The billion dollar NBN question – latest analysis

As we become more and more involved in the nitty gritty of the NBN, some of the more uncomfortable issues are emerging.

As soon as the government came to power it became clear the FttN 12Mb/s service to 98% of the population was a serious plan and the various companies began to look into network designs and costing.

And over the last few months the messages have been quite consistent – to connect the last 10% of the 98% could gobble up the entire $4.7 billion of government subsidies.

Many of the residences in the last 10% are on 100-acre properties, frequently separated by as much as 2Km. In the case of ADSL2+ nodes, service could be required to as few as 4-6 customer premises per node; and the fibre to some of these nodes will be 20Km long.

The last 1% of the 98% will comprise approximately 110,000 homes. One of the calculations put this at around $20,000 per connected service and this would bring the total cost to $2.2 billion. There is no need to calculate the revenue on those 110,000 premises – it is obvious that there is absolutely no business case for this exercise.

It is also not too difficult to see that this money could be spent much more wisely.

Depending on which vendor or operator one talks to, according to them it doesn’t make sense to roll out FttN based broadband services to the last 4% to 8% of the 98% required by the government.

For as long as I have been involved in the telco business I have been arguing for technology-independent policies, but time and again the government has become involved in legislating technologies (satellite TV, microwave pay TV, ISDN and now FttN).

Such technology choices are much better left to the engineers. At BuddeComm we believe that the government should legislate outcomes and then let the companies decide how they will be delivered.

If the government wants to ensure that these companies deliver, it should institute timeframes and even perhaps penalties for non-delivery. But it should stay away from technology decisions.

Now I certainly understand how difficult it is for governments to back-pedal on past decisions, but it also demonstrates leadership to make the right decisions – to face reality and do what is best for the country.

Perhaps we should aim at 93% or 95% coverage by fibre and use equivalent wireless broadband services to connect the remaining premises. This could be combined with the Broadband Guarantee Service and would still deliver a first-class outcome for all of Australia.

Paul Budde

BuddeBlog