full opinion/analysis by Renai LeMay
31 July 2013
opinion/analysis The success of the fibre to the node rollout deployed by British incumbent telco BT, despite its many and obvious flaws, must come as a stark reminder to Australia’s politicians, telcos and regulators of what could have been achieved in Australia over the past eight years if the various players had stopped their incessant, poisoned infighting on the broadband issue and actually got together to make things work.
In November 2005, then-Telstra chief executive Sol Trujillo, who had only stepped on board that July, presented what was at the time a highly ambitious plan to upgrade Telstra’s fixed-line copper network with fibre to the node technology.
At the time, despite all new market dynamics that had emerged in the years since the Howard Government-backed deregulation of the market in 1997, Australia’s broadband sector was still incredibly immature. With the rollout of the HFC cable networks by Telstra and Optus half a decade before largely stopped due to unresolved duplication issues, a new cadre of ISPs led by iiNet, Internode, TPG and others had started deploying ADSL infrastructure directly into telephone exchanges.
The goal at that time was to forcibly unlock the power of Telstra’s copper infrastructure through wresting control of it from the incumbent at the exchange layer. Over the years, the telco’s cadre of ISP challengers would succeed in first removing Telstra’s artificial 1.5Mbps ADSL1 speeds and allowing new theoretical maximums of 8Mbps; ADSL2 speeds at up to 12Mbps soon followed, and eventually the full potential of the ADSL2+ standard delivered speeds up to 24Mbps as standard across the nation.
Witnessing this rollback of Telstra’s market power and also being cognizant of what other global telcos were doing with their own infrastructure (the executive had direct management experience at telcos in both the US and Europe), Trujillo realised what few others in Australia’s telecommunications industry did at that point: Telstra’s copper network would eventually need to be upgraded, and that upgrade would become a matter for national debate, with the Federal Government inevitably stepping in somehow.
So Trujillo decided to get ahead of that inevitable tornado; creating his own vision for Telstra’s copper network, in an attempt to frame the debate along the lines Telstra desired.
The executive’s vision at the time (as detailed in this ancient-looking series of Powerpoint slides) called for the telco to deploy some 20,000 fibre to the node modules around Australian capital cities, upgrading 450 telephone exchanges in the process and taking other steps to ‘condition’ Telstra’s copper network — removing 7,500 of those troublesome pair gain modules and other network pieces that frustrated end user broadband speeds.
The impact of the deployment — be carried out in three years and be completed by the end of 2009 — would be remarkable in terms of fundamental broadband service delivery. Some four million premises — about a third of the total Australian premise footprint of 12 million — would receive guaranteed broadband speeds of 12Mbps. The remaining premises wouldn’t receive the guaranteed FTTN speeds, but many would have ADSL2+ modules placed in their local exchanges, providing a decent boost to broadband speeds.
By 2005 standards, when most Australians were having trouble getting speeds in excess of 1.5Mbps, and many had no broadband at all, it was a fantastic plan. It would provide an immediate speed upgrade to much of Australia and do so quickly — within three years. And, of course, as Trujillo was in constant contact with leading network vendors like Alcatel-Lucent, he was aware that the FTTN standards were still evolving and that Telstra’s new FTTN network would eventually be able to be upgraded to provide much higher speeds — just like its ADSL and HFC cable networks.
But there was one small element of Trujillo’s plan which brought it — and the entire future of broadband service delivery in Australia for the succeeding eight years — undone.
Buried in the executive’s presentation to the media and analysts at the time was a small dot point. I can’t find the precise slide, but it said something like: “Subject to favourable regulatory conditions.”
What this meant, in practice, was that Telstra’s new FTTN network would not be open to competitive access. The telco would not provide wholesale access to Optus, iiNet, Internode or TPG so that these challengers to its throne could install their own equipment in its FTTN rollout, and it would not resell services to these companies so that they could target customers with FTTN-based broadband. In short, Trujillo’s FTTN was nothing short of an attempted re-monopolisation of the telco’s copper network — one which would lock out its competitors forever. Of course, the Howard Government of the day vetoed the plan; and it’s a very good thing it did. The Government cannot, and should not, allow one telco to dominate Australia’s broadband market.
However, the revelation of the success of a very similar initiative undertaken over the past half-decade by Telstra’s equivalent in the UK, BT, does cast a new light on the FTTN network proposed by Trujillo back in 2005, and how that network might have evolved, had Telstra not proven so recalcitrant about providing open wholesale access to it.
The similarities between Trujillo’s plan and the BT FTTN rollout started in 2009 are quite startling. Like Trujillo’s plans, the BT rollout, dubbed ‘Infinity’, was a fibre to the node upgrade initiative conducted by an incumbent telco in a first-world nation, involving an incumbent telco which already owns its own copper network and all associated infrastructure, and which already has thousands of engineers in the field to help deploy new infrastructure.
Like Trujillo’s plan, it initially appeared that BT did not intend to allow competitive access to its infrastructure. It wasn’t until 2010 that UK regulator Ofcom announced that BT would be required to provide open access to its fibre infrastructure, in the same way that telcos such as Optus, iiNet and TPG access Telstra’s network in Australia.
And like Trujillo’s plan, BT’s intention was to use the infrastructure to provide a substantial fundamental broadband service delivery boost that would also allow other services such as subscription television to be bundled. By 2009, when BT started deploying its network, the FTTN technology it is using was allowing much higher speeds than in Trujillo’s day at Telstra — BT Infinity currently offers plans up to 76Mbps — and as Telstra does with its own networks, a major new planned feature of BT’s FTTN offering is its new sports TV package, to be delivered via broadband into consumers’ homes.
The important thing to realise about BT’s rollout also, with respect to Trujillo’s FTTN plans, is that the BT rollout is definitely succeeding.
Last week, BT announced that its fibre to the node network has passed more than 16 million premises since the network rollout was commenced in 2009, with more than 1.7 million customers having signed up for active connections to the infrastructure. It is also working directly with the UK Government to extend the network to rural areas, and it is also working on live trials of the new vectoring standard, which will allow speeds of up to 100Mbps on its FTTN infrastructure. It is also offering fibre to the premises extensions, which, at a cost (modest for businesses, pricey for consumers), allow customers to have fibre laid all the way to their premise (FTTP), delivering even better speeds of up to 330Mbps.
This UK example paints a very clear picture of where Australia could have been if the Federal Government and Telstra had been able to come to an arrangement (probably with the assistance of Telstra’s key regulator, the Australian Competition and Consumer Commission) about allowing some form of open access to Trujillo’s planned FTTN rollout. If that scenario had come to pass, then, Australia, like the UK, would now very likely be enjoying FTTN broadband speeds up to 76Mbps in major cities around the nation, with millions of premises signed up and the technology still evolving to provide faster speeds. It’s an extremely tantalising vision of what could have been, if the nation’s telco executives and politicians hadn’t been so unable to work with each other on outcomes for the furtherance of broadband in Australia.
Because of this lack of cooperation, what Australia has ended up with over that period is … virtually no improvement in fixed broadband infrastructure over that period. Patches of Australia now have ADSL2+ that didn’t, Telstra and Optus have upgraded speeds on their HFC cable infrastructure (but not extended their rollouts) and the availability of 3G/4G mobile broadband has partially resolved many broadband blackspot issues. But the underlying problem remains, and it’s a huge one — Australia’s fixed-line broadband infrastructure still needs upgrading.
Of course, there are also hugely negative caveats with regards to BT’s rollout in the UK — caveats which would have applied to any Australian FTTN rollout by Telstra as well.
For starters, although BT’s FTTN is technically open to competition, in practice rival ISPs have struggled to be able to get the service to market in a timely manner, meaning that of the 1.7 million customers connected to BT’s FTTN infrastructure, 1.5 million are customers with BT’s retail division. This situation has been worsened by the fact that, according to retail ISPs such as TalkTalk, BT, like Telstra has done on occasion in Australia, has driven down its retail prices to the point where other ISPs are finding it hard to compete, even though they’re using the same infrastructure.
There is no doubt that, had Trujillo’s FTTN network been allowed to proceed, that a similar situation would have eventuated in Australia. You can see this both through the fact that Telstra still maintains a massive share of Australia’s current broadband network — despite the strong competition in the local fixed-line broadband sector — as well as the market dynamics of a local sector where Telstra has been largely left alone to do what it wished — mobile. In Australia’s mobile landscape, where it is not forced to provide wholesale access to its infrastructure, Telstra is currently bringing back millions of customers into the fold and winding back competition rapidly, as both Vodafone and Optus have largely failed to substantially challenge the incumbent’s dominance.
Then too, the poor quality of BT’s copper network in some areas (sound familiar, with respect to Telstra?) has drastically limited speeds in some customer connections. And, due to the particular rollout style which BT has used, where the telco has left its existing copper in the ground and only connected customers to FTTN when they explicitly ask for it, there are questions about the future upgradability of the network, especially in the long-term, with telecommunications experts globally predicting an all-fibre future for fixed broadband networks. BT is going down that track — but there are countless roadblocks in the way, as former BT chief technology officer Peter Cochrane has very publicly highlighted. If Trujillo had been allowed to proceed with his network rollout, questions would be being asked right now about how and when that network would be upgraded to FTTP, as well as any and all of the possible steps in between.
These caveats are huge ones — massive problems which British politicians and telecommunications regulators will need to take drastic measures to deal with over the next decade.
However, they are by no means insurmountable. And there is no doubt that when you look at the fundamental question of which country has better broadband service delivery, the United Kingdom is leagues ahead. It has mostly succeeded in upgrading its legacy copper network and providing faster services to millions of premises, which Australia has not. It has done so with minimal government funding, which Australia has not. There is funding cooperation between major telcos and the Government on rural broadband, which Australia does not have.
And meanwhile, the UK enjoys all the other advantages Australia does — competitive, 3G/4G mobile networks, universal satellite access, a HFC cable network across much of the country, open access for retail telcos to its incumbent’s copper network, and so on. There is really nothing which Australia has that the UK doesn’t, in terms of its broadband infrastructure — and there is a lot they have that we don’t, all because their Government and incumbent telco were able to come to terms on upgrading the national copper network.
Well, you might say, what about Australia’s National Broadband Network?
If Labor’s NBN project is rolled out as planned, in the long term it will surpass BT’s FTTN rollout on every measure. Its all-fibre technology is vastly superior on any measure to the half in/half-out approach used in FTTN; it won’t suffer the same competitive issues as BT’s rollout has, with non-incumbent telcos such as iiNet grabbing large sections of early market share on the NBN. It will be future-proof for at least the next 100 years or so, and it will also make a long-term return on the Government’s invested capital, as well as providing the Government with a substantial asset which could be later partially or fully privatised.
However, so far, the NBN has abjectly failed to deliver. Substantially delayed by lengthy negotiations with Telstra over access to its infrastructure and customers, as well as by changed requirements around greenfield estates rollouts and extensive problem with NBN Co’s construction contractors, right now the NBN looks to many in the industry like a lame duck. 207,500 FTTP premises passed in the same four years that BT has passed 16 million is rather pathetic by anyone’s measure. And to cap it all off, if the Coalition wins the upcoming Federal Election, the NBN will lose many of its technical advantages as an Abbott administration returns it to the same FTTN model which BT has already largely implemented, causing chaos and yet more delays.
I wrote in September 2011 that the one thing Australia desperately needs is stable telecommunications policy:
“… in large part it is the ridiculously unstable telecommunications regulatory environment which Australia’s incessantly warring politicians have gifted the nation with which has held us back in so many different areas over the past decade, and will continue to hold us back over the next five years if the two pathetically similar sides of politics cannot come together on a joint proposal. One, perhaps, founded on bringing many of the aspects of Labor’s visionary NBN project and the Coalition’s more targeted policy (which, as we have already noted, has many positive aspects) together.”
“If Telstra had been separated five years ago, if the bush had received wireless broadband, if competitive rural backhaul links had been funded and if Labor and the Coalition could have agreed on a way in which to invest public money in broadband in a moderate fashion which would suit both sides of politics and stimulate competition in the sector, right now Australia’s broadband landscape would look very different than it does today.”
“The long-term nature of infrastructure investment and the squabbling of the past half-decade has made it increasingly clear that a bi-partisan approach to telecommunications policy is needed in Australia. The only difficulty may be convincing our arrogant, indecisive, stubborn and incredibly own-party blinkered political leaders that they should sit across the table from each other and discuss the issue like adults. At times they appear to forget that they are all employed by the same person — the Australian taxpayer.”
The consequence of this lack of vision and cooperation by both sides of politics, as well as our telco executives and regulators, is that the UK, through BT’s FTTN rollout, is far ahead of Australia in terms of fundamental broadband service delivery improvements. And the really tragic thing is that Telstra could have done what BT did; Australia could have had what the UK has. And we would have had it sooner — because BT didn’t even propose a FTTN rollout until 2009, while Trujillo gave it a punt back in 2005.
The NBN is a very nice idea. FTTP is a very nice idea. And it may still deliver on its promises over the next decade. But the NBN’s promise, and, in fact, the promises of Australian politicians over the past eight years, have failed Australians thus far. Most Australians still have very similar broadband in 2013 that they had in 2005. But in other countries such as the UK, where the collaboration between the private and public sectors was stronger, residents and business owners already have something much better.