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Conroy’s Digital Economy Con

Published on: May 31, 2011

The plans for Australia’s digital economy as outlined by Senator Conroy today reveal the hollowness of the argument for an immensely expensive and excessively risky Fibre-to-the-Home (FTTH) network.

The Coalition broadly supports the eight goals outlined by Senator Conroy today.  But they could all be achieved by spending much less than $50 billion on a FTTH network.

A cursory look at each of the Government’s goals reveal the shortcomings and shallowness of Senator Conroy’s arguments for a new, anti-competitive, one-size-fits-all Government-owned fixed line monopoly.

Goal One: Australia will rank in the top five Organisation for Economic Cooperation (OECD) countries in the portion of households that connect to broadband at home.

Broadband connectivity does not require FTTH – that much is clear.  As is also clear from p. 21 of the Report, the biggest barrier to Internet usage, let alone fast broadband usage, is income.  While 26% of Australians over 15 did not use the Internet at any location in 2008-09, the figure for those in households with incomes of less than $40,000 per annum is 34%.  However the percentage of those not using the Internet in households with incomes of $40,000 -$79,000 is 14%, in households with incomes of $80,000 -$119,999 6% and in households with incomes over $120,000 only 5%[1].

The massively over-capitalised NBN will be under huge pressure to charge higher prices, to service its huge capital base. And, because it will be a monopoly, there will be no prospect of competitive services keeping prices low. As we have seen in recent years the dramatic decline in the cost of telecommunication has been driven by competition.

The one thing the NBN is not going to deliver, therefore, is cheaper access to the Internet; in other words it will do nothing to bridge the digital divide which is, as the ABS statistics demonstrate, in very large measure, a divide defined by income, or lack of it.

Goal Two: Australia will rank in the top five OECD countries in the portion of businesses and not-for-profit organisations using online opportunities.

The OECD figures show that 96.6% of Australian businesses with 10 employees or more are already using broadband, meaning it is ranked fourth in the OECD already[2].  So this is hardly an argument for completely scrapping our existing competitive broadband market.


Goal Three: The majority of Australian households, businesses and other organisations will have access to smart technology to better manage their energy use.

This is an admirable goal but not one that can only be met through a FTTP network.  Economists Robert and Charles Kenny note the roll out of 30 million smart meters in Italy between 2001 and 2005 required bandwidth of just 2.4 Kbps using existing copper or mobile networks[3]

Goal Four: 90 per cent of high priority consumers such as older Australians, mothers and babies and those with chronic diseases, can access individual electronic health records. In addition, by 2015, 495,000 telehealth consultations will have been delivered and by 2020, 25 per cent of all specialists will be delivering telehealth consultations to remote patients.

This is an admirable goal, but the Government’s own research shows that this doesn’t require bandwidth of 100 Mbps, or anywhere near.  The Department of Broadband’s Telemedicine in the Context of the National Broadband Network paper cites three separate case studies where the bandwidth required for clinical applications was 1.52 Mbps, 1.5 Mbps and 10 Mbps respectively[4].

Goal Five: Australian schools, TAFEs, universities and higher education institutions will have the connectivity to develop and collaborate on innovative educational services that will extend the opportunities for online learning.

Australia’s 38 universities and the CSIRO are already connecting to superfast broadband – capable of higher speeds and greater bandwidth than currently offered under the NBN – as part of the AARNET scheme.  Meanwhile,  80 per cent of TAFEs  are connected via fibre[5] and 63 per cent of high schools are connected via fibre[6].   Increasing the penetration of fibre can clearly be achieved independently of a national FTTH network.

Goal Six: Australia will have at least doubled its level of teleworking so that at least 12 per cent of Australian employees may work away from the traditional workplace.

An Access Economics report that attempted to quantify the benefits of teleworking, referred to in the National Digital Economy Strategy, does not attempt to quantify the increased incidence of teleworking across different levels of bandwidth.  Rather, it quantifies the economic benefits of teleworking using existing bandwidth.  Although businesses have indicated they will be more likely to engage in teleworking, no economist has been able to quantify the benefits or assess whether they justify a $50 billion Government subsidy.  This is precisely why the Government should have conducted a cost-benefit analysis before announcing the NBN. 

Goal Seven: Four of five Australians will choose to engage with the government through the Internet or other type of online service.

It is difficult to think of any  Government service that requires 100mb/s bandwidth to residential premises and it is worth noting that none of the services referred to by the Government in this paper require such high bandwidth to be delivered to homes.

Goal Eight: By 2020, the gap between households and businesses in capital cities and those in regional areas will have narrowed significantly.

The Coalition agrees that rural areas of Australia have been traditionally underserved by broadband providers.  The Coalition pledged $2.7 billion during the 2010 election in funding for fixed wireless and satellite connections for the bush.  However, the Coalition would already be rolling out these services rather than setting a deadline of 2020 to bring the bush up to scratch.  If the Coalition’s 2007 OPEL plan had been implemented most areas would already have high-quality services today.

Senator Conroy’s National Digital Economy Strategy is simply a thinly-veiled spruiking of the NBN.  It does nothing to reassure the Parliament or the Australian people that there is any likelihood the NBN will be delivered on schedule, on budget, or amounts to the best use of taxpayers’ funds.


[1] DBDCE, (2011), “National Digital Economy Strategy”, p.21

[2] OECD, (2009), “Business Use of Broadband”, available online at: http://www.oecd.org/dataoecd/20/62/39574066.xls

[3] Kenny, R., & Kenny, C., (2011), “Superfast: Is It Really Worth the Subsidy”, p.19.  Available online at: http://www.apo.org.au/sites/default/files/Overselling_Fibre_1127.pdf

[4] NICTA, (2010), “Telemedicine in the Context of the National Broadband Network”, available online at: http://www.dbcde.gov.au/__data/assets/pdf_file/0016/130714/NICTA-Telemedicine_Report_cr_-pdf.pdf

[5]http://www.deewr.gov.au/Schooling/DigitalEducationRevolution/Documents/SurveyBroadbandConnectivityWebsite.pdf

[6]http://www.deewr.gov.au/Schooling/DigitalEducationRevolution/Documents/2010SurveySchoolConnectivity.pdf

34 Responses to “Conroy’s Digital Economy Con”

Stephen says:

1. Wireless, your option, will be MORE expensive than FTTH to the consumer.
2. An incomplete and disingenuous response. Try harder
3. True, but using those figures, dial-up would suffice. Are you advocating dial-up?
4. You will be hard pressed getting 10Mbps on many wireless connections. And you know that. I am 4oo metres from a Telstra Next G tower and best I can get is 5Mbps.
5. And how much do these institutions pay for these connections?
6.So, let me understand your logic on this point… No-one has ever tried it so therefore it can’t be done? What a Luddite.
7. Difficult to imagine? Imagine a bit more Malcolm.. I’m sure there are and there will be future interactions that require quick movement of large data files. Hi Res photos’ aerial surveys etc are just ONE that I could imagine.
8. Are you advocating OPEL again? Shall we revisit all the limitations of that?

Nick says:

malcolm acts and thinks he is smart but he is dumb as shit!!why do you continue to make things up as you go along.Do you want us to go back to dial up?you don’t seem to know anything about new technology,all you know is dial up.you have no imagination or any vision of the future.you are boring us with misleading info.

Dear Mr Malcolm Turnbull

after reading most of your arguments with the NBN. Is this cause being lost. because I totally agree with you that this NBN is going the same way as telstra, and Qantas once before, no competition and higher prices. My broadband as we speak is fast. I don’t need to it run any quicker because it does nothing to my life or living.
I find it amusing that Convoy can talk about the future when we have no idea how pricing will be done. It may cost $50 now but if it drags on what is it not to say it may go up according to the pricing in the future, wages or employee’s, equipment prices, they may increase thus building cost may go up. Maybe the Mining boom dies done and the government will have to borrow more money from the banks. It’s a huge risk when as you say we already have most of all the ground work so why rip them out to lay new ones that may not do any different to the copper we are using now. Who is to say Japan or Korea won’t come up with a better technology in the future that might use satellites or some new wire system, or even mobile phones as a connection point. I’m not an expert in these areas but as history shows technology never sits still. it always upgrades as you know. The more I listen to Convoy the more you can see he has no clue and is just following the Labor parties ideas without any knowledge. He is trying to sell something like a car sales person, wants you to buy this most expensive car so he gets a higher commission for the sale. Its not like he is saying the pro’s and cons it’s like his telling me I should have this as if I am a dodo. Very poor attitude, very arrogant of him to think Australians are ignorant. They are just doing this so they can say in the future we built this network. it’s all for self promotion. Another tax really because we will be taxed to cover the cost of this network. This is my view. I do hope you can stop or at least minimizes the damage it can have on our economy, because even if we go above surplus we Australia is always debt. We have been borrowing money from the 60’s like every other country. You can never go above debt. but that doesn’t mean we should spend stupidly like this labor government is doing at present. Please keep up the great work. catch them out when you can, make them look silly when they put out these types of ideas
regards

Alexander Bretti

Wes says:

Malcolm … C’Mon mate … cut the crap! You are without doubt the most intellectually capable individual in your party yet you continue to spruke this ridiculous party line. Malcolm .. in your heart of hearts, you know this is without doubt the best internet plan for our country … Take the leadership back from Mr Rabbit and drive this country forward with real direction through support of both the NBN and your climate policy. We all know you are the only real leader in your party. Time to just get on with it Malcolm. Wes

Dylan says:

I work in an organisation that for the past 10 years has just been patching its network to try and meet demand. Slowly tweaking and adding things to try and improve capacity.

We’re finally having to do a complete overhaul, and we’re spending more now to replace all the ‘patch-work’ than we would have had it been done right.

My point being, if we’re going to spend money on it now.. let’s just do it properly. Perhaps considering what we’re used to now FTTH is a bit excessive, but I don’t want to have to revisit this in the future because we’ve done a semi-upgrade.

Malcolm, I’m not a Liberal supporter, but I really do hope you consider the leadership again one day. I think you did well before and would do again. Much more so than the current uninspiring and directionless leadership.

Andrew Elder says:

As with “direct action”, you seem to be proposing a quite costly solution today that will quickly fall behind requirements and become a liability in five years or so – a wasted opportunity.

Come up with a vision that matches the scope, if not the methodology and technical limitations, of the NBN. It will be a lot more credible than either what you propose now, or what Tony Smith brought out last year. It will be credible because it’ll be authentic, Malcolm. This half-baked proposal is not helping anyone.

Reg says:

Malcolm, you’re an intelligent man, but how can you think that wireless is the future. Come to Bomaderry and try using the net. This wireless is sh!t. It should be mandatory for all comments on Broadband and the NBN to declare whether they have access to ADSL. I’ll guarantee there wont be too many people forced to use wireless that bag the NBN.

[...] me know what you think! Conroy's Digital Economy Con Published on: May 31, 2011 Retrieved from: http://www.malcolmturnbull.com.au/media/releases/conroys-digital-economy-con/ The plans for Australia’s digital economy as outlined by Senator Conroy today reveal the [...]

Phil says:

The NBN won’t be doing that. In outer rural areas, it will deliver broadband by wireless or satellite, not by running fibre “several kilometres” down driveways.

Lee Furlong says:

By all means let’s get fibre to the node. That would at least get a lot of us from ADSL1 to something better. Here in the bush it seems illogical to run fibre multiple kilometers from the property gate to the house. Copper already exists. Bring the fibre closer to the node and speeds will be more than fast for the far reaching spread out rural users..

Phil says:

Lee,

The NBN won’t be doing that. In outer rural areas, it will deliver broadband by wireless or satellite, not by running fibre “several kilometres” down remote driveways.

Lee Furlong says:

WOW! you mean I will be able to have a wireless/satellite faster than my present ADSL 1 almost of more than 20-100 kb. when can I have THAT service!!!

Stephen says:

Malcolm, I’m happy that you are holding Labor’s broadband credentials to account, but honestly none of us can predict what the cyber-world will be like in the future. At some point FTTH will probably become a necessity. Since the technology is pretty much 100% future proof, why not build it now while resource costs aren’t exorbitant and just enjoy it :)

Phil says:

GOAL 1:
The NBN will facilitate this, because it will be cheaper to get a basic internet and phone connection over the NBN, than it is to currently have a phone + ADSL service.

GOAL 2:
having access to a “broadband” connection is not the same as being able to use it effectively. Given Australia’s pathetic average broadband speeds, business use of “broadband” in Australia, while it may exist, is highly inefficient.

“Our existing competitive broadband market” What competitive broadband market is that? Less than 15% of Australian premises can get a fixed broadband connection delivered via anything but Telstra-owned infrastructure.

On the copper network, of Telstra’s 5,000 exchanges, less than 400 have competitive DSLAMs installed. That means residents connected to the other 4,500 exchanges can ONLY get ADSL2+ from Telstra.

Can someone please explain how this abysmal, 3rd-world situation is more competitive that a level playing field for ISPs to deliver services over the world-class NBN?

GOAL 3:
No argument about the need for FTTP, however the design of the NBN will facilitate this goal because the system will allow utilities to connect to the network ubiquitously, and without impacting the connection(s) of the premises.

GOAL 4:
As usual, when talking about bandwidths you fail to identify that they need to apply to both directions. On this basis, NONE of the bandwidths you list (1.52, 1.5 or 10Mbps) can be delivered over ADSL2+ networks. The lower two can potentially be delivered via different DSL technologies, so long as the distance to the exchange/node is very short, but 10Mbps can only realistically be delivered over FTTP.

GOAL 5:
If it’s so easy to deliver fibre to schools/TAFEs now, perhaps you may explain why almost half of them haven’t got it?

While most universities themselves are connected to AARNET, their residential areas usually aren’t, thereby hampering students working from their dorms etc. I would have thought that the overwhelmingly positive response to the NBN from the universities would have given you pause on this point.

GOAL 6:
In other words, you can’t dispute this point, because as you well know, the current DSL networks are a huge barrier to teleworking due primarily to their low upload speeds.

GOAL 7:
As for goal 4. While download bandwidth is often not an issue, upload bandwidth most certainly is. Neither ADSL2+ nor a DSL-based FTTN system can deliver decent upload speeds, drastically limiting any interactive use of the network for video-based services in particular.

GOAL 8:
So you’ve abandoned the usual argument that the Govt are rushing into the NBN, for one of saying it will take too long?

Any services delivered under OPEL would be significantly poorer than those to be delivered by the NBN. Apart from the massive difference for those regional areas in the fibre footprint, the NBN’s rural wireless solution will use the latest 4G technology, not even invented when OPEL was proposed. OPEL would also not have delivered new 12Mbps satellites as the NBN will, so satellite users would likely be stuck with 1Mbps.

Finally, the implication that “rolling it out now” is different to a “deadline of 2020″ is misleading. The NBN is also “being rolled out now”, with fibre already delivered to several rural areas, the interim satellite service being trialled, and the 4G wireless rollout soon to commence. In my book, that is “being rolled out now”.

Toby says:

A number of repliers seem to have missed the point of this article. It is not saying that NBN wouldn’t be fantastic. Rather it is saying that we could have the speed required to achieve these aims without spending $35 bn. There is a scarcity of capital It is a question of priorities. If the same results can be achieved through a cheaper option (taking into account the costs of ‘upgrades’ as per Dylan’s comments) then why spend the money on the NBN when there is a shortage of other public infrastructure?

Nick Hurley says:

You seem a little self-contradictory when you acknowledge that schools need fibre, with the rest of the article essentially making out how very useless it is.
Have you ever tried making an HD video call to someone on an ADSL connection? In theory it can be done, it practice, ADSL simply does not deliver high speeds consistently. Only fibre can do this.
Also, it is not a $50bn government subsidy, the government investment is capped at $26-27 billion dollars. The remainder will come from revenue and NBN Co’s private debt.
Here in the UK, where FTTN has been chosen, speeds are restricted to 4oMb. People here can only dream of >100Mb speeds. The NBN is making Australia the envy of the world.

George Kaloudis says:

You know, what does FTTH connect too?
I mean yeah it connects to the Internet yeah sure, but how, via what.
There are only a few major pipes out of Australia that connect Australia to the Internet… has anyone asked Southern Cross Cable (mostly owned by Optus and Telecom NZ) , Pipe Networks (owned by TPG) , Optus, Telstra, Australia Japan Cable (going to Japan, then USA) , NTT, APCN2, etc..
Has anyone asked them how much a 100Mbps access to the Internet (IP Transit) would cost? Or how much is an STM1 of Internet access via Southern Cross or AJC ?
Guys you can build a motorway with 100 lanes, but if there is only a 5 exit ramps for all of Australian cars… .. what happens?
Ok.. so I can connect at 100Mbps in Glebe and my mum can connect at 100Mbps in Perth.. great, but where is the 100Mbps to the Internet? How much does it cost for 100Mbps IP Transit… someone please ask Telstra, or Optus, or any carrier.. please ask them how much 100Mbps to the Internet via Fibre, Ethernet, Gig Ethernet, what.. method will cost…

please Malcolm. Call Southern Cross Cable consortium and ask them…

For God’s sake you folks have in Canberra have lost the plot.. none of you know what you are talking about.

I have ADSL2+ at home, the reason is can’t get all it can deliver ( I am only 200mtr from the exchange) is because it’s oversubscribed, by about 75:1 (at best) because IP Transit (actual Internet Access) for and ISP …cost how much?

Spend the money on upgrading our access to the Internet, where it comes in to Australia… not at my house.

Then we will see real competition for a lot less money… build a 400TB cable to Los Angeles and hook it up to Level 3, or PAIX, or all the Peering points… then build one to Japan to get Aisian Routes… then we will see what happens.

George,

Leighton recently announced that they are building a 16Tbps cable up to Singapore to improve the Asian connections. It will be completed in 2013.

Southern Cross, PPC1, SEAME3, Aust-Japan and Endeavour currently have a combined capacity of about 8Tbps. So Leighton’s new cable alone will increase our total international transit capacity by 200%.

Additionally, all of the above cables can have their capacity increased by about 10x when required, by the updating of their transceiving equipment to (already available) 100Gbps technology. (Most are currently using 10Gbps tech).

There are also proposals for additional new links to the US via NZ, and another up to Asia.

So it’s quite likely that by the time the NBN is widely available in a few years, our international capacity of 8Tbps will be up around 100Tbps, all without any Government investment being required.

Further, there is currently a boom in local datacentres riding on the back of the NBN, so there will be much more data mirrored locally, reducing the need for international traffic.

Golfman says:

Many spin mongers like Spinister Conroy like to “simplify” the debate by saying the Coalition are anti NBN and therefore don’t want Australia to have fast broadband. This is a clever and easy way to attack their more rational and financially responsible plans but it is clearly wrong.
Reading this article made me realize how much our current telecommunications infrastructure is achieving at reasonable cost due to the various competitors all trying to deliver value – as the article points out – that cost limiting driver dissappears once we create a government run monopolized monster.
The Coalition want to see high speed broadband but deliver it in a way that doesn’t saddle our kids and grandkids with unmentionable debt.
The argument for the benefits of high speed broadband are basically arguments against the Fiber to the Home (FTTH) approach of the current NBN in the short and medium term – it is simply going to take far too long for some people to get this technology (2020) because it is very labour intensive and very expensive – not so much the equipment but the labour involved in digging up roads, front yards, running new cables through people’s roofs etc.,
Australia has already falling behind in average internet speeds in households so we need something that’s quick to rollout and that means something that can use as much of the existing infrastructure as possible. FTTH is NOT such a solution. If the benefits of high speed broadband are as important as everyone is suggesting then we need something that will help people with dial up speeds or poor ADSL speeds NOW! Running fiber to neighbourhood nodes and then using existing coppers, already laid in the ground and paid for is called Fiber to the Node. It is a fraction of the cost of FTTH and is successfully rolled out in many countries including Germany (& many other European countries), NZ, USA which all have much greater average speeds than Australia. The fiber that is rolled out to nodes in an FTTN deployment can be reused for a later upgrade to FTTH when and if we need 100Mbps or higher.
Depending on your distance from the neighbourhood node and the number of existing copper pairs that run from your house to the node you could get speeds of between up to 50-100Mhz with the latest VDSL2 technologies.
FTTH rollouts are faltering in many countries because of the global economic downturn and it’s poor ROI. Some of the governments stupid enough to push forward with such financially irrational FTTH rollouts include Greece, Portugal, Spain, Ireland. It’s the technology of choice for governments who are addicted to excessive debt. Let’s hope the NBN is re-evaluated and implemented using a more rational approach by whoever is in power.

Golfman says:

@Nick Hurley

> Here in the UK, where FTTN has been chosen, speeds are restricted to 4oMb

Lucky you!!! I’m on 4Mbps ADSL and I live 40 minutes drive from the Harbour Bridge!!!.. I’d happily switch to FTTN delivered 40Mb tomorrow instead of possibly waiting until 2020 for FTTH delivered 100Mbps!!!

> The NBN is making Australia the envy of the world.

Hold on Nick! It hasn’t been built yet. It’s the biggest infrastructure project in the country’s history and only a few trial customers have it. Some people won’t be connected until 2020!!

You’ll be the envy of us with your less expensive FTTN 40Mbps for many, many years to come yet!

e says:

Thanks Mr Turnbull (and Mr Conroy, you’re obviously Stephen ;) for this debate thus far.

Here’s to keeping it all 100% constructive please.

Mr Turnbull raises some real interesting and valid points. But one area I can’t leave alone is Goal 3 re: the services delivery bandwidth. We are currently looking at content delivery right now from the ISP for TV services. Right now, quality is low, and could really do with a boost.

HD video streams at higher bandwidths than ADSL 2 is capable of right now; wireless CERTAINLY couldn’t cope with them. I know because I work with video conference specialists for my employment.

As time goes on, these services will only increase. We have always seen that when users bandwidth has increased, so has users’ internet usage. Plus with all the smart devices being installed in homes (talking waaay past Smart Meters here), there will be things like software upgrades, service delivery, file transfers, etc.

As others have discussed, we need to future proof, and this future is much closer than many of us think (who’s got an internet fridge from LG yet, for example?)

Finally, Mr Turnbull, PLEASE usurp Abbott’s position, he is ruining the country and embarrassing Australian politics.

lucy says:

I am a teacher in a high school that is already connected via fibre . There is a blithe assumption by NBN supporters that education will automatically improve because of fast internet. Can someone please provide the data?
The internet might be a good research tool (with a great deal of education on how to use it effectively, and how to access legitimate information) but it does not teach kids core skills. The best teachers still largely depend on whiteboards and pens and paper. The internet is an addtional resource – which can be used well or badly.
Same with healthcare – someone needs to explain how fast internet will allow an old person to stay in their home for an extra 4 or more years, as Tony Windsor claims.
I am not opposed to fast internet – but I think that the public deserves to be provided with evidence that it will be everything it is cracked up to be, and not merely a form of improved communication.

[...] Conroy’s Digital Economy Con | Malcolm Turnbull MP RT @TurnbullMalcolm: Why you don't need fibre into every home to achieve a modern digital economy http://t.co/sUEJiQq #NBN (tags: via:packrati.us NBN) [...]

Malcolm,

Your FTTN proposal has taken a hammering:
http://nbnmyths.wordpress.com/why-not-fttn/

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