Fine-tuning the Coalition's NBN

The Coalition’s aim of delivering a more affordable NBN could do with a different pricing model for installing fibre to the home and ask Telstra to throw open ADSL2 (not VDSL) nodes.

The Coalition’s aim of delivering a more affordable National Broadband Network (NBN) "sooner and cheaper" is laudable and would suggest that it has attempted to give some thought to the needs of consumers and the underlying technical issues.

However, the current proposal is ill-described and doesn't provide a real choice to consumers. In fact, both plans have an inherent weakness when it comes to giving consumers a clear choice.

The decision of "what connection do I want?" gets made for you in the Coalition NBN, while the decision of "what can I pay?" gets made for you in the Labor NBN.

Neither side's "one size fits all" solution provides the right answer and only works for some of the people, some of the time.

Since the NBN Co released more detailed figures for the latest Joint Committee meeting, the Coalition has been put in the box-seat, if it can tear itself away from its current policy position.

The Coalition has options, whereas Labor is locked into an "all or nothing" position. Turnbull can plan to transition to full-fibre over time, exploit savings where available, enjoy the benefit of deferred investment and introduce new policy elements, such as standard connection & upgrade fees.

By the end of 2015, there will be sufficient data on consumer demand, product preferences, price sensitivity and demand elasticity to make good policy choices, assuming the global economy doesn't fall off a cliff again.

If NBN Co turns into a river of gold, and who can prove it won't, an incumbent government can choose to sell it early, speed up the roll-out or enjoy the income.

Fibre to the home pricing 

Some of the technical weaknesses in the Coalition plan can be solved by adopting a two-step plan.

The Coalition could potentially move to a full GPON fibre rollout, just not all at once. This might allow it to pursue a strategy that sees NBN Co provide two standard prices for premises to connect to fibre. NBN Co could charge $750 as part of a mass-rollout or $1500 as a one-off install.

The contracts for the 200,000 km of fibre will have been signed and with detailed routing plans for the fibre already done, it would be a waste to not utilise all that planning effort. Assembling an equivalent team and verifying/correcting the data in 10-20 years will require a substantial amount of work, far more than what's already been done.

The Coalition should also first deploy the fibre to the node (FTTN) cabinets in areas where they are cheapest by a large margin, so they will pay for themselves in 15 years. These nodes already need 80,000 km of fibre, but of a much lesser capacity. However, instead of buying an additional 80,000 lower-spec fibre, the Coalition could deploy the high-spec already contracted for under Labor’s tenure.

The cost equation in such a scenario stands at $4 billion (for the high-spec fibre) vs $1 billion (for low-spec). However, in the long run going with the high-spec fibre from the get go will deliver higher savings.

We know that subscribers will need a network termination device (NTD) for either DSL or GPON Fibre. If the NTD's are designed to be upgradeable, either in-field or not, the change-over costs and disruption from DSL to GPON fibre will be minimal.

NBN Co has publicly stated that their budgeted cost for fibre install per-premises is around $1,000, plus a larger amount to Telstra. Installation of DSL lines should only be considered if they can be done significantly cheaper in high-density areas with good network assets. The benefit of these areas is that the cable runs will be shorter, attainable rates will be higher and the deployment should be faster.

The trouble with Telstra

However, that still leaves problems with Telstra disconnection payments and issues regarding the maintenance and ownership of the last mile of copper. In addition, unconditioned local loop (ULL) and local land services (LLS) operators are going to be out of pocket. If the Coalition’s overarching intention is to fully decommission the copper, maybe Telstra would accept a minimally altered agreement.

For a couple of billion dollars, the Coalition could ask Telstra to throw open ADSL2 (not VDSL) nodes on a 1,500 metre rule - where they'd do the most good - specifically as a transition to fibre. Such an agreement could be designed in such a way that it falls within the purview of the existing special access undertaking (SAU).

The major change from what we have now would be to charge everyone connected to the NBN a fee, either up-front or spread over 24 months in their NBN bill. The incentive to use DSL must be a lower connection fee, with the cost rebated off a later upgrade to fibre.

It's not a perfect plan, but it does start to address the problem areas and the black holes in the Coalition NBN plan. Most importantly, it breaks the expectation of consumers that they can get a free ride for a considerable capacity upgrade. 

This is an edited version of blog posts originally published on April 23. Steve Jenkin has spent 40 years in ICT in wide variety roles including large and small software projects, 7 years writing real-time Exchange software in a Telco and Admin, Software and Database work on PC's Unix/Open Source software and mainframes.

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