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Coalition Broadband Policy - Frequently Asked Questions

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COSTS

How much will the Internet cost under the Coalition?
How much will line rental cost under the Coalition?
Will Australians have to pay $5000 for an Internet connection?
Isn’t it cheaper just to go FTTP at once?
Will the Internet be more expensive in Remote Regions?
Why isn’t the Coalition’s policy generating more savings?
Why does the completion date matter?
How long will it take to change the rollout?
Some houses already have fibre. Won’t this create a digital divide?

NETWORK CAPABILITIES

How many nodes will be needed?
What applications can be used on FTTN?
How long will the copper loop be?
How will the Coalition’s network cope with future demand?
Why hasn’t the Coalition mandated upload speeds?
Can FTTN be upgraded?

INDUSTRY STRUCTURE AND TELSTRA

Ownership of the copper network
Standard of the Copper Network
Why Maintain Infrastructure Competition?

MYTHS ABOUT COPPER V FIBRE

Energy Usage on FTTN
Maintenance costs on FTTN
RIM Systems
Contention
Won’t FTTN result in ugly nodes on our streets?

How much will the Internet cost under the Coalition?

The Coalition is absolutely committed to affordable broadband and telephone prices. One of our key concerns with Labor’s NBN is that it is too costly. These costs will be recovered from users, which can only mean higher prices. . Under the Coalition, more prudent and efficient investment keeps prices lower, and means the average user will save around $300 a year by 2021 on their broadband bills compared to under Labor.

How much will line rental cost under the Coalition?

There will be no line rental under the NBN Co, whether it is a fibre to the node network or a fibre to the home network.  However, even on the current NBN architecture, you will still need to pay for a phone service, whether it’s through the analogue Uni-v port or via an Internet-based a voice-over Internet protocol (VOIP) service. For instance, iiNet’s Netphone2, a VOIP service, costs $9.95 a month plus call charges.

Will Australians have to pay $5000 for an Internet connection?

No. This is another example of Labor’s lies about broadband in which it goes so far as to cliam that connecting to “Labor’s NBN” is “free”. The truth is that whether it is a Labor NBN or a more prudently managed and cost effectively designed Coalition NBN, customers will have to pay a retail service provider in order to have an active connection to the NBN. But there is NO FEE payable to the NBN to have the connection made possible.

Under the Coalition the NBN will be rolled out and completed much sooner and at much less cost to taxpayers and, accordingly, more affordably for consumers.

Our goal is to ensure all Australians have very fast broadband by 2016 and that everybody can access at least 25 mbps. While 25 mbps will be the peak speed on the satellite and fixed wireless services (under Labor’s plan for under the Coalition’s), it will be the floor speed under the Coalition’s plan and most consumers in the fixed line footprint will be able to access 50 mbps or faster. Our 2019 goal is to ensure that at least 90% of consumers in the fixed line footprint can access 50mbps and of course over time the network will continue to be improved as demand requires.

Labor’s reference to paying for a connection is classic spin. While we anticipate that for the vast majority of consumers in the areas serviced by FTTN the speeds offered will be more than adequate, there is the technical possibility to run fibre to one or more customers in an area served by a node. In the UK this product, known as “fibre on demand” is made available for a fee. For a customer living 500 metres from a node, for example, the charge is GBP1500 or about $2,250.

Note that under our plan greenfield estates, business districts, schools, hospitals, universities and anywhere that fibre is commercially justifiable will be connected to fibre. FTTN is primarily a solution for cost effective service in residential areas. Fibre on demand is the most practical way of ensuring that a network like the NBN is rolled out as quickly as possible to all users, without imposing unnecessary costs on everyone using that network.

Isn’t it cheaper just to go FTTP at once?

Money invested in an FTTP network today could otherwise be used for more productive investments if such a network’s costs are to provide capabilities that will not be needed for many years.

Below is an exercise in comparing two types of investments: A large, upfront spend on FTTP versus an incremental investment in FTTN. The money tied up in the FTTP investment is applied against a ‘discount rate’ of 8% (that is, the standard return that might be expected if that money were invested elsewhere).

Note this model assumes that FTTP would proceed in only four years- if one were to assume that an upgrade to FTTP occurred in ten years the difference is very substantial.

Consider a simple model of cash outflows, which are the cost per premise of building and operating an FTTP network, compared to those of an FTTN network that is later upgraded to FTTP. These negative cash flows can be discounted and measured as two alternative ‘net present costs’ (in the same way positive future cash flows collapse into a net present value):

Will the Internet be more expensive in Remote Regions?

No one in the bush will be paying more under the Coalition than they would under Labor. In fact, Coalition modelling shows because our investment is more targeted the average consumer will save up to $300 a year on their Internet bills by 2021.

The Coalition will replace the NBN Co’s universal wholesale price with a wholesale cap set by the ACCC, not by the NBN Co or by the Government. This means that people in rural and remote areas will NOT be charged prices that reflect the true cost of making broadband available to them.

This also means that in the places where competition is viable, companies should be allowed to undercut each other and charge less than the cap. The very nature of opening the market up to competition will mean that we can’t forecast what prices may be offered below the wholesale cap – but few analysts have forecast that the differences would be huge. Both Telstra and Optus are currently offering 100mbps services at the same price, whether it is over the HFC or NBN networks.

Why isn’t the Coalition’s policy generating more savings?

Public funding of $29.5 billion will be required for a Coalition NBN. Labor currently claims funding of $44.1 billion will be required to complete its NBN. But many telecommunications experts believe the existing NBN Co Corporate Plan significantly underestimates the likely cost and duration of Labor’s rollout, which involves running fibre to 12.2 million households and businesses.

The Coalition estimates Labor’s NBN could cost $94 billion, based on plausible assumptions that are less optimistic than those in the Corporate Plan about revenue growth, building costs and user take-up. This implies savings from switching to a Coalition NBN could be $64 billion rather than $15 billion.

But even if Labor’s NBN were completed on time and on budget, the savings from switching to the Coalition’s alternative would still be significant. Reducing the funding needed by NBN Co by taxpayers by $15 billion saves the Budget more than half a billion dollars per year, every year, in interest costs.

In addition, less investment reduces the pressure for price increases. This is because infrastructure costs including capital costs are eventually recovered from end users. NBN Co has confirmed it plans to do this in its two Special Access Undertaking (SAU) proposals to the ACCC. (An SAU is a set of long-term commitments about prices that become legally binding if accepted by the ACCC.)

Over-investment in infrastructure leads to rising prices – this is essentially what has happened in the electricity market over the past ten years. And the infrastructure owners best able to impose higher prices on consumers are monopolies – which is exactly what Labor’s NBN is intended to be.

There is no free lunch. If capital is tied up in the NBN, then it has to be paid for, either by taxpayers or consumers or both. Less funding is needed under the Coalition’s plan – and the gap is even larger if Labor’s budget and timetable turn out to be wildly optimistic, as the Coalition contends.

Why does the completion date matter?

Bringing forward the completion date for the NBN by five years means the whole community gains access sooner to the indirect benefits of universal fast broadband. It also increases the scope for governments and companies to make use of it by providing more convenient or less costly services, secure in the knowledge these are accessible to all Australians.

As it stands, it is not clear the NBN can finish the network by 2021 as claimed. The NBN forecast that it would pass 1.3 million houses with fibre by June 2013 and is now forecasting that it will pass around 15% of that number. The constant revisions downwards in the NBN’s rollout plan show that the project is very sensitive to future delays.

How long will it take to change the rollout?

The Coalition will not stop the NBN rollout. The NBN Co has signed a number of construction contracts which cannot simply be cancelled. We will honour those contracts and seek to maximize value from them. The Coalition will also conduct a cost-benefit analysis and an audit of the current rollout to establish how long it will really take and how much it will really cost to complete the rollout on Labor’s current policy. We will also conduct a similar analysis to show what savings in time and money can be achieved if the network is redesigned along the lines of our policy document. .

It is forecast that the large scale rollout of any changes to the network design – such as implementing fibre to the node – would commence in mid 2014. We will however endeavor to get under way sooner than that.

Some houses already have fibre. Won’t this create a digital divide?

The biggest cause of the so-called digital divide isn’t access to infrastructure, it is high prices. Households in the lowest income quintile are nine times more likely to have no internet at home than those in the highest quintile. Imposing additional costs of $288 a year and more to get better broadband will only increase that gap. The digital divide in any case is not between people on very fast broadband and very, very fast broadband – it is between people with broadband and nothing.

How many nodes will be needed?

Recent plans for FTTN networks in Australia indicated that around 50,000 nodes would be needed (many of them in the basement of apartment blocks).

What applications can be used on FTTN?

By 2021 NBN Co forecasts more than 50% of users will be on plans with maximum download speeds of 25 megabits per second or less. Users in the most remote 7 per cent of Australia will only have access to maximum speeds of 25 megabits per second.

Governments are not likely to create or deploy online services that can’t be delivered to the entire population – especially given the constrained bandwidth available to those who need access to such services most urgently, those in regional and remote areas.

How long will the copper loop be?

The last serious plans for FTTN in Australia in 2007 and 2008 had maximum loop lengths of between 750m and 800m. That would mean that minimum speeds of 25mbps are more than feasible. Recent trials by Alcatel have shown that even at lengths of 750m they are getting speeds in excess of 50mbps so the technology is improving all the time.


Peeters, M., (2012), “Zero Touch Vectoring: From Innovation to Deployment”, p.11

How will the Coalition’s network cope with future demand?

The Coalition has allowed for the fact that FTTN may not be enough for applications and requirements that may emerge down the track. The fact is that a small number of users need that capacity at the moment – and hence we will ensure ‘fibre on demand’ connections are made available on a needs basis. And down the track, it is possible to keep expanding fibre beyond the node when consumer demand justifies the investment.

Why hasn’t the Coalition mandated upload speeds?

We have not set minimum upload speeds because everywhere in the world, operators allocate upload speeds according to consumer demand. The limitations on upload speeds are often a function of the allocation that operators decide consumers will value most between up and download links. To give you an idea, in the UK where BT offers an ‘up to’ 76mbps product for downloads, the upload speed is 19mbps – so quite considerable uplink capacity is available over FTTN. So we will leave that to the NBN to decide how best configure their networks – but our main focus is on greatly enhancing the capacity of the network sooner and more cost effectively.

Can FTTN be upgraded?

Yes. Multi-service access nodes (MSANs) allow ‘fibre on demand’, meaning a carrier can offer both VDSL(copper based services) and GPON (fibre based services) services from a single node, and can upgrade on a demand basis. Many telcos such as BT are doing this already. Besides the fibre upgrade from the exchange to the node is all equally useable for FTTP. Part of our design requirements is to ensure that FTTN deployments are done in a manner which renders a future upgrade to FTTP as cost effective as possible.

Who will the copper network?

The Coalition is committed to the structural separation of Telstra and a level playing field for retail service providers.

Under the current definitive agreements between Telstra and the NBN Co, Telstra is paid to decommission its copper 18 months after each fibre to the premise connection is made (at which point the copper has minimal economic value). The Coalition will seek to renegotiate the definitive agreements to allow NBN Co to gain access to and control of Telstra’s copper where this is needed for FTTN. This will be one of a number of changes the Government and Telstra will negotiate, all of them within the overall constraint that in aggregate such changes keep Telstra shareholders whole.

Many market analysts have noted that because the Coalition will accelerate the rollout (and hence migration payments to Telstra) Telstra shareholders should be slightly better off. (See for instance, JP Morgan, 2013, “Telstra Corporation: Coalition will accelerate NBN – and TLS cash flow”, 9 April). So Labor’s claims that it will cost $20 billion to negotiate access to Telstra’s copper are bogus.

Is the Standard of the Copper Network Too Degreaded to Deliver 25mbps to 100mbps?

Telstra has stringent oversight on how its network is performing and the latest data shows that only 1.5% of its customers reported a fault in their latest reporting period. Telstra CEO David Thodey recently confirmed that speeds well in excess of 25mbps are capable over the Telstra network when he said: “Look at what’s happening in the labs and other countries in the world; you can run pretty quickly on copper, it always depends on the distance from the node, and you know the issue is as you get further away from that node, the performance degrades, but we’ve seen in the labs that are actually working for many European countries speeds of 60[Mbps] down to 25[Mbps].”

It is worth noting that in the United Kingdom where there has been a huge rollout of FTTN, customers are receiving up to 76 mbps with most being able to receive at least 50mbps. This is on a service over copper lines which have not yet been vectored.

Why Keep Competition With the HFC Network When the ACCC Approved its Shut-Down?

The Coalition does not believe it is economically efficient or rational for NBN Co to pay private carriers to shut down their HFC networks – and by any measure it is high anti-competitive. Infrastructure-based competition is the norm around the world because it drives investment, encourages innovation and keeps prices lower.

See the discussion of the HFC in the Policy at pp.10-11.

What is the Energy Usage on FTTN?

No new power stations will need to be built because of choices about the NBN. Yes, a fibre to the node network does use more power than a fibre to the premises network, but the differences per user are very small, and advancing technology mean the gap is narrowing over time.

A study by University of Melbourne researchers (Baliga, J., Ayre, R., Hinton, K., & Tucker, R., 2010, “Energy Consumption in Wired and Wireless Access Networks”, in IEEE Communications Magazine, pp.70-77) predicted by 2014, the power used by FTTN would decline by around 30%, making it similar to legacy DSL power consumption. This seems to be happening in the real world, as new equipment is introduced. For instance, the Alcatel-Lucent 7330 node which recently cames to market uses 25 per cent less energy for VDSL2 services (VDSL is a technology for broadband over copper used at the edge of FTTN networks). This is consistent with the experience in the U.K. where the move to FTTN has lowered BT’s overall power consumption.

Regardless, the differences in energy use between FTTP and FTTN do not materially affect the business case for either.Various studies show the savings per user per year of FTTP compared to DSL are around $5 per year. According to Verizon, annual central office power usage is 32 kWh for a DSL line and 12 kWh for a FIOS line. If electricity costs 25 cents per kWh, a move from copper to FTTP therefore cuts annual energy costs per line from $8 to $3. (Weller, D., Verizon (2008) ‘Do All Roads Lead to NGN?’ presentation, 13 Oct 2008, p.9.)

One factor that those keen to talk about energy savings from FTTP always overlook is that at present, around 90 per cent of consumer bandwidth is used for video – and that means bigger screen displays (with their relatively high power use) are part and parcel of any increase in bandwidth usage. In other words any increase in power demand occasioned by broadband, FTTP or FTTN, is likely to be a consequence of the devices acquired by consumers to enjoy the services it offers.


Baliga, J., Ayre, R., Hinton, K., & Tucker, R., 2010, “Energy Consumption in Wired and Wireless Access Networks”, in IEEE Communications Magazine, p.76

What are the Maintenance costs on FTTN?

No telecommunications company in the world has identified avoided copper maintenance costs as a compelling reason for deploying FTTP. In New Zealand where Chorus is rolling out FTTP, the company is maintaining its copper lines to deliver voice – and in the UK BT does the same. At AT&T annual maintenance costs are reportedly US$36 per user per year for the outside copper lines used in its fibre to the node network and comparable fibre maintenance costs a little more than half of that amount.

Supporters of an FTTP NBN cite numbers of $1 billion or more as Telstra’s yearly copper maintenance costs. It is important to understand that Telstra does not release this number, and so most claims about it are informed guesswork. Most financial market analysts believe the real figure is closer to $750 million. In any case, only a few of these costs would be the responsibility of the NBN if it did obtain Telstra’s copper lines in many locations to use in a FTTN/VDSL NBN:

  • A Coalition NBN Co would not be responsible for maintaining the Telstra network in areas outside the fixed line footprint. Telstra will continue to maintain the copper network in remote areas under a $6.4 billion contract with the Government’s new agency overseeing the Universal Service Obligation, TUSMA. The maintenance costs of this part of the network are disproportionately high because of long copper loops and extreme climate conditions.
  • A Coalition NBN Co would not be responsible for maintaining the Telstra network in areas where FTTP is deployed – about a quarter of the fixed line footprint.
  • In areas where the NBN was deployed using FTTN/VDSL , the most error-prone parts of the copper (the large bundles running between nodes and exchanges) will be replaced by fibre
  • We have been advised by several operators of large telco networks, that it is also important to remember that the on the “D-side” (ie between the node and the customer’s premise) the most common maintenance issue is “shovel strike” – the accidental severing of a cable. Copper and fibre are equally vulnerable to careless gardeners and other diggers of holes and trenches. Copper’s shortcoming is that it is vulnerable to corrosion caused by water penetration however balanced against that it is easier and faster to repair than fibre.

The Coalition policy is designed and costed on the basis that themost maintenance-intensive copper (for example in areas with high groundwater levels) will be replaced by fibre. The Coalition forecasts also build in a budget for copper remediation, which is often part of a FTTN rollout.

How Will the Coalition Upgrade Users on RIM Systems?

FTTN is a perfect solution to RIMs. RIM (or Remote Integrated Multiplexer) cabinets were used for telephone lines in the 1980s and 1990s to save companies like Telstra from having to lay multiple copper lines – but turned out to be incapable of delivering broadband using technologies such as ADSL. FTTN architectures (or indeed ‘Top Hat’ network upgrades so far rolled out ot 400,000 premises by Telstra) effectively leapfrog the RIM by pushing fibre (and the active electronics previously located in the exchange) further into the field. This will allow these customers to finally and quickly receive fast broadband over copper lines.

Won't Contention Mean Users on FTTN Speeds Are Degraded?

‘Contention’ (slower performance when multiple users share a wire or a multiplexer) only occurs on elements of the network that are shared. With FTTN the shared elements of the network are on fibre. To the extent there is contention, it arises from a choice about how much fibre is provisioned to a given group of users (exactly as it does under the current FTTP NBN). Evidence from the UK (collected by the regulator, Ofcom) shows BT’s 38 megabits per second product delivers average download data rates of 32.7 megabits per second over a 24 hour period. It actually performs slightly better during the peak usage period between 8pm and 10pm, delivering average speeds of 34.4 megabits per second.

Won't the Coalition's Policy Result in Thousands of Ugly Nodes on Streets?

Every network requires distribution points, which require cabinets located on the street. Under Labor’s FTTP rollout, there will be around 60,000 fibre distribution hubs which are 1.1m in height. It’s true that FTTN distribution points, the nodes, need to be slightly larger because they also house active electronics and some remote power sources. However, the nodes being deployed around the world continue to get smaller, with BT recently deploying nodes 1.1m in height but 1.3m wide.

It should also be noted that this technology is moving very rapidly. We would anticipate many of the nodes in our design would be located inside apartment buildings rather than on the street. Further vendors are now selling compact nodes which are small enough to fit within a Telstra pit. One of the advantages of abandoning Labor’s “one size fits all” strategy and instead following a flexible, technology agnostic approach is that we can take advantage of improved technologies as they become available.

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