The Opposition’s NBN plan needs some further work

Ever since the Coalition changed its NBN policy from ‘kill’ to ‘change’ we have supported their thinking on this topic, with ideas and suggestions on how to implement some of the fundamental changes they wanted to make without undermining the basics of the NBN.

Over the last year we have seen their thinking evolve into a much better plan. We have reported on this positive change in their approach over the last few months and while their official announcement hasn’t added much information about the plan, Malcolm Turnbull’s great achievement has been to save the NBN from demolition, and to get his colleagues behind that plan.

However, in order to get from ‘kill’ to ‘change’ some very significant negotiations will have taken place within the Coalition and, given those obvious constraints, the question is whether it is possible to come up with a workable plan that satisfies the politics and at the same time can stand up as a robust policy plan, in both a financial and a technical sense. In that respect the Coalition, as a political organisation, faces the same problems as other political institutions – like the Labor Party.

The Opposition’s NBN plan has as many, if not more, questions attached to it as they claim the government’s plan has. All the issues they have raised regarding cost blowouts and delays are equally present in their own plan. There are no guarantees that their plan is technically workable – nor, indeed, that it will deliver a cheaper and faster outcome. Far more detailed plans will be needed to make such judgements.

What we do know is that, at this stage at least, it is significantly inferior to the Government’s plan and, as can be seen from the issues listed below, it could become even more inferior if they can’t deliver on it and as a result have to further downsize their plans. Because of the many uncertainties their plan, in its current state, is significantly more risky than the NBN plan.

It is good to see that the Coalition does acknowledge that FttH will probably be needed eventually.  So the question then arises as to how they will address the next stage of the infrastructure rollout after they have installed the 40,000 or 60,000 street cabinets planned for the intermediate rollout of their FttN version of the NBN.

There is not necessarily anything wrong with an intermediate step and it is quite possible that such a plan makes sense within an overall cost-benefit analysis of the NBN, but without a proper vision and a proper policy that addresses these national interest issues any technology strategy that lacks a clear vision is based on very shaky foundations indeed. It is understandable that for political reasons they will keep some of their powder dry to closer or even after the election.

Their plan most certainly has not yet reached that level of robustness as there remain fundamental unresolved issues, most of them intertwined. There are good reasons to believe that because of all of these uncertainties the Opposition will, if elected, not just change the NBN halfway through without a more robust plan being in place. Instead we understand that they will more or less continue the rollout of the NBN as it is currently taking place and only begin to make more serious changes when a more robust plan of their own is available to them.

On another positive note, if the Coalition goes through the issues below and makes the necessary changes to keep the integrity of the NBN in place we could see a better plan than their present one..

Here are the key issues that we believe need to be resolved before the Opposition can embark on the deployment of its plans:

  • We urgently need to get a better idea on why does the Opposition want an NBN? What is their vision? Is it just another telecoms network? Is it essential infrastructure for social and economic development? Or, given their focus on video entertainment, does the Coalition see it as a broadcast infrastructure?
  • Any of those scenarios will – most certainly over the longer period – require a fundamentally different business model. In the case of essential national infrastructure (the vision we support) the question is will NBN Co have to deliver a positive financial return, or will it be seen as a utility with the social and economic benefits of the infrastructure derived elsewhere – eg, digital productivity, e-health, etc?
  • What are the Coalition’s financial expectations of NBN Co? A positive here is that they continue to see the company as a monopoly infrastructure supplier under public ownership.
  • Also, the fact that the Opposition aims to include competition in its infrastructure rollout could indicate that they do indeed see NBN Co as a national utility.
  • If infrastructure competition is allowed then that competition will concentrate on the most lucrative markets – along the same lines as we see now around developments in ADSL2+ and HFC upgrades. If that level of cherry-picking is allowed then there will be no way for NBN Co to deliver a positive financial outcome, as it will be left with the areas that are not commercially viable for competition – this could be roughly 50% of all broadband connections.
  • What (technically) will be the role of NBN Co, Telstra, and for that matter the rest of the industry? It is very hard to marry the current legal, regulatory and financial arrangements with the plans as they are put forward by the Opposition.
  • A very significant issue will be the contracts with Telstra and its future role within the Coalition’s plan. This will most likely be one of the largest stumbling blocks that can create significant delays.
  • Based on a clear vision of why we need an NBN we can check if the technology plan they have put forward is indeed the right solution. Currently we have a technical plan without a strategic blueprint as to why we need the NBN, and where we need it for.
  • Even putting aside the need for a blueprint, their technology plan has many issues that can cause significant delays, extra costs and perhaps even impossible solutions, which could leave many people stranded with a substandard solution.
  • In particular the new VDSL technologies that are proposed are still in their infancy and, like all other upgrades of copper cable infrastructure, this one also depends on the last-mile distance between the home and the exchange (street cabinet) and the last-mile quality of the existing copper fibre, which in many cases is poor or unknown, and therefore any infrastructure plan for such technologies is highly susceptible to change, extra costs and technology problems. This is the single most important issue in relation to the financial and technical feasibility of the Opposition’s plan.
  • Many overseas deployments now indicate that FttH – outside incumbent deployments – can be cheaper to implement than FttN, the question is whether the Opposition has also investigated those cases during their overseas trips, rather than just looking at case studies from incumbents with a strong vested interest in protecting their current business model (AT&T, Verizon, BT, DT). But even than, all of the latter operators only deploy FttN in select areas where such deployment is feasible. None of them have large-scale deployments of similar size to the one proposed by the Opposition. Based on current indications, it is most unlikely that the Opposition has clear insight into what actually is feasible in Australia in relation to FttN.
  • We understand that they are very much aware – at least at a high level – of some of these challenges within the Australian context, but again more details are needed to see if a nationwide FttN roll out is feasible in Australia.
  • There are no details on what quality of service customers can actually expect from the Opposition’s plan. This is also not possible because the widely varied quality of the copper network makes it impossible to give a nationwide quality guarantee.
  • Technical comparisons made by the Opposition with overseas experiences are not particularly relevant to the Australian situation, which is unique in its deployment of the copper network; longer loops and lower network qualities/capacities).
  • Another significant issue will be that most, if not all, of the wholesale prices and conditions, as well as the Special Access Undertakings (SAUs), will need to be reviewed and changed. These processes take years to complete and will continue to create uncertainty in the market for a long time.

There is no doubt that all of the above will result in changes to the plans as they have been presented so far. The first reaction from the electorate has been that the majority still prefers the Government’s current version; so if essential changes that need to be made to the Opposition’s plan are going to take it further away from the current rollout they could expect a voter backlash. Unfortunately many of the issues will not be addressed before the election in September, so there could be a significant delay in getting the actual information needed to make a good assessment.

However there is no reason not to believe that the Opposition will further finetune its plans in a positive way and that it will take a responsible approach towards the current rollout, and that it will only start making adjustments along the lines of their own plans once they have all the facts on the table that will enable them to properly address and resolve the issues mentioned above.

Paul Budde

See also:

Australia – National Broadband Network and the Opposition

Australia – National Broadband Network – Comparisons with broadband plans from AT&T and BT

Australia – National Broadband Network – Cost Benefit Issues

Australia – National Broadband Network – Digital Economy

Australia – National Broadband Network – Policies and Regulations

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