Why the Coalition’s NBN plan is superior - and why it will be better for the bush too

July 23, 2012
Communications & Broadband

Reading through Stephen Conroy’s transcript from Meet the Press yesterday, I was struck by how he continues not to engage in any of the real issues surrounding the NBN.

So I thought I should repeat a few key points.

1. The Coalition is not going to destroy or (as Conroy alleged) sabotage the NBN. On the contrary we will complete the national broadband network and do so sooner, cheaper and more affordably for users.

2. Why can we do it sooner? The NBN is proposing to connect 93% of Australian premises to fibre optic cables. This is a very labor intensive and expensive exercise. Which is why, as at the end of May, there were only 3,700 premises in Australia connected to the new fibre network. It is proceeding at a snail’s pace. While there is every reason to believe that the NBN Co is poorly managed and could do the job a lot more efficiently, nonetheless the fact remains that fibre to the home is a slow process. For example the experience even in the USA is that it takes one technician day per premise to achieve a cut over from the existing copper service to fibre. And that is after the fibre has been lead into the premises. Telstra has had a similar experience in its South Brisbane fibre roll out.

The argument in favour of FTTH of course is that it is the ultimate technology and so it is worth waiting for. But even if it offers the maximum potential bandwidth, if a different technology can deliver all the bandwidth households require now and can do so in a fraction of time it makes much more sense to deploy it.

Think of it this way – if you are in an outer suburb of Sydney or Brisbane and your broadband speeds are somewhere between nothing and not very much, and you have the choice of getting fibre to the node and 50 mbps in a year or two OR wait up to a decade or more for FTTH and 100 mbps plus, what are you going to have? Its obvious. Ten years is a very long time to wait for a broadband upgrade.

And of course the tragedy of the NBN as designed by Labor is that there are thousands of households which could have had their broadband upgraded by now with fibre to the node had the Government not resolved to go down the slowest and most expensive upgrade route.

3. Why can we do it cheaper? Fibre to the node, around the world, costs between 1/4 and 1/3 of fibre to the premises. That is the experience in North America and Europe. And in Australia with very high labor costs the differential would likely be even more.

4. Why will it be more affordable? Obviously if NBN Co’s network is completed at lower cost then there will be less sunk capital to service and hence it does not have to charge as much to get a return. But additionally, we will seek to ensure that wherever possible there are no barriers to compete with the NBN and competition, even if it is only in limited areas will bring pricing pressure on the NBN Co.

5. What about the bush? Conroy said that we would not cross subsidise the bush. We are committed (and with the vast majority of rural and regional members why would we not be?) to ensuring that people in regional and remote Australia can access broadband at equivalent prices to folk in the cities. But rather than establish a monopoly and seek to overcharge the cities to subsidise the bush, we will ensure that support for the bush comes from a clearly defined subsidy so that everybody knows the actual cost of ensuring equality of access.

6. But in the context of the bush, let us consider two other aspects where the NBN Co’s plan actively works against the interests of rural Australians. First, as we know, the fibre to the home network is designed only to go to larger communities, of 1000 premises or more. Now that seems to be under revision at present, but there are certainly hundreds of small towns where there will be no fibre to the home and broadband services will be delivered only by fixed wireless. In many of those communities fibre to the node can provide very high broadband speeds and at modest cost. Where there is an existing exchange it becomes “the node” and is connected to the fibre backbone and then those premises reasonably close to the node (1000 metres or less) would be able to get very high speed broadband over a fixed line without the need for the fixed wireless. Additional nodes can be deployed where appropriate and cost effective. It won’t work for everyone in rural Australia but it would mean that a lot of people who under the NBN plan won’t get fixed line fast broadband will get it.

7. The second aspect where the bush has had a raw deal from the NBN Co relates to the fixed wireless service. The logic of fixed wireless is that there are a percentage of premises (about 4% on current plans) which are not suitable (by reason of distance) for fibre to the premises but are closely settled enough to be able to have a fixed wireless service as opposed to satellite which is ideal for the more remote areas. Consistent with its desire to own and control every element in the service, the NBN Co acquired the wireless spectrum to deliver broadband in these areas and is in the process of building its own network of towers – this part of the plan is running behind schedule too I might add. A better approach would have been to go to the three wireless telcos (Telstra, Optus, Vodafone) and invite them to tender to provide fixed wireless broadband in the relevant areas and to nominate how much subsidy they would need to do it and describe how their investment in new towers would enhance their existing mobile wireless service. There are at least three reasons for this being a better approach. First, it would mean the Government would not be directly involved in running the service. Second, it would mean it would be delivered a much lower cost to the taxpayer and Thirdly, and most importantly, it would mean that as a collateral benefit the investment in fixed wireless would result in an improvement in mobile wireless services. And the most common complaint about telecom services in the bush is poor or patchy mobile coverage. Now it is likely too late to take a more rational approach to the fixed wireless piece – time will tell. But it is certainly possible with fibre to the node to deliver wireline broadband services to many more people in the bush than would receive it under Labor’s plans.

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