Over the past two weeks we’ve seen what many of us have been longing for – signs the Government has realised its national broadband network strategy is not working out as planned.
First came the much-welcomed acknowledgement from communications minister, Senator Mitch Fifield, that the NBN charging regime needs reviewing. It appears to be discouraging Retail Service Providers (NBN re-sellers) from moving their customers off their existing broadband services where the revenue margins are better. According to Internet pioneer Simon Hackett, who was briefly an NBN board member, “As ISPs switch over from Telstra’s network to the NBN, they face such a steep hike in costs that one ISP, TPG Telecommunications, had to issue a profit warning last week. They’re just the canary in the coal mine” [http://www.afr.com/news/lunch-with-simon-hackett-20160829-gr3v5x].
Last week it was nbn’s turn (what’s with the new lower case branding by the way? It sends ‘spell check’ crazy!). For them, a back-flip over the use of the Optus HFC (Pay-TV) cables that seriously questions the Government’s so-called multi-technology mix (MTM) model.
Optus was originally to receive $800 million for decommissioning its 25+ year old cables and transferring its customers to the NBN. The MTM strategy is, instead, to actually use HFC to deliver broadband. However, nbn has now effectively conceded what industry players have been pointing out for years. In the expectation that they’d be replaced with fibre at some point the telcos had allowed their HFC networks to run down. The cost of remediating the Optus network would be so high it will be less expensive to go with new fibre cables. It remains to be seen how long nbn perseveres with Telstra’s HFC network. While reportedly in better condition, it is bound to have its own black spots.
We can only hope that abandoning the Optus cables is the beginning of the industry’s long-desired return to a world class broadband network. The next stage must surely be abandoning the use of ageing Telstra copper wires in favour of a fibre rollout, except of course in those remote areas where fixed wireless or satellite is currently the only financially viable option? At the very least, we need to see the broad adoption of fibre to the driveway (FTTdp), which is what nbn will now use instead of HFC.
So why FTTdp in place of the Optus cables? Well quite simply, imagine telling people they’re now getting a slow FTTN connection not the hitherto advertised high speed HFC service they were expecting. FTTdp has come along just in time to avoid a very embarrassing debacle.
According to nbn, FTTdp costs $2700 per premise while FTTN costs around $2300 per premise [http://www.theaustralian.com.au/business/technology/opinion/nbns-fibre-test-tube/news-story/b0b982c97260532569f078fb11fada18]. Getting fibre at least as far as the boundary will ultimately prove far less costly than continuing to roll out a copper-based network that will need to be replaced in 10 to 15 years’ time, if not sooner. This substantial expense has not been factored into nbn’s total build cost.
Given the associated expense of the separate back-end technology required to support the FTTN network, and which will become redundant, it will more than likely cost above $400 per premise to eventually decommission the copper network and install fibre. Meanwhile, those lumbered with FTTN will be hampered by speeds well below what fibre will be able to deliver.
The biggest challenge facing nbn is that we are such a big country. Even so, we’ve built roads, provided power and water because these are essential services. So, too, is fast broadband in the 21st Century. For a long time the market had the chance, but failed, to roll out ubiquitous broadband. The only way to get universal connectivity across such a large continent is to cross subsidise profitable and less profitable areas – especially the rural, regional and remote areas. That’s how we ended up with telephones in the bush and it is what the NBN is supposed to do; and why it needs to be a government enterprise.
We need to recognise the broader returns to the national economy and to our social wellbeing that this cross-subsidisation will inevitably bring. A large percentage of our GDP comes from outside our cities. Imagine how much more could be generated by new, smart, innovative ways of supporting regional businesses.
What we are witnessing right now is reality biting. I’m pleased to applaud Senator Fifield for acknowledging the need to take stock of things before any more money is wasted. Likewise, I’m confident nbn management will relish rolling out a superior fibre-based network when they are allowed to, rather than persist with FTTN in the face of so much industry condemnation and increasing consumer consternation.
So now it is up to our prime minister, who certainly knows how important fast broadband is about to become as we move to a digitally-enabled world economy. It will be a prerequisite for becoming an innovation nation, not to mention providing important advances in remote health and distance learning and the opportunity to move people out of our increasingly congested major capital cities. Come on Mr Turnbull. #FibreToTheFuture
LAURIE PATTON is CEO of Internet Australia. The views expressed in this article are his own.