opinion/analysis by Renai LeMay
12 February 2014
Malcolm Turnbull’s plan to offer Australians full fibre extensions to their premises on demand was already on extremely shaky ground, and several new developments over the past several months have made it increasingly clear that this is a concept which is extremely unlikely to see any traction in the short to medium term.
One of the most hotly debated concepts which the Coalition introduced with its April 2013 broadband policy (PDF) was it’s so-called “Fibre on Demand” model, which would allow Australians to pay to have fibre broadband laid all the way to their premises from the local neighbourhood nodes which the Coalition was planning at the time.
The attractions of this model were very evident at the time. The Coalition was, and still is, facing an incredible amount of criticism for its plans to significantly modify Labor’s universal Fibre to the Premises approach, through a combination of the technically inferior Fibre to the Node and HFC cable options.
The Fibre on Demand model introduced in April 2013 allowed then-Shadow Communications Minister Malcolm Turnbull to have his cake and eat it too, when it came to Coalition broadband policy. The party’s fiscal conservatives would be placated with the concept that the most expensive aspects of the NBN would be paid for directly out of the most demanding users’ own pockets. Australian technologists and other heavy bandwidth consumers were reassured that the FTTN architecture the Coalition was planning to use at the time could be extended with full fibre for individuals who needed or just wanted it.
April 2013 was also a very convenient time to be discussing the Fibre on Demand model. Just nine months previously, British incumbent telco BT had announced that it would be pursuing precisely this model with its own highly successful rollout of its own FTTN network. The prices the telco were charging appeared reasonable, and it didn’t take long before local telcos such as Optus were discussing the possibility of offering Australian customers FTTP on demand NBN plans.
It was a rosy picture, combining the best of necessary government subsidies, the capitalist user pays philosophy and political expediency.
Of course, right from the start there were doubts around the concept. In an article for Delimiter 2.0 published back in July last year, your writer argued that close analysis of the construction capabilities of BT compared with those of NBN Co mediated against the possibility of Fibre on Demand being deployed in a timely fashion. The slow and expensive nature of NBN Co’s existing ‘Network Extensions’ approach to extending fibre outside its planned FTTP remit also constituted strong evidence that Fibre on Demand was a proposition whose time had not yet come.
In addition, a number of events over the past several months have made it clearer than ever that Fibre on Demand as a practical reality for the NBN is many years away, if it happens at all.
The first and most obvious factor affecting the concept of FTTP on demand is the timeframes involved. To offer such services, NBN Co needs access to two key pieces of infrastructure — Telstra’s copper network, and at least the HFC cable network operated either by Telstra or Optus, although it is likely that the company will seek access to both.
It is likely that NBN Co will spend at least half of 2014 negotiating behind the scenes for access to this infrastructure. The company’s Strategic Review (PDF) notes that it assumes that NBN Co would be able to gain access to the HFC cable networks networks in the second half of calendar year 2015 — with “fill-in and lead-in work being completed in four subsequent years”.
Likewise, FTTN deployments to the remainder of the country not served by FTTP would be undertaken in the same timeframe — from the second half of 2015. Full-scale rollout of FTTN would not be possible until early 2018, according to the Strategic Review (this information can be found on page 96 of the review).
What we see from these timeframes is that it is unlikely that NBN Co will have the construction bandwidth to look at extended fibre all the way to the premises — either in the HFC or FTTN areas — until close to 2020 when much of the work has been done on the other network rollouts. That’s a full six years away, and that estimate also presumes that the Coalition and NBN Co’s new management will be able to rapidly ramp up the company’s network rollout. This is not a small concern, given the extensive issues which NBN Co has suffered in the past; a bad sign is that the company just lost its third head of construction in three years.
If you take British telco BT as a comparison to the NBN, what you see is that even that company, with its massive, nationwide resources, has been relatively slow to deploy its FTTN infrastructure. BT’s rollout started back in 2009 and, while it claims to have passed some 16 million premises since that time, most of those premises are not technically connected to the network, remaining on BT’s copper network. Only around 1.7 customers have physically been connected to BT’s FTTN infrastructure.
In Australia, NBN Co is pursuing a radically opt-out different network model to BT and is connecting all premises to its network by default, as opposed to BT’s opt-in model. Doing everyone in one go like this is probably more efficient; but it’s also likely to be slower.
It also presumes that the negotiations with Telstra and Optus over access to their networks will go well; an assumption which has not panned out well for NBN Co in the past. NBN Co and Telstra have only just started negotiating on the issue — four months after the Coalition won Government in September.
What this boils down to is that it is unlikely that Fibre on Demand will become a viable option for NBN Co before 2020. The company is going to have its hands very full with the rollout of its HFC, FTTN and FTTP networks before that point.
The second factor mitigating against Fibre on Demand as a viable option in the short to medium-term is the cost.
In June 2012, Openreach (the wholesale division of BT) revealed plans to modify its 80Mbps national fibre to the node rollout so that customers would be able to choose to have fibre fully extended to their premises, delivering a large speed upgrade to 330Mbps in the process. According to OpenReach’s price list at the time, costs for the fibre extension service were to include a £500 (AU$937) initial connection fee and ‘annual rental’ cost of £465 (AU$872), plus a specific charge ranging from £200 (AU$375) up to £3,500 (AU$6,562), depending on the distance premises are from local nodes.
This was the cost model which the Coalition was basing its Fibre on Demand plans on; and if you lived within a decent distance from your neighbourhood node, it didn’t sound too bad. A once-off cost perhaps less than $2,000, plus an annual rental cost of about $1,000.
However, several weeks ago Openreach substantially increased those costs, citing the fact that the Fibre on Demand service cost significantly more than customers were expecting.
After 1 May this year, according to Openreach’s new price list, the £500 (AU$937) initial connection fee will increase to £750 (AU$1,406), and the annual rental cost of £465 (AU$872) will increase to £1,188 (AU$2,227).
In addition, the specific distance charge ranging from £200 (AU$375) up to £3,500 (AU$6,562), depending on the distance premises are from local nodes, will increase to £350 (AU$656) to £6,125 (AU$11,480). This last cost refers to premises where customers are up to 2km from their local node. 96 percent of premises are within 2km of their local node, according to Openreach. Customers whose premises are further away will need to pay more, although the telco has not stipulated how much.
Doesn’t sound too appealing any more, does it? All of a sudden, it doesn’t seem like it will be unusual for customers to pay between $5,000 and $10,000 for Fibre on Demand in the UK. Sure, if you aggregated such costs between neighbours in the same street, and all went in on fibre together, the costs could be brought down a little. But the costs still seem out of most people’s price range for a residential broadband connection … and let’s not forget that Australia has a lesser population density than the UK. This could also help bring costs up.
The third factor relates specifically to the HFC portion of the network.
In Australia, the concepts of Fibre to the Premises and Fibre to the Node are broadly well-known and understood, especially by the telcos — principally, NBN Co and Telstra — which have deployed or at least tested such technologies. Fibre on Demand is subsequently quite well understood as a concept; bridging the gap between the node and the premise in the last mile of broadband delivery. And arguably, NBN Co and Telstra, courtesy of their experience deploying FTTN and FTTP, have some level of experience with what Fibre on Demand would require.
The same cannot be said of fibre extensions to the HFC cable network, which have not featured in the national debate, and such an infrastructure has not previously been deployed in Australia.
At a theoretical level, HFC cable networks are not dissimilar in many ways to Fibre to the Node networks. Both rely on running optic fibre to distribution points, and then using a different style of deployment to achieve the last mile deployment to houses and business premises. In the case of Fibre to the Node, it’s the existing copper wires of the Public Switched Telephony Network; in the case of the HFC cable networks, it’s thicker and more insulated coaxial cables, that can carry significantly higher amounts of data. With this style of network architecture in mind, it is logical that the fibre in the HFC cable networks can be extended from their distribution end points all the way to premises, the same way that Fibre on Demand is being discussed as being deployed to supplement a FTTN rollout.
I spoke to the Office of Communications Minister Malcolm Turnbull about the issue of fibre extensions to the HFC cable networks, and the view that came back was pretty clear; fibre extensions to cable networks are not uncommon, and have been deployed internationally. The Coalition is still standing behind its Fibre on Demand concept, even where it would take place in the form of fibre extensions to HFC cable networks.
In a sense, the Coalition is right on this one. A report prepared by European analyst house Heavy Reading on this subject, produced in 2009, states:
“After largely dismissing all-fiber networks as too costly, too disruptive, and simply unnecessary earlier in the decade, the cable industry is now moving rapidly toward widespread fiber deployment. From the Americas to Europe to the Asia/Pacific region, cable operators are quietly weighing the potential bandwidth, performance, operational, reliability, and marketing advantages of adding fiber-to-the-premises (FTTP) extensions to their conventional hybrid fiber/coax (HFC) plant. In the U.S., Canada, U.K., Portugal, Japan, the Netherlands, and other nations, cable providers are studying and testing the merits of installing fiber lines to serve master planned communities, other new housing developments, apartment building complexes, businesses, and other groups, especially in markets where they face competitive threats from major telco fiber networks such as Verizon’s FiOS and AT&T’s U-verse initiatives.
In the U.S., major MSOs including Time Warner Cable, Cox Communications, Bright House Networks, and WideOpenWest (WOW!) are all either testing or rolling out all-fiber networks to boost their competitive position in one or more large markets. Meanwhile, Tier 2 cable operators including Armstrong Cable, Bend Broadband, Midcontinent Communications, and NPG Cable are deploying FTTP systems to serve residential and/or commercial subscribers; and a growing number of other cable providers, both large and small, are giving FTTP technology a closer look as well.”
And you can see from the briefing notes for this conference of cable operators in the US held by Heavy Reading sibling Light Reading last year that fibre extensions to HFC cable networks are still very much being discussed.
However, what is also true is that most of the fibre extension plans within HFC cable networks didn’t come to much real-life effort in the end in terms of actual rollouts. The problem, according to both Cisco and Motorola, is that the practice of “node splitting” as a mechanism for boosting the capacity of HFC cable networks proved too attractive for telcos in terms of cost and convenience.
The key to understanding what’s going on here is to understand the different architecture of HFC cable compared with Fibre to the Node. HFC cable is inherently a shared infrastructure, in that the cable between the node and the premise is shared by users; whereas FTTN is not a shared infrastructure, in the sense that individual copper wires still run between premises and the node.
Over the past half-decade, instead of rolling out fibre extensions to their HFC cable networks, operators worldwide have almost universally preferred to add in extra routing infrastructure at the node level of HFC cable networks, allowing users previously served by a single node to be moved onto multiple nodes. This reduces the amount of users per node; and increases the amount of available bandwith to each user.
“Node segmentation is a useful, cost-justified, and recommended step in leveraging the existing HFC plant and transitioning the network to provide higher capacity. This step is far less operationally disruptive and provides a bandwidth increase commensurate with the segmentation of the service group. An initial jump to a fiber to the last active approach only provides marginal increases in bandwidth per user at a comparatively high operational cost.”
The Motorola whitepaper (PDF) further states: “As long as there are still nodes in the plant that can be segmented, node splitting will continue to offer operators the lowest-cost approach to reducing service areas.”
Both whitepapers go on to explicitly state (as you would expect the vendors to say) that node-splitting only offers an interim solution to long-term bandwidth growth and the need for HFC cbale networks to continue to evolve and extend their fibre reach. And they’re right: Fibre to the Premises is the inevitable end goal for all of these networks, as bandwidth demands and broadband usage continue to skyrocket.
However, what is important to note is that we have not yet reached that point in Australia. Most of the available data (beyond geographically specific anecdotal stories of HFC congestion) suggest that compared with HFC cable networks in the US and in Europe, uptake of the HFC cable networks in Australia remains low from a network standpoint, with a low percentage of users served by each HFC cable node; likely due to the fact that many premises within the HFC cable network footprint are not connected due to the fact that connections are pricey compared to ADSL broadband and that most multi-dwelling units cannot get HFC at all.
When you examine NBN Co’s own literature and the approach the Coalition is taking, it is clear that the current focus on upgrading the HFC cable networks is precisely at the node splitting level that will facilitate higher uptake of the cable, as it is internationally. As NBN Co board director Simon Hackett noted in mid-December:
“A key concern expressed by many is that the existing HFC exhibits poor performance during busy times, along with the presumed retention of existing tiny upload speeds (1-2 megabits per second).
However, this will be a deployment where nodes will be split extensively (made smaller in terms of homes per node), in order to minimise the contention ratio on the network. The spectrum being used for the deployment will also be expanded, and modern IP capable data transmission equipment will be pushed deep into the resulting network.
HFC is capable of NBN grade outcomes, providing sufficient investment is made in the infrastructure concerned. Well, the investment commitment is there (this being the key point many have missed). As a result, this is a faster and lower cost path to getting millions of premises connected than using FTTP from scratch in those areas.”
NBN Co’s Strategic Review does not deal with the concept of fibre extensions to the HFC cable network at all, but it does explicitly deal with node splitting as a technique for boosting the performance of the HFC cable network.
None of this is represents a direct argument against fibre extensions to the HFC cable networks being feasible. But from a network engineering standpoint, what it does give us is a great deal of circumstantial evidence that it will not be a focus — at all. Where something has not happened, in the global technology industry, there is usually one or more solid reasons that mitigate against it eventuating any time soon.
We have a global HFC cable industry which has rarely found it necessary to invest in fibre extensions, preferring instead to upgrade existing infrastructure through techniques such as node splitting. We have relatively low uptake of the HFC cable networks in Australia, coupled with a focus on upgrading those networks through techniques such as node-splitting. And nowhere in the relevant Australian literature, NBN or otherwise, can be found data or knowledge on fibre extensions.
What this tells us is that NBN Co is very unlikely to see fibre extensions to HFC cable networks as a priority in the short to medium term. It is likely to be cost-inefficient, pricing consumers out of such a service and leading NBN Co to suffer a lack of interest in it, and the telcos do not have significant experience or a focus on this concept in Australia. Instead, NBN Co, Telstra and Optus are very likely to instead focus on upgrading the HFC cable network (especially through node-splitting, installing better core network equipment and deploying lead-ins to premises where the HFC has not previously reached).
What I want to outright acknowledge at the conclusion of this article is that there is no smoking gun for this argument: There is no evidence yet which can conclusively prove that Fibre on Demand is a dead duck concept in the short to medium term in terms of NBN Co’s network rollout.
However, there are certainly a great deal of arguments stacking up against the concept. Right now, in the short to medium term, Fibre on Demand is looking like it’s going to be too expensive to be a realistic consumer proposition; NBN Co is looking like it’s going to be too busy to offer such a service; and there is a lack of focus and industry knowledge in Australia on the concept that leads to the conclusion that it will be shelved for a while — I would say until we get closer to 2025 than 2020.
I will be the first to say that I was wrong when NBN Co launches such a service to retail ISPs and the public. But for now, Fibre on Demand in the context of the Coalition’s Broadband Network is looking like it will not happen for quite a while … if at all.