BuddeBlog

NBN Implementation study launched – first analysis

It is great to see that the implementation study basically supports the ideas and suggestions that we have been promoting over the last few years.

It very clearly confirms the importance of the NBN as national infrastructure and as a utility for the digital economy; and with a utilities-based ROI between 6%-7%, it will be possible to create wholesale prices that are competitive.

The reason a commercial (private sector) rollout is not economically viable is that many of the national benefits of the NBN fall outside the balance sheets of private companies – these relate to lifestyle improvements, cost saving and quality improvement in healthcare, education, etc. It is therefore essential for the government to take the leadership role in this, and for it also to be prepared to take the risks, as it does in many other infrastructure projects. It will be critical to leave the NBN under government ownership for the duration of the rollout, to ensure a competitive and affordable environment.

It is perfectly acceptable that, as a utilities investment, the government works around a 15-year payback period – again, this applies to many other forms of infrastructure.

Based on the above, a $30-$35 wholesale rate – as has been mentioned in the study – is most certainly achievable and will lead to a $50-$60 retail price for a combination of broadband services (20Mb) and a voice service. This is certainly a competitive price, and will lead to a rapid penetration; which, in turn, will make the rollout economically viable.

As had been indicated previously, the NBN can be built without Telstra, but that would involve some overbuild. There obviously will be a cost saving – a minimum of $5 billion according to the study – if the NBN can be built in cooperation with Telstra.

As we have said in the past, new fibre technologies are making this infrastructure affordable for a deeper regional rollout also, and the extension of fibre from 90% to 93% of the population confirms this. Other excellent news is that the Greenfield developments we have been arguing for will now be included in the NBN.

BuddeComm is also comfortable with the reasoning around the Layer 2 issue. In the first instance, the proposed Layer 2 model will be used to create viable retail competition. If it transpires that this does not create the level of competition and innovation needed then there are opportunities for the regulator and the government to review the situation.

BuddeComm also understands that NBN Co will build a network that can, if needed, be used for further Layer 3 developments. In other words, its current architecture and design does not have to be changed – nor do we risk heading up a dead-end street in case Layer 2 is not going to deliver the projected competition and innovation.

Also the regional and rural issues we raised in our implementation preview from last week have been addressed. There is mention of an interim solution to fast-track the last 6% of the population not covered by fibre.

As there might still be people who are wondering why we should build a fibre network and not use wireless everywhere, this study, along with many others, categorically states that wireless is simply not an option for the mass market deployment of the services that the NBN will make possible. This notion is supported across the world – it is not unique to Australia.

There is also a strong focus on the trans-sector services (healthcare, education, smart grids, etc) and it is clear that government leadership is needed here, as well as coordination across the various government sectors to break through the silos.

The study highlights the fact that government procurement is seen as a key driver of trans-sector developments over the NBN. It is also important to note that over the last six months BuddeComm has noticed a definite change in attitude from various government groups within these silos – a more positive approach regarding the delivery of e-health and other e-services. This, in combination with the strong emphasis on developments like this in the report, will smooth the way for a well-focussed future plan.

What’s next?

After a short consultation period the government will respond within the next month or so. This is obviously critical for them. If they do it right and get it off the ground the plan could be an election winner; if not, it could create the opposite outcome. On the positive side, the NBN has the full attention of the Prime Minister, and therefore the full government, and it is in his own best interest to make sure that the recommendations in the report are followed up swiftly. After all, they have been sitting on the document for two months, so they should basically have their response ready by now.

So far, all elements of the broadband plan have moved forward in a positive way and as such the project remains well and truly on course. So there is a very good chance that Australia can pull this off. It has attracted such attention, worldwide, that the UN has decided to lift the trans-sectoral use of shared broadband to an international level. I am leading a team that is producing a report for this purpose, which will be presented at a UN summit in New York in September.

Paul Budde