Blog: 20 Years Too Long To Wait for Broadband Upgrades

August 11, 2015
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The AFR has quoted Malcolm Rodrigues, from Singapore-based ‘MyRepublic’ as saying that the multi-technology mix will be a ‘shit’ network and that Australians should instead wait for up to 20 years for broadband upgrades.

One of the key points about the nbn™ is that it is designed to allow entrepreneurs like Mr Rodrigues to shake-up the market. 

It is a good sign that RSPs are looking to break into the market, to challenge the business models of the incumbents and give consumers more choice.

And insofar as Mr Rodrigues is trying to stimulate more demand for higher-end products, that too is a good thing.  As I say at nearly every ‘Politics in the Pub’ or town hall meeting I attend, we need more people buying more products on the nbn.  It is, after all, a business and we need the money.

But while I understand the need for Mr Rodrigues to generate some publicity as he seeks to get a foothold in the Australian market, it’s worth putting some of his comments into perspective.

The Cult of ‘Free’

Mr Rodrigues said:

"On FTTN we'll market 100Mbps and when people come over we'll say 'sorry, thank your government [because] you're on a shit network and the most you can get is 20-30Mbps, but we will continue to lobby your government to turn it into a fibre-to-the-home one and as soon as you get there we'll get you a free upgrade to fibre'."

There are two important points to make about this.  Firstly, the nbn’s speed qualification tools mean nbn won’t be selling 100mbps services to customers who can’t get those speeds.

That being said, the early FTTN trials from Umina show that the nbn is achieving speeds of 91mbps download and 36 mbps upload over a variety of loop lengths.

The nbn is hardly the only company in the world rolling out a multi-technology mix.  In Germany, Deutsche Telekom has recently announced an expansion of its fibre-to-the-node network, to cover 80 per cent of its fixed line footprint by 2018, while there have also been mass deployments by BT Openreach in the U.K., AT&T in the U.S. and many others. 

Singapore is a market utterly unlike Australia’s.  Passing each premises with superfast broadband costs a small fraction of what it costs in Australia, as a 2013 study by Analysys Mason shows:

Second is the point that MyRepublic will lobby for a ‘free upgrade’ to fibre.  At first when I read the article, I had assumed Mr Rodrigues would be funding the upgrade to FTTP and not seeking to recover the costs, but on second reading I realised he meant the upgrade would be ‘free’ because the Government would be paying for it.

It may be true from the RSP’s point of view.  If they do not have to invest in the network, well then that investment is ‘free’ of any direct contribution from the RSPs

But it is certainly not true from a customer’s or taxpayer’s point of view. Either the customer will pay more and/or the taxpayer will have to shoulder the cost of an even larger subsidy.

The nbn is a business.  The company’s Strategic Review found that going to a full FTTP model would increase internet bills by up to 80 per cent (which is up to $43/ month for users on an average 50/20mbps product). 

Time Value of Upgrades

Also as confounding is Mr Rodrigues’ comments on the time taken to deploy FTTP.  He said:

"What they should've said is that this would be a 20 year rollout rather than a 10 year rollout and focussed on building FTTH into the key markets and continued to push that," he said. "I'd even be okay with the current approach if they said this was phase 1 and that phase 2 would be to move the FTTN guys to FTTH [as part of the plan]."

When the Government measured Australians’ access to broadband, and the quality of their connections, the report revealed there were up to 1.6 million premises which had either no broadband or very poor broadband connectivity, with peak median download speeds of less than 4.8mbps. 

The Vertigan study found that the MTM rollout had a net benefit of $17.9 billion compared to the net benefit of an all FTTP rollout of just $1.8 billion.

Just as importantly, were the Government to take his advice, it would mean that many Australians with no or very poor broadband will not get an upgrade to superfast speeds within the next few years but rather would  have to wait, as he recommends, for another decade. When his company has spent a little more time in this market, he will find out how little appeal his twenty year timetable would have to Australians. 

Chart 6.2: Timing of direct benefits to households and businesses for each scenario

Data source: The CIE.

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