This is a reprint of an article Delimiter published in February this year. We re-publish it here to remind readers of analyst views of HFC cable networks, in view of the Government’s plan revealed last week to abandon the deployment of NBN infrastructure to up to a third of the Australian population, in favour of upgrading the HFC cable networks instead.
news Australian telecommunications analyst Paul Budde has published a strongly worded blog post arguing that the HFC cable networks focused on by the Coalition in its rival NBN policy are akin to steam trains in the 1930’s through the 1960’s — they’ll still around for decades, but don’t represent the future of their industry.
The Federal Government’s current National Broadband Network policy would see the HFC cable networks operated by Telstra and Optus shut down as the NBN’s fibre to the premise network is rolled out. The two networks are only used by close to a million premises in Australia and have not been strongly focused on by the two telcos over the past decade. Many in the technology industry consider them to be legacy technology as they represent a shared telecommunications medium which slows down dramatically when many premises use the networks simultaneously.
However, Shadow Communications Minister Malcolm Turnbull last week confirmed part of the Coalition’s telecommunications policy would see at least one of the networks – that belonging to Telstra — upgraded and opened for wholesale access. The Coalition’s policy would also see a national fibre to the node network constructed — but areas outside the HFC cable footprint would be prioritised, despite the fact that many within the HFC footprint cannot technically connect to the HFC networks.
In response to the issue, Budde published a lengthy blog post this week entitled “the end of HFC and FTTN networks is approaching”.
“While the DOCSIS 3.0-upgraded HFC networks theoretically can deliver 100Mb/s, the reality is that most are delivering speeds of between 20Mb/s and 50Mb/s,” wrote Budde. “The shared nature of these networks and the extra cost involved in providing consistent services at higher speeds to mass markets makes HFC increasingly less competitive with FttH networks.”
“This is not to say that the existing HFC and FttN networks will immediately die out,” the analyst added. “Diesel trains started to replace the steam train in the 1930s – this happened at the height of steam train technology (reaching 220km per hour) – but it was not until 1960 (30 years later) that the last steam trains disappeared in the USA and Europe. Good quality HFC and VDSL2+ networks could possibly survive for 10 to 20 years. The problem is that there are only a limited number of areas where this is technically possible or economically viable.”
Budde noted that it was definitely possible that the Coalition would win the upcoming September Federal Election and continue to use the HFC networks and a simultaneous FTTN rollout to support Australian broadband users.
However, the analyst noted that the low penetration rate of HFC cable in Australia was a clear indication that Telstra and Optus had never been keen to maximise the use of the networks. “the decisions by Telstra and Optus to not further pursue HFC were made well before anybody started talking about the NBN. If the industry is not keen on pursuing HFC it will be interesting to see what the Opposition will do to make it change its mind,” he added.
And the long-term future is also a question.
“FttN and HFC technologies are the modern-day equivalent of the steam train, and their days are numbered,” Budde wrote. “Customers who would be affected by a reversal of the FttH decision under a possible change of government will most certainly want to know the plans for their services once the old infrastructure finally begins to run out of steam.”
Budde’s comments come as others in the industry have also warned of the dangers of focusing on HFC cable technology for Australia’s future. Last week, The Competitive Carrier’s Coalition — representing most of the non-Telstra carriers — demanded Turnbull abandon what it described as his “HFC fantasy”, criticising it on commercial and technical grounds, as well as the long-term interests of consumers. ““These comments ignore the reality that such a proposal would mean that for 30 percent of the population there would be no effective competitive broadband market.” said Matt Healy.”
Not everyone has been so negative about the potential for HFC cable to provide for Australia’s medium-term broadband needs. In an extended opinionated article this week entitled “Get a grip … HFC could make a fine interim NBN technology”, the publisher of industry newsletter Communications Day argued that HFC was a suitable technology for Australia’s future needs.
“There are some in the industry who really need to take a good look at what they arguing for and against, especially their “see no evil, hear no evil” attitude to interim DOCSIS 3 and VDSL2 technologies,” wrote Lynch.
opinion/analysis
I don’t always agree with Paul Budde, but I think the analyst’s comments here represent a very solid view of the current situation in Australia when comparing the potential mix of broadband technologies to be used for the nation’s future telecommunciations needs. Could the HFC cable be used, in tandem with a FTTN rollout, to provide for the nation’s needs? Yes, in the mid-term, this is certainly possible. It’s one option on the table.
However, like the steam train situation, it is clear that this would not provide for Australia’s long-term future, which will no doubt be based on fibre running to every premise. I don’t think there is much doubt out there — no matter which side of politics or the industry you speak to — that in the long-term, say 30-50 years — fibre to the premise is going to be the dominant technology.
And this, as Budde correctly identifies, is the real issue. Do we really want to ditch the current FTTP NBN project, which represents the long-term future of the telecommunications industry anyway, and which has a huge head of steam behind it right now and the support of most of the industry, and move to a HFC cable/FTTN rollout?
Do we want to go through the hassle of forcing Telstra and perhaps Optus to open their HFC cable to wholesale access, incentivising them to upgrade it, legislating so that those in multi-dwelling units such as apartments can actually connect to it and incentivising retail ISPs such as iiNet and TPG to provide services over the HFC?
Personally, I say no. Let’s have some vision for once and go for the technology which everyone agrees is the right one for Australia’s very long-term future: Fibre to the premise. Just because a technology works, as the steam trains continue to to this day, does not mean they are the best technology out there. Personally, whenever I go to Japan I prefer to ride on the country’s high-speed Shinkansen train. Getting from Tokyo to Kyoto in a couple of hours via rail is a satisfying reminder of the things humans can achieve when we have some vision and the will to implement it.
Image credit: Timo Balk, royalty free
pretty decent analogy.
Also I can just see Turnbull in his office puffing away… “I think i can, I THINK i can, I THINK I CAN….
It’s a very sad state of affairs when you can reprint an entire article verbatim, and have it still be cutting edge news!!
No kidding ;)
Budde certainly proved the point in February didn’t he.
I’m waiting for “Steve” to come in and spout his incorrect “Facts” about why its better to restrict capacity in a digital economy due to the time value of money, when the SR shows that it only saves money when using a non industry standard discounted rate.
“the SR shows that it only saves money when using a non industry standard discounted rate.”
Sorry Non Puto, the SR shows no such thing. On the contrary, the SR shows that using a non industry standard discounted rate saves money, which means that using a industry standard discounted rate saves even more money.
NPV = Sum of CF(t)/(1+r)^(t), where t is time and r = discount rate. So there is an inverse relationship between NPV and discount rate. This means that a higher discount rate would lower the NPV of the upgrade, which would in fact increase the savings from deferring the FTTP upgrade.
So the SR Pg 100 should read “If a discount rate of 10% or higher were used, as is common in the telecommunications industry, the NPV savings of an upgrade strategy (rather than deploying FTTP now) would be higher.” There is a typo in the review report that omits the word “savings”.
Non standard, as in not calculating the actual time value of the money. Inflating it by using Telco and other private enterprise numbers. Discount rate for the government is much lower, they get lower interest loans, they have, effectively unlimited capital to invest, so borrowing for this is not taking away from borrowing for other profitable enterprises.
You’re just playing with numbers.
Sigh. The SR uses a non-standard (much lower) discount rate to calculate the savings i.e. a discount rate well below standard telco rates.
Non Puto suggests that if they had used standard (higher) telco discount rates, the savings would be lower or non-existent.
I corrected that misconception. A higher i.e. telco standard discount rate would mean higher savings.
Lionel then thows his 2c in that the non-standard rate used is inflated as it uses standard Telco and other private enterprise numbers.
Lionel, as stated in the SR, the rate used in the SR is LOWER (20% lower) than discount rates used by Telcos and private enterprise. Read, comprehend, post.
“Sigh. The SR uses a non-standard (much lower) discount rate to calculate the savings i.e. a discount rate well below standard telco rates.”
So? It’s still not a rate that accurately reflects the actual discount rate. 8% is over double the amount they could save.
“Non Puto suggests that if they had used standard (higher) telco discount rates, the savings would be lower or non-existent.”
No, he said if they use a non standard discount rate. You were the one that suggest, inappropriately, that the Telco rate should be used. They are a GBE with cheap access to money, not a private Telco.
“Lionel then thows his 2c in that the non-standard rate used is inflated as it uses standard Telco and other private enterprise numbers. ”
And it is. The discount rate is designed to reflect the savings you can make by delaying investment, 10% 8 % are grossly inflated for a GBE.
“Lionel, as stated in the SR, the rate used in the SR is LOWER (20% lower) than discount rates used by Telcos and private enterprise. Read, comprehend, post.”
STOP BEING SO RUDE. You and Turnbull are using figures to indicate savings that can never be achieved by NBN Co.
I don’t give a toss about what you or someone else use as a standard figure for private Telcos, NBNCo isn’t one.
Lionel: “So? It’s still not a rate that accurately reflects the actual discount rate. 8% is over double the amount they could save.”
Really? Le’s see what the Department of Finance says:”A principal objective for each GBE is that it adds to its shareholder value. To achieve this it is required to:….earn at least a commercial rate of return” http://www.finance.gov.au/publications/governance-arrangements/docs/GBE_Guidelines.pdf
So the government could use the savings to invest in another GBE and earn a commercial return. Or it could invest in the future fund which last financial year returned 15.4%
Lionel: “And it is. The discount rate is designed to reflect the savings you can make by delaying investment, 10% 8 % are grossly inflated for a GBE.”
Let sees what seven_tech says “8% is a conservative and reasonable rate for a predominantly Government funded utility.” and “8% is a reasonable and conservative rate for government infrastructure.”
Lionel: “You and Turnbull are using figures to indicate savings that can never be achieved by NBN Co.”
According to Dept. of Finance regulations and OECD/World Bank definitions, NBN Co. as a GBE/PNFC is required to commercial return. If it can never achieve even a conservative and reasonable rate for a predominantly Government funded utility, it shouldn’t be classified as a PNFC.
Lionel: “I don’t give a toss about what you or someone else use as a standard figure for private Telcos, NBNCo isn’t one.”
Making it up as you go, just like the previous NBN which promised a 7% IRR,
Paul Budde is a biased Labor shill! etc.
Paul Budde is no biased Labor shill.
“with these very important principles in place..some of the suggestions that BuddeComm has made in the past include:
– Use good existing infrastructure (HFC and ADSL2+) as long as possible and concentrate the rollout of the NBN in those areas where it is needed most, still linked to further FTTH upgrades when the need for such infrastructure becomes more urgent.
– Extend the rollout of the NBN over a longer period of time, eg 15 years, based on when the old infrastructure will no longer be able to deliver the quality of services society needs.”
These are pragmatic principles that are the very principles underpinning MTM and government policy i.e use good existing infrastructure (HFC and ADSL2+) as long as possible, concentrate the rollout of the NBN in those areas where it is needed most and extend the rollout of the NBN over a longer period of time eg 15 years based on when the old infrastructure will no longer be able to deliver the quality of services society needs.
http://www.buddeblog.com.au/frompaulsdesk/the-coalitions-nbn-plan-is-starting-to-look-interesting/
Wow, once again cherry-pickin’ I see…
How many pro FttP articles did you ignore until you found that one? I see a clear pattern with your comments steve…
From my understanding Paul has long suggested FttP is the correct and smart way to go…and I think everyone (well everyone but one maybe) recognises this.
BUT I’d also suggest he’s thinking, if were are going to be dumb, just as Malcolm and his faithful messengers insists we must, well we may as well use HFC…
See below. Paul still appears to be all pro-FTTP, but operates on the belief that we should serve underserved areas first, and those areas that are already (at least nominally) well-served (by HFC and ADSL2+) will be pushed out to the end of the rollout. Nowhere does he make the following suggestions:
– Purchase Telstra and Optus CAN and HFC networks.
– Roll out FTTN.
– Make major investments in these networks to bring them up to speed (no pun intended) and rebrand them “NBN”.
Either steve was being deliberately misleading, or he misunderstood Budde’s comments completely. I’ll give him the benefit of the doubt and assume it is the latter.
Seeing such a clear pattern of deflection, ignorance of facts and the cherry-picking of some figures whilst excluding others at each and every comment, sadly but predictably, I’d guarantee the former…
Interesting:
http://www.buddeblog.com.au/frompaulsdesk/the-coalitions-nbn-plan-is-starting-to-look-interesting/ dated Tuesday, November 13th, 2012 at 4:44 pm
http://www.buddeblog.com.au/frompaulsdesk/the-end-of-hfc-and-fttn-networks-is-approaching/ dated Thursday, February 21st, 2013 at 9:31 am
Maybe he’s had a change of heart. (Are you capable of the same?)
Actually, that’s too simplistic and inaccurate. There’s been no change of heart, it’s just a misunderstanding on your part.
Here is what the MTM and Coalition government policy says:
– Purchase and use CAN to build FTTN to service Australia (this involves major investment in these areas)
– Purchase and use HFC (this involves major investment in these areas)
– Make additional investments in those areas later to meet some arbitrary minimum speed requirement (not guaranteed to the customer)
– Eventually “tear it all up” and build FTTP anyway
Here is what Budde says:
– Roll out to areas that do not have decent ADSL2+ and HFC infrastructure (no initial investment in ADSL2+ and HFC areas)
– After underserved areas have been served with FTTH, replace ADSL2+ and HFC with FTTH
– Increase the rollout time frame to allow for this change in approach
Do you see the difference?
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