NBN BUZZ: Hackett job

NBN Buzz is a weekly wrap up of everthing that's going on with Australia's biggest ever infrastructure project. For previous editions go to our NBN Buzz page.

Fear factor up

The current turmoil in global markets has evidently provided Malcolm Turnbull with more ammunition to take aim at the NBN, with the opposition communications spokesperson telling a trio of News Limited journalists the Gillard government is now facing increased pressure to cut the cost of the endeavour as it can't afford to spend more money when global markets are entering a period of dangerous volatility. Turnbull's argument hinges on the one palpable concern that many do share – the rollout of the NBN is destined for a cost blowout because that's just how public infrastructure projects operate – forget about the $37 billion Labor estimate, we are looking at anywhere between $60 billion to $80 billion.

“There are no reasons to suggest this would be any different and there are plenty of well qualified people in the industry who are on the record saying the capital cost is less likely to be $37 billion as forecast by the Government and more likely to be between $60 and $80,” Turnbull said. 

“Now at some point even a Labor Government, one would hope, would say, hang on this is way too expensive.”

They well may do that at some point but the more immediate issue for Turnbull is that the alternative he has put on display still has plenty of grey areas that need to illuminated sooner rather than later.  The key one is just how much cheaper the Coalition's plan is on taxpayers compared to the government's plan. Turnbull provided little on that front in the interview other than harking back to his trans-Tasman modelling and sticking to his guns that delivering high-speed broadband to Australians can be substantially cheaper if the existing network infrastructure is not decommissioned but rather upgraded. However, the bottom line is that there is no credible number and at this point there are so many unknown variables that Turnbull can't provide one even if he wants to.

The other issue for Turnbull is whether the creation of 'Network Co' – which will be owned by Telstra shareholders but would be separate from its retail and other operations – will actually dispel fears of handing back a wholesale monopoly from NBN Co to Telstra.  Turnbull said that while the Network Co won't be a monopoly in the legal sense it would be in many areas a practical monopoly. But his key selling point here is that the entity will be a regulated one and would have to justify its price rises to a regulator. I'm not sure that's going to be enough to convince everyone in the industry, nor consumers.

Hackett win

Another man who has had plenty to say about the NBN was been Internode's boss Simon Hackett and it looks like his campaign against the NBN Co's pricing model has paid off with the company now forced to relent on its previous plan to hit ISPs with a Connectivity Virtual Circuit (CVC) charge of $20 per 1Mbps before its signed up a single customer.  The CVC charge is essentially the fee ISPs have to pay to get the bandwidth from the 121 points of interconnect (PoI) to their customers and Hackett was on the forefront of the opposition warning that the impost would run smaller ISP's out of town. The NBN Co has now decided to waive the fees until these ISPs get enough customers on board.

“NBN Co plans to rebate the wholesale charge for the first 150Mbps per month on its Connectivity Virtual Circuit (CVC) until there are 30,000 premises passed in a connectivity serving area, which connects to a point of interconnect (PoI).”  

The ISPs will still pay the same access charges to NBN Co, which start at $24 a month for wholesale broadband services for every customer on a 12 megabit per second download and 1Mbps upload connection, and $38 a month for customers on a 100Mbps service. The 150Mbps mark is short of the 200 Mbps exemption that Hackett was calling for, but the decision is still a win for the junior ISPs who will now find it easier for to enter the broadband field. However, there is some fine print that needs to be sorted out. As ZDNet's Josh Taylor points out, the CVC charge is a source of substantial revenue for NBN Co and is crucial to it making a return on investment. Just what impact the discount will have on that is still open to conjecture. Meanwhile, Hackett hasn't declared complete victory just yet, saying that while the rebate removes a set of “punitive” overheads for ISPs it still doesn't reduce the long-term cost for participating in the NBN. And so Internode is sticking with the NBN pricing plan it released before NBN Co's announcement on the rebate.

Brunswick renters

The inner-city Melbourne suburb of Brunswick joined the list of communities connected to the NBN and while only 14 properties have signed on it hasn't stopped Stephen Conroy from declaring the move a success. Conroy said that he wasn't really looking for high uptake rates during the trial phase and the interest from the community has been strong with about one in two households consenting to have a connection box installed. For the total 2689 premises covered in the Brunswick trial, 1405 properties opted for a connection and as this CNET article points out that's the lowest sign-up rate for any of the first five mainland release sites for the NBN. Still, the lucky 14 properties with NBN access are reportedly very happy with The Melbourne Weekly Times reporting that residents had noticed a marked improvement in video and online gaming performance.

However, the trial run in Brunswick has also highlighted a couple of interesting points apart from just the price issue. Firstly, the high number of rental properties in the area meant that even if the renters were interested in signing up to the NBN, they still had to get the property owners' approval. That has proven to be far bigger challenge than the one envisioned by the NBN Co which said that getting the approvals from body corporate and property owners added an extra layer of logistical and bureaucratic difficulty. The problem of rolling out the fibre is further compounded when dealing with older apartment blocks. All of this raises the interesting question of whether renters are disadvantaged under the NBN's “opt-in” model which could see them foot the connection bill if the landlord is not willing to take up the fibre. It will be interesting to see if the results from Brunswick will force the New South Wales and Victorian government to reconsider their stance on the “opt out” model implemented in Tasmania.  Brunswick is the first metropolitan trial area for the NBN so this is very much a taste of things to come and interestingly the team at Lifehacker has taken the opportunity to test how mobile networks stack up against the NBN. The end result: living in the city is no guarantee that mobile network performance will be up to scratch, and the networks can't really compete with fibre networks on speed or availability.

Telstra LTE in sight

Speaking of mobile networks, Telstra has brought forward the launch of its Long Term Evolution (LTE) products to business and enterprise customers from the end of the year to the end of this month. The move lets Telstra, which is taking registrations from customers, get the jump on its rivals when it comes to going live with its services. The one thing everyone would like to know is just what sort of speed 4G services will bring and as Richard Chirgwin of The Register points out Telstra has been careful to stay mum on that issue lest it fall foul of the Australian Competition and Consumer Commission (ACCC) and its strong disdain for telcos making spurious claims in their promotions based on claimed data rates.

Wrap up

In other NBN related news, Telstra's main opponents AAPT and Optus have reportedly warned in their submissions to the ACCC that they are still at a disadvantage when it comes to the 121 points of interconnect (PoI). The telcos have told the competition regulator that with 111 of the 121 permanent PoIs to be housed in Telstra's existing exchanges they are going to be at a serious disadvantage to Telstra. It's a change of tack from Optus, which had earlier argued in favour of using Telstra's exchanges but it is now worried at the prospect of Telstra abusing the process to gain an unfair advantage.  Meanwhile, the latest findings from the Cisco Visual Networking Index Forecast make good reading for all proponents of the NBN, with the research showing that internet traffic in Australia is set for a six-fold increase by 2015, with the number of internet users set to increase from 14 million to 20 million. It's safe to assume that a lot of that usage is going to revolve around video and streaming applications and that's going to need a lot of bandwidth.