

        • It is a double whammy

          1. Due to competition there are less people on the network reducing the amount of money for cross subsidisation

          2. Due to competition NBNCo need to charge less for plans reducing the amount of money for cross subsidisation

          • If that is the case why does The Turnbull insist that where competition exist there will be lower prices if the prices are all the same?

          • Secondarily that does not affect the first point!

            You have not addressed this in any comment as yet

          • Due to infrastructure competition at the wholesale level in the cities, there will be fewer of the highly profitable customers to subsidize the expensive rural ones.

            This will need to be offset within the LNP’s business plan as the ALP is a complete monopoly that does not allow any competition (see 80+% profit margin) and does not have this issue.

          • @Michael

            ‘Due to infrastructure competition at the wholesale level in the cities, there will be fewer of the highly profitable customers to subsidize the expensive rural ones.’

            Which is no different to what we have now, the Broadband Connect program offered funding to applicants to DSLAM enable small regional and rural exchanges, in the main only Telstra applied for funding and the rural exchanges got the DSLAM gear then all ISP’s not just BigPond resold ADSL2+ Plans from, there was no cross subsidisation as such from ‘highly profitable customers’ to subsidise that rollout.

            You also overlook the fact that if private operators decide to cherry pick high density population centres, which I assume is what you mean by your term ‘highly profitable customers’ they can only sell at the wholesale level to all access seekers at the same price the ACCC has set for the Government backed rollout.

            I don’t see much room in that externally wholesale price controlled scenario in limited rollout areas to pay back the massive CAPEX and OPEX investment sunk into the rollout for their investors do you?

            ‘This will need to be offset within the LNP’s business plan’

            It’s not the LNP Business plan you need to be worried about, it is backed by Government debt and tax funded equity, it’s the private operators Business plan that would be the worry.

          • Yes,

            There are different capital requirements as you identified between NBN Co (either form) and any private firm. However, HFC cables are already deployed in many suburban regions, these alone will decrease the customer base. Since they are already built the capital is a sunk cost and it will only be the cost of running it (looking at wholesale side of business only) so there is some additional profit to be extracted until they are overbuilt in the LNP model. The HFC network will be used and will take customers away from the FTTN network which will decrease resources available for a cross subsidy.

          • I explained this above and Michal has explained it as well

            It is simple NBNCo will either need to raise prices in the bush or it will fail to repay its debts and the cost will be on Budget.

          • Well the other way decreased revenues can be offset is through a lower CAPEX requirement.

            If you decrease the capital requirements for a project and hold the revenues constant then the IRR will increase.

            As with the ALP’s NBN, it will all come down to the actual business case.

          • @Fibroid

            I repeat (again!), the NBN Co does not control its wholesale pricing, the ACCC does, that uniform pricing applies irrespective of who owns the infrastructure, see my response here:

            I think you have that a little wrong there. The NBNCo. set their original pricing. The ACCC controls its increase based on external factors and cost of service.

            The NBNCo. will do so again based on cost of service and external factors for the FTTN version. That may be higher or lower than FTTH, depending on any number of factors. And as long as NBNCo. can show that is what it costs, the ACCC cannot argue they should lower it. So the ACCC does NOT set the price. They stop price rises but cannot argue for price drops when its clear the price being charged is fair based on all factors. The NBNCo. sets prices. Or other operators.

            And the uniform pricing only I repeat only applies under the Coalition, to base level plans that is; the cheapest and most popular plans that are broadband only and broadband and phone bundles. NO other plans are under uniform pricing. Read their policy. There is not uniform pricing under the Coalition plan. Only the most basic plan. Which means everyone who doesn’t want that plan, of which there will still be millions, will be at anywhere from a slight to a large disadvantage depending on where they live.

            Your interpretation of their policy is incorrect. There is no uniform pricing under the Coalition. Only a guaranteed basic speed and cost for 2 plans- the most popular broadband only and most popular bundle. That’s it. Otherwise, its duck hunting season for which operator wants to shoot the highest first for the 80Mbps plan for example.

          • I know the initial pricing is set by the NBN Co, the same way the Telstra initial ADSL, LSS and ULL pricing is set by Telstra Wholesale now.

            The ACCC ensures such wholesale pricing is the same for all RSP’s and makes judgements if RSP’s makes submissions that the pricing is too high or that access is restricted.

            ACCC makes judgements on all speed tiers not just basic plans, it is ludicrous to try and say that the ACCC will change the way it provides judgements on wholesale BB products in the past from a monopoly supplier just because the Coalition have gained power and intend to rollout a mix of infrastructure types.

          • @Fibroid

            And that’s where you’re wrong. NBNCo. WON’T be a monopoly supplier under the Coalition. They have made it clear they will be “encouraging competition”. So therefore any judgements the ACCC makes on pricing has to reflect the fact that the cost of infrastructure has to be covered. NBNCo’s costs go up as fewer people connect, same as any other provider of infrastructure.

            Therefore under the Coalition, it is MORE likely that the ACCC will allow price rises thanks to “competition” of fewer people on infrastructure to cover the CAPEX outlaid.

        • Has he changed from this then??

          5. What about the bush? Conroy said that we would not cross subsidise the bush. We are committed (and with the vast majority of rural and regional members why would we not be?) to ensuring that people in regional and remote Australia can access broadband at equivalent prices to folk in the cities. But rather than establish a monopoly and seek to overcharge the cities to subsidise the bush, we will ensure that support for the bush comes from a clearly defined subsidy so that everybody knows the actual cost of ensuring equality of access.

          http://www.malcolmturnbull.com.au/blogs/malcolms-blog/why-the-coalitions-nbn-plan-is-superior-and-why-it-will-be-better-for-the-bush-too/

          I have to admit, it can be a chore keeping up with them sometimes, the way they change, and even contradict each other on occasion, but going back on that would be a pretty big back-flip even for them…

      • Malcolm will use taxpayer funded subsidies to ensure the prices of the LBN stay the same between “the bush” and everywhere else. The NBN actually averages those price differentials across all users, so no additional taxpayer funds are required, the “users” of the system pay for it.

    • Actually Malcolm has stated that where there is competition they will likely be lower prices so in the cities the price will be lower.

      He has said there will be a cap on prices but then with competition the cap will likely have to be higher due to fewer customers on the whole network

      • If you word The Turnbulls claim as “nobody will pay more than $50 a month, but cities are welcome to charge $40” then his statement is technically correct. They’d get away with it by justifying that an exchange costs money to run, and those costs are spread around 10,000 households in the city, and only 3,000 in rural areas. Old argument, still applicable.

        Turnbull is saying for the Libs there is a wholesale cap thats the same for everyone, while Conroy is saying that for Labor there is a wholesale base that is the same for everyone. Technically, under the Labor plan the ISP’s could charge $100 on top of the wholesale $24 for the basic plan and theres not much people could do about it. Its only competition holding that back.

        Fortunately, the Exetel’s and TPG’s in the business give that competition that would (or rather, should) keep the prices down. Not sure there’s really anything to stop gouging rural customers with a higher price than the metro equivalents under The Turnbulls plan, even if its only a small amount.

        • If, as MT claims the wholesale caps are the same as the cross subsidized prices for the ALP’s NBN then the LNP’s NBN will have the same or lower prices.

          • If thats what he means, then he’s telling porkies to one group or the other. You cant tell one group you’ll pay the same price as a second group, then tell that second group they’ll get it cheaper. That cant happen if he’s refering to the same cap as Labor.

            I’m suggesting they are refering to 2 different things. A consistent rate charge to the ISP’s versus a flat maximum FROM the ISP’s. In that scenario, The Turnbull can be correct. As can Conroy.

            It wouldnt be the first time they have gone head to head over 2 similar yet crucially different stances on a subject.

  9. For frig sake MT just build the damn NBN properly and stop pissing about with it.

        • That old furphy gets a airing again I see,some basic research will show you France Telecom invests in FTTN, and FTTP as well as wireless infrastructure.

          • Some even more basic research shows that France has just announced the roll out of a 20 billion FTTP roll out over the next 10 years.

            http://www.nbnco.com.au/blog/france-chooses-fibre-to-the-home.html

            The proper wording should, therefore, have been France Telecom have invested (note the past tense) in FTTN. Small nuance, I know, but it conveys a more accurate picture. Otherwise, it would be like saying that Telstra invests in copper and we know that it is no longer the case.

            It should also be noted, that France Telecom is not the only one rolling out a network. Orange, amongst others, is also rolling out FTTP.

          • @Observer & GENIII

            “In Poland, the Group also invests in high-speed broadband by deploying an alternative technology, the VDSL (Very high bit-rate DSL). This technique uses the existing copper network and permits to offer speeds up to 40 Mbit / s and 80 Mbit / s. The first commercial offers have been launched in 2011. The deployment of VDSL will continue in the coming years to expand the geographic coverage in this country.”

            http://www.orange.com/en/networks/our-network/very-high-speed-broadband-access-FTTH

            Note the last sentence.

            I repeat, France Telcom invests in and continues to invest in FTTN, FTTP and wireless infrastructure.

          • The original point was “He can’t he has already invested it all in a french FTTP rollout”

            It was not about he has already invested in a Polish FTTP rollout.

          • What we are talking about is the French company MT invested in which is France Telecom which invests in both types of fibre infrastructures as shown, there is not a France Telecom FTTP only company or a France Telecom FTTN only company, you effectively buy shares in all infrastuctures.

          • Wow… those weasel words are almost Turnbull/Conroy quality.

            :-P

            Seriously tho you understood what he was saying.

            France Telecom may well be invest in FTTN in other countries, however in their own rollout in their own country it appears that FTTP is the main method being invested in.

            You know, being able to admit mistakes isn’t a bad thing.

          • Yeah, Alain likes to move the goal posts around a little if his points go “soft”.

          • If you care to point out exactly where I made a mistake I will gladly retract it.

            I repeat again:

            ‘France Telcom invests in and continues to invest in FTTN, FTTP and wireless infrastructure.’

            Any investor in FT doesn’t get to choose that they only want their investment to go only into the France FTTH bit do they?

          • Apology for your mistake will be accepted at anytime, won’t be holding my breath though.

            GENIII

          • I have done the research i know exactly what he invested in, maybe you should before you start running off at the keyboard again…

            GENIII

          • Australia and France are so similar for FTTP rollouts,

            I mean it has no bearing at all that all of France could fit inside NSW and yet it has a population 3x that of Australia. The economics will be identical.

          • Good point.

            So France has more people in a smaller space. Wouldn’t that suggest that FTTN would be a better solution for them? I mean presumably the distance for the copper is shorter?

            (Yes I know I am being grossly generic, but then so was Michael).

            Each and every nation out there seems to have different requirements. You cannot point at any one rollout and say, “That’s the same for us”. Cause it isn’t. Australia has different Variables to France, to Poland, to England, to USA, even to New Zealand.

            We can use those other examples as examples of what is being done, and learn from them. But we still need to do the footwork for ourselves.

          • Yes, Australia is different, but we can and definitely should learn from their experiences.

            But my main point was that so many posters here continually bemoan the state of MSM reporting and 5s soundbites but then consistantly bring up MT’s investment in FT.

            FT will have significantly different economics due to different population densities, geographics, legislative requirements, etc etc than is faced by NBN Co.

            They are not the same but by making the comparison are you not guilty of the same superficial comparisons that you accuse of reporters of in a field that a lot of commentators here are very knowledgable about?

          • Wasn’t Malcolm complaining the public wasn’t looking at enough overseas examples only recently?

            And when we do, people say we’re looking at them too much :/

          • Perfect example of superfluous example designed to distract from the main point and superficial analysis for partisan point scoring.

            It does not matter where the comparison is based, as long as it looks at all of the relevant factors when they are not the same as Australia. Since the rollout in France has significantly different economics why should you draw a parallel when looking at investment products?

          • Right, you just want to cherry pick the bits that suit you to prove some point your making, but any one else referring to it is a “Perfect example of superfluous example designed to distract from the main point and superficial analysis for partisan point scoring.”

            Bravo mate, you should look at getting into politics…

          • Claiming that you need to look at all the economic factors between the two models is “Cherry picking” when you are making an investment decision, right.

            But that aside, what are the major similarities between the two rollouts apart from the fact that they both use FTTP? since you are advocating that they are such good models for each other.

          • I wasn’t the one saying we should be looking to how France or the UK do it and copy them, Malcolm was. I was just pointing out the irony that when we do, FTTN supporters say “You can’t do that, they are totally different”. That’s the basis of the cherry picking comment and wasn’t directed at you personally.

            I actually agree with you that the lessons we can take from the French/UK experiences are only fairly minor (and mostly technical).

            One of the biggest problems I see with Malcolm wanting people to use “those” ones as examples is they are all incumbents, which is actually a huge flaw in Malcolms thinking when it wont actually be an incumbent doing it here (I have been unable to find an example of the Libs “FTTN built by a non-incumbent” anywhere else in the world).

    • I reckon, their policy gets closer and closer to Labor’s every day. Can’t they just call it a different name, paint it a different colour and pretend it’s their policy?

      • Heh I highly doubt it they just want to have a another Telstra but called Telstra mark 2.

  10. The Coalition: building a more expensive network and somehow charging less for access.

    Next week: the devil ice skates to work.

  11. Turnbull forgets to mention that these price caps only apply to two services, 12/1 broadband, and ‘the most popular broadband + telephone bundle’.
    If this is also 12/1 as their document suggests, the only regulated broadband service is 12/1

    With other providers able to overbuild the more profitable high density city areas and offer speeds unobtainable on the NBN, there goes his money for the cross subsity. (except perhaps from the extra 2% GST!)

    • If private investors/operators have to offer access to all RSP’s under the same terms and conditions as the Government owned NBN infrastructure which is price set by the ACCC I don’t think there will be too many chomping at the bit to rollout fibre infrastructure do you?

      :)

      • When M.T indicates up to 50% Subsidy of cost for private sector rollout, was aimed at the greenfield operators for greenfield, but also indicating would apply to brownfields, they could choose to sell to NBN or operate themselves.
        On that basis of half install cost they could operate profitably, however they too can play the game and will cry poor because hamstrung by the ACCC regulation, The LIBS desperate to have private sector competition will allow them to be vertically integrated.

      • Fibroid
        “under the same terms and conditions as the Government owned NBN infrastructure which is price set by the ACCC”
        Is that applicable to the Telstra Bris South rollout, Same plans and services being offered, same ACCC Oversight. ???

      • Because the speed for fibre will be more the ACCC plans only cover plans under 100Mbps anything higher is fair game!

  12. How can their be a cross-subsidy when it is one of the primary aims of the coalition policy to have all the profitable traffic on competing privately owned networks?

    • “How can their be a cross-subsidy when it is one of the primary aims of the coalition policy to have all the profitable traffic on competing privately owned networks?”

      Um … what?

  13. The reality is that in the end the ONLY customers on the coalition NBN will be rural ones.

    Wholesale competition will be actively encouraged meaning fewer customers on the NBN but in unprofitable rural areas, there is no option so they will stay on the NBN forcing prices to increase in metro areas.
    As prices increase in metro areas, more areas will become profitable to build competing infrastructure meaning more people will move across forcing NBNco to increase prices over-all which will lead to more areas becoming profitable to roll out competing infrastructure and so on.

    Remember that all that unused infrastructure will still need to be maintained even with just a handful of customers on it, all those nodes will still be using electricity with no users on them and all that money borrowed to pay for it will all still have to be repaid, in the end either by the poor suffering rural customers who are the only ones left or, the normal bunny, the tax payer when it finally becomes profitable to roll out competing wireless and satellite services because NBN prices have hit ridiculous levels..

      • Just look at the current ADSL market today. Only Telstra is offering ADSL service to the rural/region area at a higher price and with government subsidy. While in the city area, the alternate operators such as IINET, EXETEL, and TPG are offering cheaper price for ADSL2 service.

        Now, replace Telstra ADSL1 with Liberal FTTN network, and ADSL2 with FTTH and the alternative competitor is now TELSTRA itself.

        • Do note a major aspect of the delays and costs is delays in Telstra remediation, especially in the “Last Mile” which won’t be needed under M.T’s plan , the FTTN option of course precludes the multicast media products the NBN has in the pipeline, – good luck getting your FOD, yet they are up to scratch, even ahead on install of backhaul and transits which will be used by either plan or even by Telstra – paid for by the NBN

    • The reality is that in the end the ONLY customers on the coalition NBN will be rural ones.

      If that is true then it should reduce the cost of the NBN substantially, meaning less government borrowing, which is OK by me.

      • @Tel

        That is an incorrect logic assumption. CAPEX of the rural section of the network in a Coalition policy will be orders of magnitude higher than the urban areas. Therefore OPEX and charges to cover CAPEX must be orders of magnitude higher to recover cost within the same period.

        You cannot assume because of overall lower CAPEX, that the same number of people will use it and therefore the cost of recovery goes down. Only 30% of the population is in regional areas. That means only 30% of the revenue. At much more than 30% of the CAPEX than to cover the same area in urban sprawl.

        • Incorrect logic assumption? Sheesh SevenTech you’re being polite there…

          Tel wtf are you smoking? You can’t be this dumb because you have demonstrated your ability to type words. In a sentence. Even if the content doesn’t actually make any sense.

          NBN Co could roll out the NBN to just 10% of the population (those in regional areas) and yet the cost would remain at 80% of the build for the whole country. You think that’s a good idea because the total cost figure will fall? It is statements like this that make me despair for this country.

          Pay close attention. The total cost is essentially immaterial when the costs are recoverable through profitable operation of the infrastructure. It doesn’t matter if the whole NBN costs just 4bn – if those costs are unrecoverable, that’s $4bn more than the $44bn NBN. $4bn greater debt, $4bn less money for other government spending and alternative infrastructure. $4bn more tax payer money.

          Again, I cannot fathom why or how you have come to this conclusion because not only does it not make any logical sense it is demonstrably stupid.

          If you believe you are capable of following a logical argument and reaching a conclusion based on facts, please scroll up and read my earlier post about the economic reality of the LNP FTTN NBN plan. Total cost isn’t just a distraction, it is completely irrelevant to the impact the NBN will have on the budget, government funding, tax payers and the country as a whole. The pertinent question is cost recovery (or profitability or ROI). The fact remains that the FTTH NBN has a strong, developed business case to achieve its ROI targets, while the LNP have dubious election promises that don’t stand up to analysis.

  14. “Like Labor’s own policy, a core feature of the policy is that every Australian will see some upgrade to their infrastructure.”
    Not trying to be a pedant, but I find this to be a most curious and interesting set of words! It may, in time, find itself becoming one of the most remembered interesting and curious set of words of this period and that is saying something: just saying is all…!

  15. How many people are aware that the data limits on wireless and satellite are significantly less than fibre on Labor’s NBN?

    • I presume you looked at the iiNet options and thought “Oh look, they aren’t offering as much quota on fixed-wireless and satalite for their plans! SEE LOOK, NBN IS BAD.”

      But did you take the time to oh, I don’t know, try a few other providers.

      Internode offer up to a Terabyte on fixed-wireless, the same as they offer on FTTH.

      Honestly, as the wholesale AVC and CVC costs are exactly the same, it surprises me that iiNet have decided to differentiate, but they might be the exception rather than the rule.

      • ” it surprises me that iiNet have decided to differentiate, but they might be the exception rather than the rule.”

        That’s one of the reasons I prefer the FTTP for, choice! RSP’s can offer whatever they like basically (speed, data caps, whatever).

        You’ll have a lot less choice with an FTTN :(

    • @Matthew

      You are referring of course to the fact that the satellite and wireless sections don’t have the total throughput per sector like fibre. Which, as several dozen people have told you before, is irrelevant. You seem to believe that NBNCo. will be completely static in its’ job- that when demand rises towards what the sector can handle, they will simply look the other way. You are utterly mistaken. It is NBNCo’s JOB to ensure demand is met.

      You assume their base figures will never change. You are, again, mistaken. This network is highly upgradable and easily adaptable. You appear to be the only one who believes this.

      • Absolutely correct, 7T. The upgrades on Labor’s NBN happen organically.

        Wireless and satellite technology specced in 2010 to deliver at least 12 Mbps is now delivering double that in the 7% Coalition/Labor outlier footprint.

        Meanwhile, the 100/40 fibre spec has already morphed into 1000/400 due to the natural capacity improvement in the entry-level GPON units per 28 premises.

        And yet, Malcolm Turnbull would lay more copper and build cabinets with eight car batteries in every residential block.

        FTTN will simply not recover $40 billion of construction cost, but FTTP will do it easily.

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