A NBN reality check

The politicians and the electorate can do with a good dose of realism about what can actually be delivered by any government – Labor or Coalition – in terms of high-speed broadband and how long it will take to deliver it.

NBN Co boss Mike Quigley’s recent suggestion to consider reviewing the design of the NBN was enough to send the die-hard backers of Labor’s version of the network into frenzy. Quigley’s, well-intentioned but politically incendiary, words have at the very least tested the faith of many a true believer.

To the NBN’s most loyal backers the fact that the NBN delivers fibre to the premises (FTTP) to 93 per cent of households – putting a fibre line right into 12.2 million premises nationwide - is a sacred factor in its design and they are vigorously opposed to any change.

Their argument goes that changing the network design would destroy the NBN’s core strengths, those being its egalitarianism, uniformity and simplicity, and would create a vastly inferior ‘patchwork’ network of different technologies.

A ‘patchwork’ NBN – what’s the big problem?

The fact is that putting a new fibre-optic cable into every single dwelling in a country is something very few telcos have done because of the huge time, cost and complexity of doing so. Indeed, the leading high-speed broadband markets in Asia Pacific themselves all have ‘patchwork’ networks where operators have deployed a range of last-mile technologies including FTTP, FTTB (using VDSL and Ethernet) and HFC to connect subscribers.

Even in South Korea around 65 per cent of subs are either on FTTP or FTTB connections, a further 25 per cent of subs are on HFC cable services, while 10 per cent still use plain old DSL – with the figures broadly similar for other leading high-speed broadband markets like Hong Kong, Japan and Taiwan.

So, the message to the NBN’s most devoted backers is simple; don’t be scared of a ‘patchwork’ NBN – we’re in impeccable company. The truth is that the NBN’s current one-size-fits-all FTTP approach puts Australia very much at odds with the global market.

Despite building its own nationwide FTTP network Singapore is keeping other competing infrastructure alive, with cable operator StarHub keeping its HFC network open, offering a 10Mbps HFC service for just $S29.95 per month – compared to $S49.95 per month for its cheapest FTTP service – aimed at households just seeking a plain, no frills broadband connection.

Uniform networks not the norm

Telcos are relatively agnostic about last-mile technology, their focus is to deliver high-speed broadband in the quickest and most cost-effective way possible and they will use whatever technologies are available to do this.

For example, several major European operators are currently trialling the use of existing co-axial TV cabling in multi-dwelling units (MDU’s) to also provide high-speed broadband – enabling them to offer subscribers much higher speeds than DSL but at a fraction of the price and time of rolling FTTP.

Indeed, it should be remembered that when Asia Pacific operators have actually taken the plunge and deployed full FTTP they have usually done so as a defensive measure to fight off competition from a ‘disruptive’ new market entrant offering 100Mbps FTTP, rather than because they were convinced FTTP was going to present amazing new opportunities.

The best examples of this are PCCW rolling out its own FTTP after the success of Hong Kong Broadband Network’s (HKBN) low-cost 100Mbps FTTP services in Hong Kong and the similar reaction of KT and SK Broadband in South Korea after Powercomm (now owned by LGU ) began winning significant market share with its 100Mbps optical LAN services in MDU’s in the late-2000’s.

Are the comparisons fair?

When confronted with this argument, supporters of the NBN often retort that the NBN can’t be compared with what is happening in other markets because NBN Co. ‘is not an incumbent’ or say global comparisons are irrelevant and Australia should not be afraid of being a technology pioneer by creating a unique network.

While it is true that NBN Co is not an incumbent – although by 2021 it should very much be one (albeit as a wholesaler)  – if we don’t compare NBN Co to other global operators building FTTP/B networks then who exactly do we benchmark them against? Would people prefer that a $37 billion project not be benchmarked at all?

Secondly, deciding to become a pioneer and put all your eggs into an FTTP deployment is admirable but also risky, there are very good reasons why most operators have shied away from universal FTTP – time, cost and complexity. Unless NBN Co has cracked those problems – and their current problems, particularly in MDUs, suggests they have not done so yet - then ignoring the realities of what has happened in those markets is not a particularly wise move.

Recalibrating expectations

The current government is adamant that FTTP can and should be delivered and despite the early problems and delays that NBN Co has suffered in deploying the network many remain staunchly committed to the current model. However, it’s certainly arguable that expectations from Australians about FTTP might have gotten out of hand, the current FTTP-based NBN model is obviously very popular but can it actually be delivered?

Just the other week I spoke with a CTO from a leading Asian telco who was stunned at our expectations regarding the NBN.

“I can’t quite believe what I am hearing at times,” he said, “People don’t seem to understand how big this [NBN] project is and how hard it will be to deliver – it [the NBN] is unlike anything I have ever seen before.”

Indeed, the CTO commented that even the Coalition’s likely election policy to run fibre to the node (FTTN) to 93 per cent of homes would be in itself a “massive project” which would face its own huge challenges and inevitable complications during the rollout.

With this in mind, it seems that above all else what we really need is a good dose of realism from both politicians and the electorate about what can actually be delivered by any government – Labor or Coalition – in terms of high-speed broadband and how long it will actually take to deliver it.

We seem to be playing a high-stakes poker game in which Labor has promised an unbeatable – but extremely hard to deliver – NBN which the Coalition refuses to support but has now put forward its own solution which would itself be a very complicated and difficult to execute project. Neither major party seems to have adequately taken on board how hard these projects will be to actually deliver, the immediate goal seems to win support from the electorate for your policy – or at least to discredit the broadband policy of your political opponent.

Indeed, one of the most interesting aspects of the NBN project is the way in which many in the electorate are willing to jettison their usual scepticism about the government’s ability to solve other major infrastructure issues.

If Prime Minister Gillard or Tony Abbott stood up in a campaign stump speech and declared they were going to revolutionise the quality of our public health system, the education system, the public transport system or the nation’s roads then most people would be hugely sceptical about their ability to actually deliver on these promises. Yet in the high-speed broadband policy arena many people seem quite happy to believe that the government – of whatever stripe – can actually transform the existing system and deliver a world-class broadband network.

As the great Richie Benaud might say in a commentary stint at the cricket, “Hmmm, interesting one that.” 

Tony Brown is a senior analyst with Informa Telecoms & Media. He is a key member of the Broadband and Internet Intelligence Centre team, covering the broadband and Internet markets of the Asia Pacific region.

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