NBN – cost benefit analysis, cost of service, monopoly and other issues
Why should there be a cost-benefit analysis of the NBN?
The truth is that every major piece of infrastructure investment should be the subject of a rigorous cost benefit analysis. As Ken Henry famously said “government spending that does not pass an appropriately designed cost-benefit analysis necessarily detracts from Australia’s well being.”
Of course the larger the investment the more appropriate is that analysis and this is especially so when the investment is to create a business asset.
The failure to conduct the cost-benefit analysis is particularly egregious because it is this Labor Government which set up Infrastructure Australia for precisely the purpose of identifying and assessing infrastructure investments of national significance. It is difficult to think of any piece of infrastructure that would better qualify for the attention of Infrastructure Australia, but the Government has refused to allow it to consider the NBN.
So what would a cost-benefit analysis do? It would first make sure we were asking the right question. What is the problem we are trying to address? Put another way, if fibre to the home (FTTH) is the solution, what is the problem?
Unless the problem is that nobody in Australia currently has adequate broadband services to their home and nothing less than 100 mbps bandwidth will do, then the NBN FTTH network is an excessive investment.
So let us assume that the problem can be framed in this way: Many Australians have access to fast broadband services but many do not. In some parts of our big cities there are black spots where for historic network design reasons ADSL is not available. In regional and rural Australia there are many places where broadband access is very poor and certainly not comparable to that available in the cities. A lack of competition in the backhaul, trunk backbone of the network has prevented telcos from competing with Telstra in many areas.
So if that is a fair description of the problem then a cost benefit analysis would carefully consider the various options for addressing it and their cost. What would it cost to upgrade our existing network so that all residents of our cities and towns had access to ADSL2 for example?
What about 4G wireless? There seems to be a readiness by many to dismiss wireless as a broadband contender, but we must accept that people are voting with their feet (or credit cards) by taking wireless broadband at a rate that far outstrips fixed line broadband which is fairly static. The authors of the Alliance for Affordable Broadband paper are not fools (they include some of our most experienced telco CEOs) and their contention is “We believe that next generation 4G technologies are the best fit for purpose for the vast majority of consumers and SOHO clients currently without other broadband delivery options.” Read the full paper here.
The largest new national broadband initiative in the United States at present is the $7 billion LightSquared project to build a nationwide 4G wireless broadband network to provide up to 100mbps speed connectivity. See www.lightsquared.com I mention these matters not to suggest that wireless IS the answer or indeed the only answer, but simply to note that broadband wireless is a real option for many people, that its next evolution will involve much higher speeds and that to dismiss it as a non-contender (as so many do) is hardly credible. A rigorous cost-benefit analysis would give wireless very serious consideration, something the Government has failed to do.
Given neither FTTH nor ADSL will be viable in rural and remote areas, the technology solutions will be largely wireless and satellite. How best can that be delivered?
So a cost-benefit analysis would rigorously assess the most cost-effective means of meeting the perceived need. It would also ask whether this required the Government to establish a new, monopoly telecom to do so. Government support is doubtless required in rural and regional Australia and both sides of Australia recognise that, but how much support is needed in the cities? That should be rigorously assessed as well.
Another question that needs careful examination is the business case for these products. While many enthusiastic users of the Internet are salivating at the thought of higher speeds available to their home, Telstra has been selling 100 mbps broadband on its HFC network in Melbourne for over a year and so far has only a few thousand subscribers.
It is easy to see the use of fast broadband in schools, universities, hospitals, medical centres and businesses. But how many households would derive meaningful additional value from upgrading their broadband access from, say, 20 mbps to over 100 mbps?
And of course let us not forget that simply because you have a network capable of delivering 100mbps to your home or office does not mean that you will be able to download material at that speed. That will depend on the speed of every single connection between the server you are accessing and your own device.
Of course the value of such a network is not limited to the dollars and cents in the profit and loss account. We all recognise that there are spill over benefits to the wider economy from broadband connectivity. But again, while we can readily recognise the productivity benefits from being online with broadband access, what is the incremental benefit from going from 20 mbps (or less) up to 100 mbps for the vast majority of households?
What applications will take advantage of these higher speeds? It is easy to respond as Senator Conroy does by saying “Things we don’t even know about.” but it is hardly a credible basis for investment. Right now the applications which are consuming more and more bandwidth each year are video services, especially YouTube. Indeed only a few months ago I head David Thodey say that 80% of Telstra’s Internet bandwidth was taken up by video material.
FTTH offers the potential for hundreds of television channels, instant video downloads and high definition interactive gaming. That would seem to be the most likely use for the massive lift in bandwidth for most households. But if that is so, are people going to value that sufficiently to pay a higher rate per month to justify the massive investment in the NBN and whether they are or not, is making these applications more readily and abundantly available a worthy object of government subsidy? How does it rate against more investment in health, or schools let alone public transport services.
If the cost benefit analysis were to conclude that health, educational and business premises needed access to fibre then an assessment would be made of how to deliver that. As it happens all but one of our universities (Bond) is connected to a national and international high speed fibre network by AARNet. Many of our schools (not enough) are also on fibre as are many of our larger businesses. How should that fibre be expanded? And what is the most cost effective way of doing so.
And finally, given the structural separation of the network from the retail business of Telstra is cited as one of the great virtues of the NBN, let us not forget that structural separation of that network does not require its overbuild and replacement by an entirely new network. Structural separation is a consequence of the NBN agreement with Telstra, but the NBN is not a necessary companion of structural separation.
These are just some of the issues a cost-benefit analysis would consider. The Government’s failure to undertake that analysis has been rightly and widely condemned. If the NBN is the right decision then its proponents have nothing to fear.
Cost of Service
Right now we don’t know what the NBN will charge. The Implementation Study suggests an average wholesale price of $35 per month for voice and entry level basic broadband. That would suggest a retail price of at least $65 -$70 (so I am advised) which is higher than many plans currently available. It is not clear whether NBN would charge in addition to this the equivalent of a line rental fee either.
But rather than speculate about what NBN might charge, let’s look at a few facts. The first fact is that the NBN is going to involve a massive, new investment in telecommunications infrastructure. That investment is going to need to be serviced and common sense suggests that is going to put upward pressure on pricing.
Consider the recent massive hikes in electricity and water charges arising from the large investments in infrastructure made in both those sectors.
The Implementation Study acknowledges this and states at p. 254:
“The relative value of fibre is likely to increase over time as new services and uses emerge. As it does, NBN revenues should increase to provide a fair return on the network investment. An increase in revenues over time would likely correspond to an increase in user value.”
The Study assumes real growth in prices of between 0 and 2 percent, so around 1% above inflation – say 4% per annum. Now that may not seem much to some people, but for well over a decade we have been enjoying declining telecommunications costs. Now the NBN will see them increasing. Will the increase in cost be worth it? Well it may be for some people, but for many it won’t be. And as noted above, there isn’t much evidence that people will pay a premium for high speed services. Put another way, if 100 mbps is a much sought after nirvana why wouldn’t it make more sense to turn on the entire HFC network to that speed (for a very modest additional cost compared to the NBN) and see what the take up is?
In short, there is no reason to believe the NBN will see a continuation of declining Internet access charges. If the Implementation Study is to be believed and if the massive investment is to be serviced, the reverse will be the case.
A monopoly
Now we should not beat around the bush here. The object of the NBN is to create a monopoly. See the Implementation Study at p. 60
“Government policy in building the NBN is likely to create an industry structure with no significant competition between fixed networks, since the existing copper and HFC networks are likely to be deactivated over time.”
Too right there! The deal with Telstra will require it to decommission its copper network and not use its HFC network to compete with the NBN for voice and broadband business.
So how is that defensible? The study goes on to say:
“The trade-off is that NBN Co will offer wholesale-only equivalent access to service providers. The rationale for this is that – given the high cost of laying the fibre, the long asset life and the limited ability to differentiate – fibre has the characteristics of a natural, stable infrastructure monopoly analogous to an electricity grid or gas pipes.”
So the argument runs: yes it will be a monopoly, but that’s okay because it will be structurally separated from any retail provider and will provide access to all retail providers – as a common carrier. But that gets back to the question of structure. If the Government’s claim is that industry structure is the problem with the current arrangements, then that can be addressed without building a new network.
The establishment of this monopoly does carry with it real risks, as the Implementation Study notes at p. 446 and preceding. These include NBN expanding its activities beyond that of a wholesale carrier, operating inefficiently and lacking incentives to innovate. The Study acknowledges that the NBN approach is unique in the world.
“Competition between alternative networks has stimulated the roll-out of next generation broadband infrastructure in several countries around the world.” (p.433)
And nowhere more so than in America where the competition between the cable companies and the telcos has been especially intense.
“Cable and telecommunications companies found themselves competing to provide substitutable services and were compelled to match each other’s performance improvements.”
Remember the only reason for requiring Telstra to shut down its competitive infrastructure is to enhance the financial viability of the NBN.
In summary: If monopoly is bad, then the NBN could be built to operate as a competitor with the copper network and the HFC networks. If the Government’s claim is that vertical integration of Telstra is bad, then structural separation could occur without building a new network.
39 Responses to “NBN – cost benefit analysis, cost of service, monopoly and other issues”
“What about 4G wireless? There seems to be a readiness by many to dismiss wireless as a broadband contender, but we must accept that people are voting with their feet (or credit cards) by taking wireless broadband at a rate that far outstrips fixed line broadband which is fairly static.”
People are buying wireless broadband because of two reasons: 1) They already have fixed line broadband, and are looking for a portable solution, or 2) There are no available broadband ports at their local exchange.
The second is applicable for me. Moved into a rental, there’s no ports available for me to get fixed line broadband, so I’ve had to go wireless. It’s ok – but it’s far from perfect. Sometimes, speeds are incredibly slow that I’d rather go with dialup, except that I don’t have a phone line (my choice), so I just have to wait.
The Government is right to think long term and implement infrastructure that will last for years to come.
Cost benefit analysis Liberal style would leave us with nothing as investment in social infrastructure is considered non beneficial to liberal party and their supporters. Look at what they didn’t do for 11 years. Compare it with how massive cuts to education and health were used to create budget surplus and high income earners were rewarded for their success with tax cuts and we got the GST…back off Mal and let the commuity get something for a change.
Malcolm, I have a basic #Internode plan, that provides 50GB and is NOT #ADSL2, thanks to the existing exchange and copper network running off RIMS (Telstra ACT) Your iPad runs faster on wireless from Parliament. My package is not extraordinary at all nor is it expensive in comparison to other good ISP’s. It does cost $80.00 per month. #NBN is holding a Roll Out meeting at Palmerston ACT in 6 days time. You should attend and “feel the anticipation”.
@kane You are making one of the greatest economic fallacies of all time, if the government doesn’t spend $43b dollars then someone else will spend the money. When the government spends money it must eventually take the money from somewhere and more often than not it is the tax payers who are up for the bill.
Also to your comment about how “high income earners were rewarded for success”, what do you think are supposed to do with our most successful people? tell them great job but see joe over here cant seem to keep a job for more than a month so we need to take some of your hard earned money for him.
For further technical information about the different options for a national broadband network, take a look at this video seminar from the CUBIN special research centre on “Ultra-Broadband Information Networks” at University of Melbourne, June 2009.
Their research has shown that of the options, FTTH is the greenest (lowest energy consumption), as well as being superior in other ways.
Watch here:
http://www.cubinlab.ee.unimelb.edu.au/seminars/view-video.php?seminar=1245211200&public=1
(it doesn’t seem to work in Safari on Mac OS X, but does work in Firefox on Mac and Windows)
I should hope that an CBA would include some analysis of the energy consumption into the future.
In fact, this should highlight the uncertainties involved in doing CBA.
What do we know about the price of carbon in 10 years?
How will this uncertainty affect the cost and benefits of a FTTH NBN?
I think a good half of this ramble, if not more, is predicated on the completely false idea that the NBN is actually supposed to be profitable. What nonsense. If the NBN was supposed to be profitable, it would have been built by the private sector already. Don’t we pay taxes for a reason?
Hi Malcolm, good to see some healthy debate on this topic.
You asked this question: “But how many households would derive meaningful additional value from upgrading their broadband access from, say, 20 mbps to over 100 mbps?”
There have been many statements like this throughout history, one famous one from the chairman of IBM in 1943 when he said “I think there is a world market for maybe five computers.” With the benefit of hindsight this seems like a ludicrous this to say, but at the time this would have seemed like a personally reasonable statement. Sometimes we cannot see the potential.
As time goes on the Internet has become more integrated into society and more fundamental to how we live our lives. In the last decade we have seen it transform how we spread information, how we network with friends and how we market our businesses. Indeed, it wont be long before both the TV and Radio become a relic – replaced and superseded by the Internet which offers interaction and choice far beyond what we are used to currently. And yet it’s likely that the communication revolution that the Internet sparked is only at its infancy.
High speeds and low latency (something wireless networks can never provide) will be the key to making a new generation of ideas possible. We can’t know what those ideas will be just yet, although there are some rather obvious applications (anything involving rich media). We have to provide the medium in order for it to be exploited (a catch 22), but I’m as certain as one can be that it is not a mistake to make this investment and that if we don’t, it will be something that we regret as a nation.
There is no technical nor financial justification whatsoever for blowing away 43+ billion tax payer dollars on NBN fibre.
@Michael – We pay taxes for shared infrastructure commensurate with our population and needs. NBN caters for our wants (not needs) – Additionally it would be akin to building 12 lane superhighways in the suburbs – completely unnecessary.
Mr. Turnbull, I would like to take issue with your claim that NBNco’s network would create a monopoly. As you have previously stated, wireless networks (which are far superior in your own words) are in competition with the NBN, particularly the 4G WiMax and LTE networks being deployed by the private sector.
A ‘monopoly’ like NBNco is perfectly reasonable so long as they do not actively supress competition at their level (infrastructure) and provide fair wholesale pricing that is equal to all telcos. As the inplementation study says, it is charging a fee to use public infrastructure. It is actually more beneficial to have this sort of network consider to the duplicated network debacle that Telstra and Optus have had. There is plenty of competition in the NBN, and dare I say the bigger telcos might have some problems dealing with smaller, more agile ones that can offer better deals and service.
Now, I don’t know how much more free-market and small-government you are compared to myself, but a piece of essentially public infrastructure that is run privately and is self-funding (after capital-raising, of course) is a great boon. It will have better safeguards in place than Telstra to ensure that there is competition and fair pricing.
The sale of an unseparated Telstra was an absolute disaster for the Telecommunications industry. Gradually a huge government monopoly has been turned loose, creating a privately run, vertically-integrated monopoly. We would not be having a discussion about the NBN had the Liberal Party looked at the health of the industry and structurally separated it into wholesale and retail businesses. The wholesale arm, with government control, regulation and capital, could have quietly started rolling out an NBN much earlier, without the hassle of making deals for trench access. The NBN exists solely to make amends for this grievous error.
I am not a bolshie left-winger, but I voted against my incumbent in this year’s election because he was the Shadow Communications Minister, and a grossly incompetent one at that. Watching Mr. Smith bicker with Senator Conroy on national television was cringeworthy, and I sincerely hope that as his replacement you can restore some sanity and credibility that was certainly lacking in this debate previously. I implore you Mr. Turnbull to start listening to some actual people in the telecommunications industry instead of so-called ‘I.T. experts’. You will find a different story there, one far more supportive of an NBN.
@Mark Beukers, lol. Didn’t expect to get a bite. Just thought that it needed to be said that more than money is at stake here. However, as I got one let me illustrate what your model of society as an economy does. As a student in university under the Howard govt I watched the economic rationalism being espoused by Malcolm and friends gut funding to key subjects in mathematics, natural science, social science and humanities. I further watched as international students were courted to supply funding to fill the massive shortfalls Howard economics had left. Subsequently I watched as subjects were dumbed down so far that multiple choice replaced essays (and extensive thorough analysis in other mediums) and became the measure of a student’s knowledge. Now I watch as PhDs are shortened from 100, 000 words to 80, 000. Our educational standing internationally is suffering as a result of the economic rationalism of the coalition years. Our quality of education is falling. This means we are becoming less competitive. Put in the context of our primary industries exporting raw materials to the world as the basis of our economy, what kind of future does Australia stand to have when the resource boom ends? And why is this the case? Because apparently, the wealthy needed to be rewarded more than through the “mere” wealth they have amassed and are able to further amass more easily than others and apparently it doesn’t matter that the amassed wealth is supplemented by tax payer’s money… Re monopoly Malcolm it would seem to me that with the coalition’s history the only threat of a telco monopoly would be under a coalition govt. Wad up? You are making less and less sense…credibility slipping.
So, what do we get for our $26B of taxpayer money spread over 8 years (thats $3B pa [from a budget of $600B], the total cost is $43B)? We get stable, high-quality bandwidth to 93% of Australian premises (residential, business, government).
For what outcomes?
- residential: media consumption, telecommunications improvements
- business: telecommunications cost reduction, improvements in operational efficiency, better prospects for value creation
- government: service delivery improvements, etc
Can’t get this, on a national scale, from a piecemeal approach. Neither from wireless.
Also, the government receives a return (at the bond rate) over the life of the project rollout. Plus, over the life of this new assett, there is much potential for increased income for the government (think new businesses, employment, etc)
So Malcolm, I think Tony has you in a bind. A no-win situation for you.
Building a shared national resource is worthwhile. As a Network Manager for a large Australian organisation I can only see the upside.
Regards,
Paul
Great article Malcolm! It’s great that you understand every detail of it and are good at articulating it. The NBN is going down!
Hi Malcolm,
They are some interesting points that you raise but I’m getting frustrated with your arguments. There are a lot of mis-truths and clutching at straws throughout this piece.
One of the basic premises of your argument is to leave private companies to build it themselves. Well Telstra, Optus and the like have had the option to build these networks in rural areas and they haven’t. Why haven’t they? Because it isn’t profitable for them to do it and in an age when shareholders seem to rule what a business does, if it won’t make money we won’t build it.
Doesn’t it become the responsibility of government to provide services when private business won’t?
Also, I’d like to ask you to think back to the days when you were running Ozemail. What would you have thought at the time if you were being told by the Government that you were no longer going to be held to ransom by Telstra for pricing and access to their infrastructure?
Regards,
Andrew
A rationale for the NBN that keeps coming up is the unforeseeable potential use of high-speed internet.
The “potential” part suggests that it may be great; while the “unforeseeable” part implies that it can also be a waste.
Can’t we built something that requires less initial investment but is more flexible and expandable? In this way we would be limiting the risk, while being able to easily increase supply when the demand catches up.
I don’t think anyone is opposing fast internet; just an argument over how this can be best achieved.
Malcolm , Your assessment is spot on. What is also alarming is that the NBN spent 90% of its budget and only connected 50% of the homes in Tasmania. Refer to the link below. This cost overrun translates to the whole of Australia then the NBN could cost 77 not 43 billion. Many of the supporters of the NBN are mesmerized by the superfast speed and don’t realize how difficult it is going to be to run fibres into every house, ie. climbing through ceilings and digging up front yards etc.
http://www.abc.net.au/news/stories/2010/10/08/3033506.htm
I can’t help but say that your sounding a little short-sighted Malcom. Your arguments here and in your previous post are like saying that velcro is a pointless invention when we already have shoe laces. A crude analogy, I know but the applications we don’t know about yet should not be scoffed at. To do so reflects more poorly on your assessment of the grand-scale implications of the technology. Personally, I am not offended by the idea of a government owned monopoly of the broadband infrastructure any more than I am offended by the government monopoly on roads. Oen day, we are going to have to get off the gravel and seal it. Simply because other countries haven’t done it yet, it does not mean it’s a bad idea. Although I think a cost assessment, is a certainly necessary (because a project of this size definitely needs some stringent scrutiny to ensure it is done efficiently and serves as many as possible), I think you need to be more careful as to how the benefits are weighed. As for the notion that the speed could be excessive and be largely wasted, I (as a network engineer) can categorically say is nonsense. Like any person who gets a raise in salary, we will find a way to spend it.
If you truly understand the technologies involved and what the long-term implications actually mean for the nation, I honestly believe it is in your best interest to simply ensure that NBN is rolled out properly and without waste. Please do your best to keep the big picture in mind rather than merely following along with Tony Abbott’s small-minded party politics (we both know you’re smarter than that).
We may not need it right now but we WILL need it. The sooner we get it, the sooner Australia’s digital economy will be allowed to flourish.
may be we will need the scale of NBN in the future. what about things that are needed right now but lacking the required resource, right now?
we need to carefully find the balance between addressing immediate problems, and investments for potential future benefits.
about potential future benefit, the problem with the tech industry is that, it is moving so fast and rather unpredictably. back in 2000 who would have thought it is Apple but not Microsoft that would be the sweetheart of 2010?
NBN is a bet, and a pretty big one at that. so good luck.
@ B Chan
As it is right now, electronic commerce is massive and beyond the imagination of our internet founding fathers. If they had forecasted the huge use of internet and electronic communications, you can predict the would have built in more security in the infrastructure.
Similarly, this nation needs to plan for and build the next generation infra and the higgest gating factor is the conduit. Copper has technological limitations and comm expects agree fibre is the way to go albeit an expensive one (but future proof and will last for a few decades).
What you have mentioned are the changes in hardware at the enduser or termination ends which, if you care to observe, has gotten cheaper and more powerful. It is the **CONDUIT** that has not changed and needs to be changed in order to exploit high speed internet.
One of the reasons video conf or video call isn’t widespread is the poor upload speed – no issue with the Mac or Win or phone devices – they are powerful enough. The bottleneck is the conduit.
Malcolm urge for a CBA and I don’t have a problem supporting him on this. But he and anyone else need to realise CBA cannot address chicken-and-egg issues such as the kind and volume of apps developed from the availability of high speed internet.
And they can be absolutely exciting and stunning.
Electronic medical records – not only your text files but **very high** resolution pictures of your scans. Take for example, the numerous slices of MRI negatives. In the next decade, there **can** be no MRI negatives and every film is stored electronically in **very high** resolution accessible by a few or any specialist a patient approve – simultaneously in their respective offices in a collaborative fashion without meeting face-to-face. Apps needs to be developed! Hey, that is green as well!
I can go on….
But the future is exciting when the enablers are in place.
The NBN can and probably will charge very high rates to the retail on sellers when it achieves a network monopoly. Then what choice do we have for a cheaper service. I can see it going higher and higher, just look at how Labor has increased taxes and is planning more increases eg carbon tax? Not to mention how state governments have used water and power as a back door method of tax since inception. I smell a rat!!
Forget the NBN. The City Council of Brisbane is allowing the private industry to lay their fibre in the sewers. Roll-out has already begun.
No reason why this can’t be done in other cities around the country & at no $43bn cost to the taxpayer.
Brisbane plans for its own fibre network
Mr Thomas said that, by using a mix of fibre deployment techniques that used sewers, stormwater systems and micro-trenching, i3 could connect each premises at a cost of about $600, which was much cheaper than the projected per home cost of up to $3000 for the government’s NBN.
Unlike the NBN, which has a mandate to improve telecommunications services in rural and regional Australia, i3’s network will be making a good rate of return from day one.
Although Mr Thomas would not reveal the profit expected to be garnered from the network he said it would be a commercial return, which puts it at odds with the NBN and its projected government bond-like returns of 6 per cent.
http://www.theaustralian.com.au/national-affairs/brisbane-plans-for-its-own-fibre-network/story-fn59niix-1225938922604
It is so frustrating seeing all the idiots that make comments along the lines of we don’t need the NBN. If you make a comment along those lines you clearly have no idea and should stick to not planning for our country because you will get our country nowhere.
As for Malcolm, when are you going to learn to support the NBN, I am guessing your lack of technical knowledge has something to do with your ignorance and lack of vision or do you prefer arguing for the sake of arguing. Being on the board of tech companies doesn’t mean you know about technology.
The possibilities for the NBN are huge and social benefits include cheaper costs and more money saved for everyone. Just a few of the possibilities:
Online movie rental (Distribution is cheaper, Less Labour costs, No transport costs -> cheaper rental costs, better for environment. Don’t have to pick up/return movies -> Save time, Save petrol = Save money, Save environment)
Online data backup (Save hardware/software purchases = save money, Data Centres -> More reliable, Cheaper, Off-site)
Working from home (HD video conferencing with customers/colleagues -> More productive use of time = save money and time, More than one person in the household can do at the same time)
Those three alone would be worth more than $43B to our country and they are just a few.
Why is the minister not visiting oak flats nsw 2529 / ALBION PARK exchange can not be converted due to no spare ROOM in the building! Ouer telephone cables are rotten in the ground/footpath.Can not be updated.
I rest my case…….
@John: Allowing medical collaboration over internet is important. On the other hand, do people need their hi-res MRI scan streaming to their home? Perhaps it is sufficient to have ultra-fast connection between hospitals?
For specific applications and between critical organizations, high bandwidth is warranted. For households, is it a necessity or a luxury item?
For small businesses, fast internet can be important depending on the nature of the business. Government should assist. However, does it need the scale of NBN? For instance, how many run their server from home?
Malcolm, I have been a liberal supporter for my 39 years, but the lack of vision showed by the party with tackling Telstra’s monopoly, and Howard’s unwillingness to take action like Labour has with the NBN drove me away and was my reason for voting for them for the first time in my life.
I am positive, behind closed doors the party think this is a brilliant plan, but due to ‘playing politics’ the Liberals have to shoot it down.
The NBN will create a level playing field for all telecommunication companies, consumers and business alike will be the benefactors! This is good for the country and will open up many doors for different technologies and opportunities. Not just consumer, but medical and educational as well. I beg the party understands that this country needs this leg-up to compete in the global economy in coming years.
Your party number crunchers would of disected the election, but I am sure that if the party came to the election supporting the NBN build, you would of won and now be in government. At the end of the day 43billion for a technology which is going to last another 50 years like our copper, is worth it, the productivity gains alone would pay for itself.
I was supporting you with regards to your stand when you were leader and got tossed out. I was impressed by your willingness to follow what you believed in. Being an ex IT executive (btw I was one of your customers back when you started), surely you can see the benefits. Stand up again Malcolm, support this and get back into Government. And win my vote back, as currently the Liberal stance I believe with regards to this is just plain vandalising our future in the world economy!
Malcolm
I have always admired you as a politician, and still do. You are someone of intellect and reason. Surely you can see that Tony has stitched you up in this portofolio with a mandate to “destroy the NBN”?
@ G Hildyard
You might be right or spot on on the Libs winning the election but playing the NBN issue to their advantage.
Instead of destroying or shooting down NBN, imagine this twist the Libs could have approach (and it is not entirely unrealistic): THE LIBS SUPPORT NBN BUT IS NOT SATISFIED WITH THE LABOUR GOVT ON THE SLOW SPEED THIS DEFINING PROJECT HAS TAKEN OFF. IF ELECTED, THE LIBS WILL 1. FIND WAYS TO SPEED UP THIS PROJECT BY THREE YEARS 2.FIND WAYS TO REDUCE COSTS OR ALTERNATE MEANS OF FUNDING.
That might have put Tony Abbot into power and catch Labour completely off guard.
ps. I write from a apolitical stand.
It is such a frustrating thing to see a very good brain hijacked by a poor cause for the sake of politics. The strongest points against the Coalition’s NBN policies have been made above already but they bear repeating because they are correct.
1) You (Malcolm) say “how many households would derive meaningful additional value from upgrading their broadband access from, say, 20 mbps to over 100 mbps?” The answer is that we are considering the FUTURE, not the present. The Coalitions’s hotch potch plan is a plan to create fairer and more widely available broadband (BB) for the PRESENT. But we are talking about the future when demands on BB will be much higher. How can you put yourself in the basket of famous people who make plainly foolish quotes about technological progress to be laughed at by future generations? What is being asked is a plan for a widely available BB platform for the FUTURE. The coalition’s suggestions do not meet future needs and will be a lost investment very quickly. They are an embarrassment when it comes to nation-building or vision or even demonstrating understanding.
2) You tout 4G wireless. It takes only a rudimentary appreciation of physics that an intelligent lawyer should be able to grasp to realise that wireless can not provide the bulk of future BB demand. This is based on bandwidth considerations. Of course 4G is a cheap way of providing high capacity to some people. But not most people. 4G is cheap and will be provided by private enterprise without any help from government. It will not form the backbone that we are talking about.
3) Cost-benefit studies have one overwhelming weakness – it is impossible to quantify many benefits, this applying more so, the larger the project. This is where vision comes in as well as insight and a native understanding. With cost-benefits as usually practiced, the national road system would never have been built, neither the telephone service nor many other hefty infrastructure projects. If the benefits were truly counted, the NBN would certainly be justified.
What are some big unquantifiable benefits?
- the huge benefit to society of having a predictable and consistent service, a single universal service that you don’t have to think about, don’t have to analyse on a daily basis to make sure it is the best value for you, that doesn’t require duplication by multiple providers and that you just don’t have to think about because it works, it is fast and it is (near) universal. This has always been a major advantage of government monopolies such as Telecom as it was and Australia Post. Have we gained by the current situation with deregulated Telstra? No. We have to put up with touts and incomprehensible plans and incomprehensible value for money assessments, needless competitive advertising and needles duplication of admin, infrastructure and the rest. There is no way that OPtus + Telstra + AAPT + the rest offer a cheaper service than could have been provided by a single government monopoly, even allowing for lower efficiency of the latter. Today we need less choice, not more, so long as the reduced choice includes a good product. This is a very good reason for and a good benefit of NBN, but which is unquantifiable simply because the majority of people don’t even recognise it so won’t stand up for it or put a value on it. But to ignore it is wrong.
- financial savings of avoiding duplication. Look at the current situation with mobiles in Australia. There are three – THREE – networks entirely duplicated over the country. Three sets of towers, hardware, links, exchanges … when there only needs to be one. It is not possible that these three networks and their associated triplicated administration costs cost the country less than a single government monopoly would have cost, nor can they be run for less than a gov monopoly even allowing for lower monopoly efficiencies. In addition we suffer a reduced technical performance in terms of coverage. If there was a single network with the same amount of hardware, the infrastructure currently used by the two unnecessary competitors could be moved to almost triplicate the available area coverage. i.e. one network would have vastly better coverage than three networks all covering the same lesser area. Free market provision of services is NOT efficient for most infrastructure, it just creates duplication in popular areas and leaves other areas uncovered. All the same arguments apply to the NBN.
- householder technical simplicity. Who wants to deal with keeping up with latest hardware, software and alternative service providers all the time? Apart from a few tech heads who enjoy it for its own sake, who wants to decide whether to change their modems, software, provider and email addresses because a new cheaper service has just become available in their street? And then go through the same thing three years later when yet another provider comes up with a marginally cheaper/faster option… and again and again? Quality of life is served by not having to spend that life on technical and competitive decisions that should be invisible to us. A single coordinated, integrated, predictable, universal system is a far far better thing and a huge benefit of an NBN that is completely unquantifiable.
- the benefit of better and more predictable performance. Fibre is the only known technology that is practically open-ended in capacity terms, and is way way ahead of copper and wireless. It provides a scalable solution that if done correctly will be more reliable and faster than the alternatives. What price efficiency and predictability?
Malcolm many people were taken with your principled and undoubtedly fundamentally correct approach to the need for climate change action. Most of all your willingness to run against the cheapest of politics. It would be a sad day fo all of us if you weren’t able to repeat the display of integrity re the NBN. The LCD politics being played out now by the Coalition surely can’t be the best we can hope for? Many are hoping you have a cunning plan.
Can someone please provide specific examples of future applications that will (1) take advantage of the ultra-high bandwidth, and (2) will advance our society?
It is not like the tech industry doesn’t plan, major software and internet companies spend years in development. Digging around, we should be able to find out what the next decade, or even beyond, might look like. So let us assess the project with more detail.
We won’t be able to have a genuine discussion without a clearer picture.
@BChan – the big ones that it’s hard to argue with are health care (remote diagnosis and easier access to specialist services, faster service, less requirement to travel, better records and doctor information access thus reduced risks and better outcomes) and education (multiple obvious and not so obvious applications). The greatest demand though is likely to come from movies on demand and (shudder) gaming. An interesting one will be immersive experiential stuff eg simulated experiences like space flight, earth flight and virtual tourism. How much any of these will advance society is arguable however that will not stop the inevitible demand which will need to be satisfied somehow.
@Julian, thanks.
I think the strongest case here is education. For instance, it would be nice to enable teens, with a click, to watch JFK’s speech. Whether it needs to be in full HD to inspire is somewhat arguable.
As for health, there is a case but I think it is weaker. Medicine is a very complicate and a largely physical subject. For example, you can communicate with a doctor online but internet won’t let you supply him or her a blood sample.
In both cases, I want to ask two questions:
(1) Do we need fibre everywhere, or can fast internet be placed more strategically, into schools, universities and hospitals?
(2) If we divert some money away from the NBN and invest the savings directly into education and health, can we achieve more?
For those more consumer-oriented applications, a point for debate is the appropriate level of government involvement. Is the current level excessive? Should the private sector bare a larger part of the market risk?
I’m by no means object to the current form of NBN per se. However, I think many questions are yet to be answered before it is convincing enough.
Malcolm
Try this one. Why don’t you ask Stephen Conroy where the majority of content comes from that we download here in Australia.? Put another way why don’t you question the logic of having a super high speed network here in Australia when everywhere else does not. Its like having a freeway from Darwin to Sydney, but an unsealed road from Darwin to the USA…Basically the majority of content is off-shore, so the network is only as fast as the weakest link……
Best Regards Peter
Peter – local infrastructure current speeds are a good match for the current overseas links. They will not be a good match for future overseas links which will rise of course to match demand and the capability in other countries. So we will have to increase local capability. This increase is beyond what wireless and current backbone can support. So we need an NBN or something equivalent.
Once again, it is ludicrous to base your future planning on current restrictions.
Also – many of the likely applications for which the NBN is needed are local, not involving access outside Australia. That is FUTURE demand, not current, for services that don’t yet exist eg Health access and education implementation.
Your argement is as flawed as Tony Abbot’s and (apparently) Malcolm’s.
Dear Mr Turnbull
I’m glad that you’re tackling this white elephant!
However, I think people are having difficulty imagining what $48 Billion (or is it now $54 Billion??) really means.
I came up with the following facetious comparison by way of assistance.
My emails arrive fairly quickly now and they MIGHT be fractionally faster with the fibre optic NBN in place.
However, our postal service is stuck using little red motorbikes and vans to make local deliveries.
Lets take the latest 5.4 x 10 to the power of 10 dollars and divide it by 35,500 (ie total number of Australia Post employees, including management, cleaners, so on…)
That equals $1.52 million dollars per employee of Aust Post. We then find out that a Bell Jetranger helicopter is $700,000: so we buy 35,500 helicopters and use the remaining $821,000 per employee to train them as helicopter pilots and cover fuel and maintenance.
Now if I order a product online, the slowest part of the transaction, being postal delivery, can now to take place at awesome high speed as my postie will be able to drop it onto my front lawn from his personal Bell Jetranger helicopter.
I call this the National Bell Jetranger Network or NBJN.
Hi, your critisms are justified. Many people are concerned about the $43 billion cost and the lack of cost-benefit analysis. Many people are also attracted to large infrastructure projects and faster broadband. You need to come up with an alternative policy that delivers fast broadband, but with a minimum of cost and exposure to the Australian taxpayers. Two points :
1. Why do we need the NBN Co, which will eventually be sold off, but will put taxpayers money at risk? Yes, let us allow Telstra to structually seperate, but let them retain 50% of the new entity, and be compensated by selling the other 50% to Optus. We can then build out from the existing network, achieve wholesale competition sooner, which will make the current broadband market more competitive, cheaper and faster.
2. The whole reason for going FTTH (Fibre to the Home) was because the Government of the day was unable to negotiate with Telstra and unwilling to pay compensation, leading to the original FTTN tender being abandonned. The reasons for going FTTH was to provide more competition in the wholesale market, and to bypass Telstra’s existing network. Now that both of those reasons are no longer valid, with the $11 billion deal to use Telstra’s infrastructure and remove them as a competitor, let us revisit FTTN/C (Fibre to the Node/Curb). By going FTTC (which can still be upgraded in the future if needed), and still offering 100 Mb / second, we can still have a NBN for $20 – $30 billion less.
Let’s find out from Telstra and Optus, if they were to jointly own the network together, what Government funding, if any, would they require to implement 100 Mb / second speeds via a FTTC deployment.
Hi Malcom, Keep up the good work! I encourage you to have a look at my campaign which has been running for around 18 months. Regards, Todd.
experienced telco CEOs = Lindsay Fox (vested interest)
both sides of Australia = Both houses / side of government ??
meaningful additional value =
describe this as the difference of see or not see a person
.. you seem to be confusing statistics sometimes with qualatitive staements other times
20 mbps (or less) –
you live in Sydney (fastest internet in Australia), you visit Canberra (2nd fastest internet)
I moved from Sydney to Cairns, from have ADSL 2+ available at $60 per month to have 512Kb at $70 p/m
so when we see that (or less / slower) this is not just a “little bit” slower
this is orders of magnitude slower.
What applications will take advantage of these higher speeds –
Guessing you age is approx 62 years. I would suggest you have seen many changes in technolgy
some great and some not so great. But we have seen the advent of mobiles phones, allowing lives to be saved by
EMT’s arrive earlier, business deals / stock pricess can be watched and analysised and traded on faster, for great profit and security
I’m sure you have used a microwave oven to heat something up, used a DVD play to
watch a movie when you want to, play CD with cystal clear sound, need I go on
we have seen so many inventions that have helped both in our day today lives and
the country as a whole. The NBN is the next one.
A question I have been wanting toask you “Does / has anyone done a productivity analysis on a highway?”
- Any geographer will tell you that 80% of all the worlds cities grew along the highway / train-line
- The NBN is just the next version of this highway / trainline
investment in health, or schools
This would be an investment in these areas
“And finally, given the structural separation of the network from the retail business of Telstra is cited as one of the great virtues of the NBN, let us not forget that structural separation of that network does not require its overbuild and replacement by an entirely new network. Structural separation is a consequence of the NBN agreement with Telstra, but the NBN is not a necessary companion of structural separation.”
What does this mean? You ( I guess it’s probably one of your marketing people) are writing a blog, this says nothing.
Implementation Study acknowledges this and states at p. 254: …..
This basically equates to Senator Conroy’s … “Things we don’t even know about.
If monopoly is bad,
Governemnts would be then considered monopoly’s on country politics ??
Regards
Adam