This article is by Peter Gerrand, Honorary Professorial Fellow in Telecommunications at University of Melbourne and the managing editor of the Telecommunications Journal of Australia. From 1991-1993, he was the General Manager for Network Strategy and Forward Network Planning at Telstra. It first appeared on The Conversation and is replicated here with permission.
“The superfast broadband of the order of 100+ megabits per second (Mbps) and into the gigaspeed bracket is de rigueur for any nation purporting to be a developed and advancing economy.” – Phil Ruthven, “A Snapshot of Australia’s Digital Economy to 2050”, IbisWorld, June 2012.
opinion The Coalition should firstly be congratulated upon launching today a detailed, closely argued policy proposal on their alternative vision for the National Broadband Network and how it can be implemented “faster” and at less cost than the current NBN.
Malcolm Turnbull has moved the Coalition light years – or at least several million fibre optic kilometres – from the Luddite criticisms thrown up by the Opposition during the 2010 federal election campaign. And today, with his party leader Tony Abbott, he has released a coherent policy five months in advance of the 2013 election, in contrast to the Opposition’s broadband policy release just three days ahead of the previous federal election, on 13 August 2010.
That said, it was sad to see the number of debating tricks employed in launching his national broadband policy.
There was the conflation of the government’s NBN policies mark I (2007) and mark II (2009), and the selective omission of the “externalities” in the rollout of the NBN — (particularly the long negotiations with Telstra and the business-model-changing interventions of the ACCC) — in order to trash the reputations of both NBN Co and the government, in failing to meet rollout targets announced in either 2007 or 2010.
And there is the claim that the NBN, as a “government-owned telecom monopoly”, somehow inhibits retail competition. In contrast, the Australian telecommunications industry recognises that it has only been through part of the current government’s NBN policy — the structural separation of Telstra and the positioning of the NBN building blocks as wholesale resources available to all retailers on equal terms of usage — that will allow totally equitable retail competition in the supply of broadband.
There was also Mr Turnbull’s claim that in choosing the cheaper FTTN (Fibre to the Node) option, rather than Fibre to the Home (FTTH), the Coalition is following world’s best practice. This political delusion – not shared widely within the telecommunications industry – was recently burst by independent journalist Stuart Corner’s article in the Telecommunications Journal of Australia, “The politics of speed”, where he found that “82% of investment in FTTX (FTTH or FTTN) in 2012-17 in the world’s developed countries is estimated to be in fibre-to-the-home (FTTH)” – i.e. only 18% of that investment is destined for Mr Turnbull’s preferred FTTN.
These debating points must be debunked because they are part of a smokescreen that portrays the current NBN as being needlessly gold-plated, incompetently managed, and ridiculously tardy in meeting Australia’s real needs for broadband – none of which I believe to be true. The reality is that we now have the chance to compare two policies pitched at different timescales of infrastructure need and use – and there are arguments in favour of both approaches. But we need to remember that, under both policies, there will be a world of difference between the timelines set in politicans’ election promises and the hard engineering realities of managing any project of such massive scale.
Let me briefly compare the essential differences between the two policies. First, timescale. The current NBN is based upon meeting bandwidth needs, in the case of the lucky 93% with FTTH, for perhaps three decades beyond the rollout completion in 2021. (Just as the copper access network rolled out by the PMG in the 1950s was intended to last – and generally did last – for a further 50 years.)
The current NBN’s vision satisfies two key drivers. The first is the need for Australia to grow its digital economy, as the only likely growth sector that can complement, and ultimately overtake, the mining industry. The Ibisworld report, from which I have quoted above, lays out a well-argued scenario in which by 2050 some 20% of the national GDP will be generated by the digital economy – if it is underpinned by ubiquitous high-speed broadband.
The digital economy is already a larger employer than the mining industry, and it has the advantages of providing a much greater diversity of highly paid, high-value jobs, which can be teleworked virtually across Australia – given enough access bandwidth.
The second driver is the inexorable historical growth in telecommunications access rates, which has been exponential since the 1950s – see the attached graph from Rod Tucker’s 2010 article, “Broadband facts, fiction and urban myths”.
This exponential growth prediction, which is the telecommuncations industry’s equivalent to Moore’s Law for computing, continues to get empirical support – for instance, Google is currently trialling 1 gbps applications in Kansas City.
The current NBN policy is predicated upon building the major infrastructure – the network infrastructure – only once, and its lasting for decades. For this reason, the current NBN policy must be seen as being far more future-proof than the alternative policy. Optical fibre, already capable of supporting bandwidths in terabytes per second, is considered to have a lifeteime of 40 to 60 years. (A caveat is that the new satellites to be launched in 2015 to support the 3% of homes in remote areas will probably need to be replaced in 15 to 20 years. The fixed radio technology supporting 4% of premises can be replaced or upgraded much more cheaply, but should last a good 20 years without upgrades.)
If the current NBN policy is predicated upon providing international competitive advantage to Australia over several decades, the Coalition’s NBN policy can be fairly categorised as a more cost-effective catch-up across Australia of the bandwidth that most households need now, in two stages.
Firstly, within the parliamentary term ending in 2016, their plan aims to universally match the 25 mbps “bar” now set by NBN Co’s fixed radio technology, announced two months ago (an impressive doubling of the previously planned 12 mbps download speed, due to improvements in radio technology). In a second stage, to be completed by 2019, they aim to provide 50 mbps minimum access speed to all FTTN and FTTH premises. This is an excellent aim for a cost-effective short-term (six year) plan.
However, in many cases, the proposed new FTTN technology intended for use in 71% of premises will not reach this speed in areas of low copper reticulation (British Telecom’s solution in the UK requires the use of two pairs of copper per house connected, which is not universally available here), or in areas of ageing or particularly water-prone copper cables (a frequent situation).
The Coalition’s solution is to provide FTTH in these exceptional cases. Without access to their business plan, one cannot see if they have factored in enough cases to affect their budget.
Four quick points in conclusion. Firstly, the Coalition has minimised the likelihood of any rural backlash by basically leaving the current NBN plan intact in rural areas. Secondly, it has not (at the time of writing) released its estimate of the cost of paying Telstra to maintain in working condition the copper network that will link its new FTTN cabinets to customer premises. There is reason to believe that the Coalition will have significantly underestimated this.
Thirdly, the Coalition has behaved extraordinarily like the Gillard government did in 2010 in building an investment case for the NBN that fails to factor in the real benefits to the nation’s GDP, such as to the digital economy – let alone attempting to “capitalise” the benefits of social inclusion through facilitating universal broadband access.
Instead, the Coalition’s proposal reads like an engineering investment case alone – an impression reinforced by Mr Abbott’s statement today that his NBN, unlike the current one, will provide “a real commercial return”. Given all the cherry-picking that their NBN policy will allow to private developers, free at last to directly compete with the NBN’s access infrastructure wherever they can make a profit, there is good reason to think that the Coalition’s NBN will, as a result, inevitably operate at a loss.
Lastly, the Coalition makes much ado about saving taxpayers’ money through reducing the scope and scale of the NBN. In fact, the only taxpayers’ money saved would seem to lie in lower interest payments made by Treasury in the period before the NBN breaks even – in a period of historically low interest rates. These savings need to be offset by the loss to the economy of all the construction jobs associated with FTTH – the most labour-intensive part of the current rollout.
Further reading:
A tale of two NBNs: the Coalition’s broadband policy explained
This article was originally published at The Conversation. Read the original article.
So they need to rollout cabinets that are within a distance of 450m of a household to achieve their 25 mbs minimum speed targets.
http://boundlesscomms.com/assets/templates/boundless/images/BroadbandSpeedComparisons.png
They need to achieve this before the end of 2016. That’s after they renegotiate the contracts with Telstra, where they’re not going to pay Telstra any additional money to takeover the ownership of their copper. When the existing NBN contact is to lease Telstra’s conduits. They’re also going to conduct a series of audits on the project. I’m not sure what their start build date will be.
” I’m not sure what their start build date will be.”
About 2016, when the negotiations with Telstra are likely to finish.
Yep, Telstra dragged out it’s NBN contract discussion by 6 months, which NBNCo allowed 12 months for.
It’s sad, every single hold up for NBNCo has been caused by the, supposedly, more efficient “free enterprise”…
those who forget the past are condemned to repeat it
#fraudband !!! favourite word of the day!
good / cheap / fast …. you get to choose 2 , and they just chose 1 -> cheap
They chose it and failed to achieve it. Slightly cheaper now for more expensive in the long run is only cheap if you expect to die in the next couple of years.
Excellent review by Mr. Gerrand. Spot on from where I sit and also adds a few elements that I had not thought of – thankyou.
It’s strange – the fellow in the cubicle across from me complains his adsl barely makes 4meg on a good day and is up and down like a yoyo but keeps banging on about how much the NBN will “cost” per person, etc, etc….
I looked up the current budgeted expenditure amount for the government last night (around 380 billion for this year).. and the current NBN is around 37 billion…. so for around 1% of yearly budgeted expenditure for the next 10 years, we could have a full FTTP rollout (yes, I know they are borrowing so the actual dollar cost is the interest in the interim, more or less)… doesn’t sound very expensive to me.
I don’t care if the “cost” is $50b or $60b.. it’s still a pretty small amount of money, spread over years, for the right infrastructure at the right time for the future. Anyone who says otherwise is a fool or has an agenda.
Instead, it appears we are doomed to have a hodge-podge of different technologies providing our internet needs for the forseeable future. yay.
We will be the laughingstock of asia (you do know that the next 100 years will be all about asia don’t you? or did you think our US pals will dominate for another 100?).
When talking about economic benefits of broadband, one should be careful not to confuse benefits of NBN and the benefits of broadband, or benefits of universal broadband. Given the high end-user cost associated with NBN and the extremely slow roll-out progress, it is difficult to argue that NBN would have led to anything near universal broadband in the short to medium term. Further, connections to productive elements of the economy (businesses, schools, hospitals, institutions, etc) are mostly now, and will be, direct fibre links. To claim this as a benefit of the NBN is false. To claim the benefits of any service that is possible at ADSL2+ speeds as a benefit of the NBN is also false. It is bad economics.
The incremental benefits of the NBN are those services that cannot be delivered at speeds below ADSL2+ levels. At the moment this is limited to video services (on-demand HD 3D video). Emails, websites, browsing, e-commerce, etc can and are delivered by the ADSL2+ speeds.
When the true marginal benefits of the NBN are assessed against the costs ($47bill +), it is clear why no other government or business in the world has proposed such a venture.
This article is a classic example of why highly-intelligent academics who are trained in one field (engineering/physics) should not write about matters in another where they lack the necessary competencies.
This article is littered with so many glaring economic fallacies… not to mention his highly inaccurate statement:
And there is the claim that the NBN, as a “government-owned telecom monopoly”, somehow inhibits retail competition.
Malcolm has never said that. The author is clearly unable to appreciate the difference between competition in the network infrastructure provision part of the telco value chain and the retail access provision component. Such a basic concept.
*shakes head*
Please point out the economic fallacies
The most glaring economic fallacy is forgetting the time value of money. If we need 1Gbps speed in 50 years time, it is much more economic to invest in that service closer to the date of use (ie, in say 45 years time). If adopting a FTTN solution rather than a 1Gbps solution saves $10 billion in costs, delaying that expenditure for 40 years saves around $60 billion in interest at 5%. This impact is magnified given the massive declining price trend of technology. Who knows how much, or what technology will be best to delvier 1Gbps in 45 years time?
If we need 1Gbps in 45 years’ time, it will be because a new product or service has been developed that makes use of that capacity.
If we have that capacity ahead of time, we can be the place where that product or service was developed.
What is the economic benefit of that?
I only did Yr 11 Economics and can tell you are ignoring things like Opportunity Cost .
Are you also ignoring the fact that this rollout will take longer than 5 years? Your entire scenario of rolling out the NBN when demand for it exists is the height of stupidity. You can’t just instantly rollout a network when the demand for it exists. All infrastructure development is about planning to meet future needs to prevent constraints on growth.
Just look at Perth where the State Government upon getting into power cancelled all future train purchases so they could divert that money to what they considered more pertinent developments like the new Ent Center despite all the protests from public servants in the Department of Transport.
Sure enough a couple of years later, more trains are needed to meet the growing needs of the population and they go to purchase some. The public servants from the Department of Transport then point out to them the dozens of memo’s and letters they had sent explaining that all train purchases had a decade long lead time and that no new ones would be available till 2021.
Ah well, you’ve got to break a few plebs to make a “born to rule” omelet.
certainly haven’t forgotten opportunity cost. key policy question is whether the $60 bill in avoided interest can be used for better services, like education reforms. no doubt $60 bill in education would do more to promote innovation than the building of spare capacity and excess speed.
Interest on 60 billion is 1.8 billion so 30billion or 31.8 billion
Luke
Interest on $60Bill which will be repaid by the current NBN. The expenditure will take 10 Years to reach $60Bill.
Do you realise what Health facilities and educational facilities currently pay for their relatively limited broadband. I have seen figures posted on Whirlpool from individuals in those type of facilities who are aware of the price they pay for their broadband. Many are paying up to $100,000 + p/a for a much lesser service, so they could save up to 90% of cost and get 5xDownload/upload and 4xquota in one example quoted.
Guess what they will save far more than the interest bill in that alone freeing money for other purposes, let alone Radiologists and some Specialists can cover peak on call demands from home rather than travel time being part of the equation
There is one thing often forgotten in those price comparisons, that is that speed and limit is one component of the the price equation for those type of connections. There will be contention 1:1 contention up-time guarantees and redundancies that will still need to be paid for. What I think will change is the fact that the NBN might open up a bit more competition in the space with regards to small and medium business including things like small clinics and health precincts which will drive down the price of these premium style connections. I’ve already seen it happen with the back-haul black-spot project reducing the cost for our 10:10 connection by about 50%, while there wasn’t a big a reduction in the higher speeds due to the large cost being last mile service as you can’t leverage copper at the higher speeds so we should see a similar reduction when fiber reaches our door in higher speed service once NBNco sorts out real business grade solutions with regards to SLA.
My concern with the Liberal policy is it might actually see an increase in cost for these business grade services as FTTN breaks them, as I doubt ISPs will be able to install there own hardware in the nodes to ensure SLAs are meet and enable synchronous connections, so at a minimum small and medium businesses will be forced to pay for the last mile fiber as we wont be able to use the copper or we may be forced to bypass the node completely and be up a huge increase in cost.
I would really like comment from an ISP insider on this as this is my guess from the outside looking in.
No government borrows for education (or health), both of which are on-going costs. Your not actually an economist, are you?
We are currently (as a nation) borrowing for education / health / welfare spending. It is very common around the world and currently the Greens as a political party are advocating that we do exactly that.
For buildings, yes, not for the teachers, doctors and nurses to fill them…
So we spent 44bn on non-recurrent expenditure last financial year?
Also, going on their past record (and philosophy) the Liberals will actually cut spending (and jobs) in education and health…both of which actually need more (and will get more under Labor thanks to Gonski and programs like NDIS).
AJ and Abel, the 60 billion he is referring to is a sum total of interest saved given his assumptions. It is not a figure against which you can then calculate interest again.
I would say however that any potential interest is currently planned to be capitalised and covered by revenue. This is the point you would have to argue.
Any amount that does get paid out of the budget would have an opportunity cost as described even if it is eventually paid back.
Luke, appropriate modelling of opportunity costs should include the benefits of each opportunity in order to reflect a truer cost. Focusing simply on the cost side is ignoring the benefits of an FTTP network vs an FTTN one. Or do you deny there would be ‘positive externalities’?
You seem to have a few fallacies of your own.
Firstly, Malcolm expects 50% of his investment to be applicable to a future upgrade to FTTP. You cannot simply stump up the extra 10 billion (going with your figure) to achieve the upgrade. Neither would the $10 billion be an upfront figure, it would be spread out over the course of the rollout. And even then it is arguable that it would be delayed for 40 years.
Secondly, the ‘massive declining price of technology’ is not applicable to the rollout in general because the technological items involved are only a small fraction of the price. The majority of the cost is labour which as GT noted below might remain static in real terms (yet another separate argument but let’s go with GT’s case). Further, whilst any given technological plant will likely fall in price it is unlikely that we’d be purchasing the exact same plant in 40 years to that which we’d buy if we were spending now.
Thirdly, when it comes to predicting network technologies of the future it is not so hard as you make out. If you follow the technology and science sites you can see where current R&D is making progress. On the horizon are various technologies which might be commercialised in the coming decades but by far the most promising ones are fixed line or point to point. One example is quantum networks but that will have greater implications for security than bandwidth. Purely optical networks will arrive first but that will only necessitate cheap technological equipment changes, not necessarily relaying fibre. There is one development around reducing the relatively slow speed of the propagation of light through fibre. This uses a hollow fibre to reduce the refraction of light and hence effectively ‘speed-up’ the light but it has a maximum theoretical increase of ~33%. Which is not significant when you consider that terabit fibre-optics is where CAN technology is heading now. But even that has to become commercialised, affordable and have standards defined.
Another thing you are ignoring is that the maintenance costs of maintaining the copper network are drastically higher than that of maintaining a fiber network.
We know Telstra spent $31B over the last decade on maintaining it’s copper network. Essentially $3B a year.
Most experts are predicting the fiber NBN will cost somewhere in the vicinity of a third to half of this to maintain.
The next thing to consider is that the Liberals plan involves them taking ownership of the entire copper network in 2014 when their plan commences. This would mean they would immediately assume liability for all of the maintenance upon starting their plan.
The fiber NBN however hasn’t assumed the maintenance costs for Telstra. Instead they pay Telstra to deactivate their services as they rollout in an area. Turnbull has stated he expects this will turn out as a similar total expense but he is ignoring something rather important. The fiber NBN will only be paying maintenance for the network they have laid out at that time.
So by the time the VDSL NBN finishes rolling out in 2019 they will have accrued about an extra $18b in costs above their current stated costs. By the time the NBN finishes rolling out (latest 2021) the Liberal plan will have spent at least $24b more than Turnbull is claiming.
The NBN has actually factored in their maintenance costs (as well as interest payments etc.) into their figures already.
Now after that lets assume the fiber NBN costs half what the VDSL network costs to maintain (I’m being extremely generous here).
This means in 5 years time they will have accrued another $15b in costs. Meaning the Liberals plan will have cost an extra $39b in operating costs at the 5 year mark to Labors plan with $7.5b.
10 years: Libs $54b vs Labor $15b
20 years: Libs $84b vs Labor $30b
How’s that stacking up against your interest savings by going the Liberals plan? They pretty much cancel each other out. Only at some point there with the libs plan they are going to have to roll out FTTP and so there’s another $20b – $30b expense even if they do manage to recoup half their costs.
Basically the Liberal plan costs more money and provides a lesser result. It doesn’t even save us money inside the roll out period.
To add to what was said above, the majority of the cost of building the FTTP network is in labor costs, not in the equipment costs. Labor costs will not reduce as time goes on, but increase. So essentially all the FTTN plan is doing is delaying those costs. Which means the interest from the loans can be factored out. So the only ‘time’ value is in having the FTTP service sooner rather than later, because these services bring all sorts of benefits and value to the community and australia.
Furthermore its not so much the download speeds that will be required sooner, but the upload speeds, especially with cloud services emerging and becoming more popular. Current upload speeds are poor, with most plans giving a max 1mbps (best effort). With the FTTN plan we only get a max of 5mbps (best effort). Under the FTTP we get 40mbps+, you could even get symmetrical services. Currently most people cannot stream HD video from their homes (skype, conferencing etc), you could only just do it on FTTN but you severely disrupt all other traffic, inhibiting all other users.
To add to what was said above, the majority of the cost of building the FTTP network is in labor costs, not in the equipment costs. Labor costs will not reduce as time goes on, but increase. So essentially all the FTTN plan is doing is delaying those costs. Which means the interest from the loans can be factored out.
Pure nonsense. The time value of money (or opportunity cost) has a nominal component and a real component. If you want to factor in a gradual trend of rising nominal prices and costs, that’s perfectly valid. In such a case where labour costs are expressed in nominal terms, the discount rate should also be a nominal one (and include an inflation premium) to be consistent. The end result for DCF analysis is that the inflation adjustment factor for the numerator cashflows cancels out the inflation premium incorporated in the discount rate. This is hardly suprising — opportunity cost of capital is a real phenomenon. Factoring in inflation (or playing around with the analytical numeraire) does not extinguish the cost of capital.
All well and good, but aren’t you forgetting the ‘future value’ component of the investment in the NBNco it’s self?
I think you miss the point. If it only costs $8b more to build FTTP than FTTN and that cost is mostly due to labor, cheaper technology in 5-10 years time wont change the cost significantly to warrant waiting. The cost of labor will not change significantly in that time. So why wait?
Furthermore, delaying to save on interest (with a AAA credit rating it is comparatively small to the total cost) makes no sense. If NBN co has to borrow an extra $8b now, or in 5-10 years time they still have to pay the interest. Besides its not like the taxpayers have to pay the interest. The money will be paid back and make a 7% profit.
It would only make sense to delay if it is a long time before FTTP is needed, but i’m saying, and many agree that it will be needed sooner rather than later. I concede that i certainly dont need 100mbps now or in the next 2-3 years and probably even in the next 5. It would be nice and i could make use of it, but i dont need it i can get by with FTTN speeds. What I do need right now and increasingly as time goes on is good upload speeds and reliability. Sure with FTTN (50/5mbps) it would take me only ~6mins to download a 2gb file, but it would take at best ~1hr to upload it. Most people will only get 3-4mbps upload speeds if that, so you can expect anywhere between 1-5hrs. In that time my net could drop because it started raining or from other copper related issues, and i lose the transfer. With FTTP (100/40mbps) it would only take me 7mins to upload the same file with significantly better reliability.
The real value of the FTTP solution is in its upload speeds and its reliability.
True, and there’s all the Cloud stuff as well, a good upload speed there makes a lot of difference to things like Dropbox and off-site backups, etc…heck, even just using RDC/RDP over a decent upload connection makes a world of difference..
I don’t get what you are saying about labour costs?
Are you claiming that labour costs will increase significantly ABOVE inflation? i.e. labour costs will increase in real terms?
Or just that the price of labour increases due to inflation?
N.B. The NBN business plan relies upon labour costs not increasing significantly in real terms.
I mean labor costs will be more or less the same and only increase with inflation.
Just as a heads up about NPV or IRR calculations,
They are normally done in “real” terms not “nominal”.
There would only be a difference due to inflation if the rate of inflation was different for expenses growth compared to revenue growth. Otherwise the two rates of inflation will cancel each other out and there will be no difference between real or nominal calculations.
N.B. The NBN business plan relies upon labour costs not increasing significantly in real terms.
[in Borat voice]
Haha! Nice one! You caught him out with his BS… High Five!
The money we borrow has interest a lot less than inflation, so the labour costs will actually be greater if we leave it.
5-10 year bond yields are not below 3%, let alone near 1% ( a lot less than inflation) which definitely indicates the markets expectation of interest rate movements in the future.
Since that you cant borrow money through long term bonds at below inflation rates, how do you beat labour inflation?
This assuming inflation of ~3%.
A very valid point on the inaccurate statement.
To expand on that, Turnbull was expressly criticising the decision of the ALP to contractually bind Telstra and Optus into not providing voice or broadband services to premises over HFC once connected to the NBN.
Considering that the Coalition will roll our FTTN to area’s that have HFC in place, this will create direct competition between the networks/retailers. In this particular case, where a premise will have access to both FTTN and HFC and is free to switch between them, I believe it will undoubtedly benefit the consumer.
Whilst this free market to approach to retail infrastructure is good, under the ALP FTTP plan, would it come at the expense of creating a patchwork network where users that decide to stick with HFC, refuse a FTTP connection?
What is the greater benefit – free market retail infrastructure or a nationwide standardised network?
Personally, I prefer the benefits of a standardised network.
Considering that the Coalition will roll our FTTN to area’s that have HFC in place,
No actually, they’ve said they will get the telcos to open up their HFC networks so the RSP’s can access them (something the telcos have said in the past as being impossible and/or very difficult). They (the Libs) already stated HFC areas are low priority and presumably make up part of the number in the reduction to 71% to get FTTN.
I expect those “discussions” would take longer to complete than the NBNCo negotiations over the “pits and pipes” deal took (which ended up taking 18 months).
It surprises me how often people make this assumption.
The coalition plan as it stands is actually the same percentage in terms of satellite, fixed wireless and fixed line at 3%, 4% and 93% respectively. The difference being that they break down the 93% as 22% FTTH and 71% FTTN. The FTTP component represents work to date and greenfields. Whilst the 71% would include any HFC footprints not yet covered by fibre (not sure if any have been). MT has stated though that the HFC would be overbuilt last.
And he’s going to allow infrastructure competition but hasn’t modelled what effect it would have on revenue…
I suspect that once the time comes they’d rationalise the non-rollout of FTTN to HFC areas as “Well, they already have high speed internet, so why bother?” given their austerity mind-set. True though, that’s not officially part of the plan.
Heck, as long as they can sort out the RSP access to the HFC network so there’s competition and pricing parity to the NBN plans, I might even be OK with that as a short term (~10Y frame) solution
Leafing through the Coalition’s NBN policy document, they only talk of lifting the contractual obligation where voice and broadband could not be provided to premises that had been cut over to NBN. In return for this, Telstra and Optus would be required to sell the services at the equivalent wholesale price or lower to that of the NBN. Considering that Telstra and Optus own the HFC networks, they would be in a postition to offer very competitive pricing.
No-where have I read in the policy document that Telstra and Optus will be forced to open up wholesale access to the HFC networks to RSP’s. When directly asked about it during questioning, Turnbull was quick to sidestep the question and focus on ‘the monopolisation of wholesale infrastructure’. This may have changed since yesterday but I doubt it.
As for the effect on revenue, it would of course be lower due to this competition. Whilst we could argue that this is better for the consumer, it isn’t better for the tax payer.
I was going off his Commsdat speach http://www.malcolmturnbull.com.au/media/speeches/speech-to-the-2013-commsday-summit/ (it’s near the bottom, but it is a bit vague about what exactly he’ll “open”.
“And there is the claim that the NBN, as a “government-owned telecom monopoly”, somehow inhibits retail competition.
Malcolm has never said that. The author is clearly unable to appreciate the difference between competition in the network infrastructure provision part of the telco value chain and the retail access provision component. Such a basic concept.”
http://www.brw.com.au/p/tech-gadgets/abbott_turnbull_detail_coalition_L8WKnGCmk8EZueu8fYSTGJ
6th paragraph down…
“Free enterprise” has had many decades to invest in the “network infrastructure provision part” of the telco value chain, and yet they haven’t except for high return areas. This is why the government needs to step in now before things get even worse than they already are for those outside `burbs (and even some of those in them).
This stifling competition spin has been there since 2011 – http://www.computerworld.com.au/article/381473/nbn_will_stifle_competition_turnbull/
That being said so thats *one* “economic fallacy”. Where’s the rest? I thought the article was riddle w/ them…
While i have always encouraged debate ( i mean why else would u b here) there are some people with a certain agenda, that no matter what the issue is they will always side with their religion/Politics etc that they either grew up with or was hammered home, The sad aspect of this is people become net bots, Net bots will do what ever the Murdoch/Abbott hackers want,
Now what this forum is about is the truth no BS, So if you want to talk about the NBN please talk about the facts and not about BS, Sorry but unless u know what u are talking about please dont add to the already huge amount of BS that is being said about the most important infrastructure that Australia has ever made. We are talking about the BACK BONE of Australian communications. All the other wireless comms etc are add ons.
A very good read, and I do agree for the most part.
One point though, Turnbull anticipates acquiring the copper at little to no extra costs (I’d still like to see how he achieves that!). Therefore it would be NBN Co’s responsibility to maintain. And I do believe there is a figure of anticipated line replacements but I can’t find the reference right now.
I appreciate that MT has released his plan and put a lot of effort into it, but it doesn’t compare very well to the level of detail in the NBN Co plan (as you would expect given the resources of each party). There are significant holes.
The largest being the effects of infrastructure competition cherry picking the lucrative markets. By his own free market ideology the market will provide competition wherever profitable thereby leaving his NBNCo to support the unprofitable areas but unable to cross-subsidize from the profitable areas.
> One point though, Turnbull anticipates acquiring the copper at little to no extra costs (I’d still like to see how he achieves that!). Therefore it would be NBN Co’s responsibility to maintain. And I do believe there is a figure of anticipated line replacements but I can’t find the reference right now.
The copper is an interesting factor. On one hand you hear people claiming that the copper has no value and that costs of maintaining are expensive. On the other hand you have people arguing that Telstra will want a small fortune for it. You cannot have it both ways.
The maintenance of the copper is an interesting issue. Even the ACCC cannot determine exactly how much it costs to maintain the copper network. Telstra have been doing their best to inflate the cost of maintenance in order to maintain line rental fees.
“On one hand you hear people claiming that the copper has no value and that costs of maintaining are expensive. On the other hand you have people arguing that Telstra will want a small fortune for it. You cannot have it both ways.”
Nobody is having it both ways. The more likely scenario is the copper as a going concern is not worth that much. As metal, there would certainly be a value. But with regards to the coalition, Telstra will want a big fortune. Why? Simply because without it it is goodbye LNP plan. Simple supply and demand.
The maintenance of the copper is an interesting issue. Even the ACCC cannot determine exactly how much it costs to maintain the copper network. Telstra have been doing their best to inflate the cost of maintenance in order to maintain line rental fees.
“On one hand you hear people claiming that the copper has no value and that costs of maintaining are expensive.”
The logic goes something like this: Labor is planning to overbuild the copper network and decommission it, thus it would provide no value beyond its scrap value.
“On the other hand you have people arguing that Telstra will want a small fortune for it.”
The Liberals are planning to use the copper as a critical part of their plan and have advised the seller to that effect. Telstra suddenly has an asset that is in demand and a captive market.
“You cannot have it both ways.”
You can, just not in the same scenario. Can you see the difference?
“The maintenance of the copper is an interesting issue. Even the ACCC cannot determine exactly how much it costs to maintain the copper network. Telstra have been doing their best to inflate the cost of maintenance in order to maintain line rental fees.”
It certainly is an interesting issue. MT would have you believe he has succeeded where you say the ACCC has failed. He puts the maintenance costs at 750 million. Costs that are, by all accounts, constantly rising as time goes by. One could argue that Turnbull has cause to understate the costs because his plan is beholden to them.
You claim that Telstra is pushing up their maintenance costs, others claim that Telstra is neglecting maintenance and has been since long before the Labor plan was made and more so since. One might assume that if the former was true we would have a perfectly maintained, possible even gold-plated, network by now. But we don’t.
This nonsense about being a ‘saleable asset’ after crippling it’s potential to capitalise on profit potential, introducing significant competition and substantially increasing its ongoing cost base (electricity usage seems to be a subject very few are talking about right now) will leave them with debt laden infrastructure hemorrhaging money. The idea that they will be able to offload this without significant ‘incentives’ (read: bribes) is laughably naive (or simply disingenuous – it may be how they’ll get through their Telstra negotiations, promising to deliver the new fibre backhaul network to Telstra on a platter once it’s finished).
MT must realize he has the task of proverbially selling ice to the Eskimos with this alternative offering. All it does for us, is protect Rupert’s and Gina’s asset profit forcasts by garrotting bandwidths, which I am sure all of us agree with. *cough* *cough* *hack*
MT must realize he has the task of proverbially selling ice to the Eskimos with this alternative offering
Of course he does, which is why he tripled the actual cost of the NBN.
Welcome to the Malcolm Turnbull version of “honesty in politics” :o)
Just as a question, the author criticises both the ALP and LNP for not focusing on or capitalising the benefits from “social inclusion”.
What does this mean? What need is being addressed by faster internet speeds that is lacking currently? (Faster than ADSL2+ speeds) Who is lacking it?
Or is this being confused with positive externalities?
The ALP actually does include it, http://www.socialinclusion.gov.au/about/what-social-inclusion
It could be argued (pretty easily) that they don’t focus/capitalise on it more though
Thanks for the link.
It just still seems to be another way of rebadging policies targeting education / disability / disadvantaged groups.
I agree with the gist of what he is saying in that indirect benefits should be identified and emphasised, but it doesnt seem to be a distinct category just another name for different categories. All it does is create confusion and allow for obfuscation and spin by not having clearly defined guidelines.
I think it’s more accurate to say it’s different ways of doing the same things.
Take education as just one example, someone that couldn’t get to a school/uni for classes can now do them remotely. Hence, that person is included, rather than excluded, from education.
But then why isn’t that called an indirect benefit towards education, or positive externality in education?
We can measure education outcomes and the impact the NBN will have on them, but by using terms like “social inclusion” there are no longer any indicators for whether we have actually achieved anything.
The same would go for health etc.
I am very supprised at the response from the liberal party on this whole issue. At this point in time the NBN is one of the few real vote winners in the ALP’s war chest, if the libs gave it bipartisan support it would have removed it as an election issue giving them a huge advantage. But now they are stuck defending a unpopular and easily attacked broadband policy and handing the advantage back to the ALP.
I strongly suspect that MT was origionally pro NBN but has been forced to follow the party line and sell thier current policy against his better judgement.
Yeah, me too, seems obvious to the rest of us.
I do love how the anti nbn brigade state the money could be used for hospitals or schools….
you know ALL the things a coalition government love spending money on…..
I love it when people talk about economics as if it was an exact science. As an economist friend of mine used to say. Economists have predicted 6 out of the last 4 recessions.
The liberals vision is tunnel vision
The Coalition’s NBN plan is only being considered now due to the lack of transparency in the Federal Government’s decision in choosing FTTH in the first place; and the poor mismanagement by NBNCo in delivering on targets. If both theses issues didn’t exist than Malcolm’s plan wouldn’t be getting any oxygen.
The Coalition’s NBN plan is an option that should have been reviewed and debated 4 years ago.
Neither side is looking a winner at the moment.
Headsup Renai!
The link to Stuart Corner’s article links back to Delimiter, not the actual article which is http://www.tja.org.au/tja/index.php/tja/article/view/400/812.
Suck it up boys, the NBN waste is about to end.
If you really believe the NBN fibre to the door is so good, you can under the Coalition policy pay for it. According to you its money well spent.
A saying comes to mind, the fatter the pig the louder the squeal, and no doubt the fanbois will be squealing very loudly. Because shortly they will have to pay for fibre to the door instead of being underwritten by the taxpayer.
Hey back again to gloat or stir coalition fanboi. Before you get too excited just remember that at least 22% will get it for free. That is not counting those who will get it for free under the current rollout, as well as those who will get it because the copper is rotten, unsuitable or insufficient. how do you like them apples, smarty pants?
Oh, by the way, I will be one of those getting for free. Eat your heart out big boy.
It is not a “triumph of short-termism over long-term vision”, it is a triumph of spin over substance.
The price quoted for their FTTN proposal is construction ONLY. It does not include such things as compensation to Telstra for seizure of it’s copper asset (estimated $15-20 billion). It does not include remediation of that voice grade asset to a data grade quality. It does not include the ongoing maintenance of that asset over the life of the network, Telstra currently spends about $700 million a year to keep it at voice quality (barely) and a data grade network would be expected to be commensurately more expensive. It does not include the electricity costs of the 10,000 to 20,000 nodes Abbott mentioned would be needed.
Put these absolutely necessary costs that MUST be incurred by the very nature of the FTTN network proposed, and you add as much as $40 billion on top of the roll-out construction cost just over the years of the roll-out itself. And remember, those maintenance costs just keep on costing until the FTTN is finally scrapped and replaced with FTTP.
The supposed 2 year earlier completion date ignores the 6 months lost while waiting for a CBA. It ignores the time required to re-negotiate contracts with the build contractors. It ignores the time it will take to retrain the technical workforce to work with a different technology. Most importantly, it ignores the time it will take to negotiate a deal with Telstra for it’s network or worse, teh time the court case will take to resolve if a mutually acceptable deal cannot be reached.
Taking these factors into account, it is unlikely that ANY gain will be made in the roll-out timing and more likely, the completion of the network will be significantly delayed. Certainly, in the short term, all those people in the blue areas (1 year) on the roll-out map are looking at extensive delays, and the green areas (3 year) will have significant delays even should (somehow) the actual roll-out going forward after these delays, actually be faster.
And all this ignores the fact that for all this, only 20% of the current FTTP customers will get it and the rest will get a network capable of 25Mb/s instead of 1000Mb/s, 2.5% of the performance and even THIS is a maximum not typical data rate.
It does not include the electricity costs of the 10,000 to 20,000 nodes Abbott mentioned would be needed.
Are you sure it’s 10-20k? Considering you need to be within 500-600 metres of a node to get 20-25Mbps, I think 20,000 square Km’s wont quite cover it.
“Are you sure it’s 10-20k?”
I was using Abbott’s own best case figures.
apples to apples, oranges to oranges.
CAPEX vs OPEX
Labor’s plan is to have 50% of Australian’s connecting on fibre at 12/1Mbps. The Liberal plan is to start at 25Mbps and work up to 50Mbps. The Labor plan enforces artificial speed limits (remind you of Telstra) where as the Liberal plan lets the technology set the speed limits.
Under the Labor plan for 1Gbps, NBNCo charges $150/month ($1800/year) wholesale for AVC. Under the Liberal plan $3000 upfront buys you the same performance. I know which one I prefer. With these numbers more people will be on 1Gbps under the Liberals than Labor (less than 5% in 2028).
Many small towns (less than 1000 premises) will be better off because they have a chance that FTTN will be installed whereas under Labor the only option is wireless.
Typical Labor brilliance that they can select the better technology and yet make a complete mess of the infrastructure. Under just about all measures the country will have better broadband under the Liberals – pretty sad isn’t it.
1) If you read the Coalition policy you would note they are assuming the existence of speed tiers as well. Speed tiers are a business decision not a policy one, and a minor one at that.
2) Currently there are more people than projected even accounting for earlier adopters connecting to the 100Mbps according to most ISPs.
3) Your assumption that once you have purchased the infrastructure to get 1Gbps you will be offered 1Gbps services at nominal cost compared to VDSL plans is unfounded and inconsistent with behaviour we are seeing with organisations that do FTTHoD like BT.
4) You neglect to mention that that cost you have quoted is the inital cost of a 1Gbps plan.
5) FTTP networks are designed to reliably deliver 100Mbps, just because Google Fibre is giving away 1Gbps does not mean other organisations will, or even have to, especially not right away. BT in the UK is is only offering a third of that as their top tier.
6) If you had read the policy you would note that the proportions, that is 93% fixed-line, 7% wireless and sat are unchanged. The only change is that the 93% is being split into FTTH and FTTH. Rural towns that would get wireless under the NBN will still get wireless under the Coalition.
7) In both cases the councils and individuals are free to try and arrange an upgrade to a full fixed line connection if they are getting wireless and are able to independently organise the funding.
8) You continually spread this misinformation on every NBN article I have thus far read since the release of the Coalition policy. That includes articles not on Delimiter. Although I know we cannot do anything about your contributions on other sites I will remind you there is a comments policy here, and frankly Mathew, after various attempts to play devils advocate, acknowledge areas of your points where they have merit, and discuss alternative options with you, your position remains unchanged, and in my opinion, is now in clear violation of the policy.
Please cease and desist, as I said before you’ve been heard.
“Labor’s plan is to have 50% of Australian’s connecting on fibre at 12/1Mbps”.
Surely, it is time for you stop pushing this silly point ad nauseum. I’ll tell you why. Labor has no such a plan.
NBNco has conservatively forecast that 50% would connect at that level. Now, can you see the difference between your statement and the truth. Had NBNco been less conservative and the figures did not match, it would been accused of not reaching its forecast.
Furthermore, had it been Labor’s plan as you continuously and incorrectly repeat on every forum you visit, they would not have succeeded given the actual ratio of connection at much higher level.
Additionally, NBNco (not Labor) doesn’t enforce artificial speeds, it gives people a choice as some people may not, at this stage need,, 100Mbps. The LNP plan on the other end only provide varying speeds depending on where you live, whether the copper in your area is stuffed or you can afford a few grands. Also, you must have inside information because I don’t think anyone would know what sort of plans will be available under the LNP “lucky dip” broadband.
The last issue, that you seem to have little interest, is the lack of decent upload speed in the LNP offering.
So, you see Matthew, this is the problem with your dislike of Labor. Not only it is causing you to blame Labor when, if a blame was needed, NBNco should be blamed. Secondly, it also severely impair your judgment. You can no longer differentiate between a conservative forecast and a plan to do something.
You talk about Labor’s brilliance (ironically, of course). Yet, what do you think of a plan to build a ‘New” technology relying on a copper network that no one can evaluate how much of it is beyond repair or usable for the purpose you have in mind. If you were that silly, would you add to your silliness by buying it site unseen? Well, your favourite politicians look like they are about to. Forget about a CBA on this one, how about an audit of the copper network before you even have a plan?
I sincerely hope I have got through to you because, honestly, your obsession with Labor’s plan is become not only boring but also worrisome. I hope this helps
Oh, I forgot, and you think that $3000 up front will give you broadband free for life ? Hey, I have got a nice bridge to sell in Sydney; real cheap, want to buy it?
Seems many may have been listening to Alan Jones’ FUD?
Labor: 12/1Mbps, Libs; (up to) 25/?Mbps.
The above 12/1Mbps constantly being quoted here is ancient history.
The Labor NBN version’s minimum plan was revised long ago to a universal 25/5Mbps for all consumers including wireless & satellite connections.
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