NBN BUZZ: How to fly a Bentley

Malcolm Turnbull has attacked NBN Co's $620 million twin satellites as the Bentley alternative when a Falcon would do. But is it such a bad deal?

NBN Buzz is a weekly wrap up of everything that's going on with Australia's largest infrastructure project. For previous editions and the latest news visit our NBN Buzz page.

The federal opposition launched a three pronged attack on the NBN this week, but amid the political jousting over prices, transparency and whether we would be better off following the UK’s approach to the NBN, it was the Labor government and NBN Co that stole the show with their $620 million satellite deal which will form the backbone of the satellite leg of the national network.

Satellites, Bentleys and shooting stars

We start with the satellite deal that will see California-based Loral Space and Communications build two Ka-band broadband satellites, providing a 12 megabits per second (Mbps) download and one Mbps upload service to 200,000 residents in areas which will miss out on the NBN fibre rollout. The contract has been handed out after a lengthy two year process which has seen all the major global satellite and ground hardware manufacturers battle it out. NBN Co chief technology officer Gary McLaren has told iTnews that a competitive procurement process had delivered a cost effective outcome that still fits the bill when it comes to providing the best possible service to customers.  The $620 million is part of the $2 billion that the government has promised to invest over 15 years to deliver the NBN Long Term Satellite Service and there are still a few more contracts to be handed out. NBN Co still needs to find parties that will deliver other components of the service, construct the satellite ground systems and an outfit, most likely France’s Arianespace, which will launch the two satellites into space.

Shadow communications minister Malcolm Turnbull wasted little time in attacking the deal and in a rather colourful tone decided to tie the latest deal into his overall argument that a profligate Labor government was hell bent on sacrificing as much money as possible on the NBN altar. Turnbull told reporters in Canberra yesterday the plan was expensive and why bother buying a Bentley or a Rolls Royce when a Camry or Falcon would do the job just as nicely.

"Don't buy yourself a Camry, a Falcon - buy yourself a Rolls-Royce, a Bentley," he told reporters. "Nothing but the best will do, nothing but the most expensive will do."

He also said that the telecommunications industry had told him there was enough capacity on existing and scheduled-to-be-launched satellites that NBN Co could rent rather than spend billions on a operating its own services. And then there is the interim service that Optus and IPstar are running at the moment, why not just upgrade them and make them permanent?

I'm not sure whether comparing satellites to automobiles is fair but Turnbull does get his point across with regards to extravagance, a message that he also eloquently put forward in his latest missive published yesterday in Technology Spectator. As for the other issues, NBN co says the leasing capacity option wouldn't work because it has doubled the number of people it wants to connect on the satellite network from a 100,000 to 200,000 and there just isn’t that much capacity available. The interim satellite services currently in operation were always designed to be rolled into the overall plan by 2015 and I am not sure upgrading them will provide the sort of service that the government is promising.

The bottom line is there is very little the opposition can do to roll back the clock on the satellite contracts, it will almost certainly have to honour the Loral deal as well as the ones still in the pipeline, which NBN Co won’t waste much time in announcing. The best the coalition can do is integrate the satellite component into its professed “mixed technology” approach to broadband services.   

NBN battlelines

Coming back to Malcolm Turnbull’s argument that the NBN is going to lead to higher broadband prices, it’s a position that the shadow communications minister has taken a number of times and it's one that never fails to divide opinion. The talk of a government monopoly, lack of appropriate regulatory oversight, and the assumption that the NBN is never going to be finished on time and budget is exactly the sort of fuel that reinvigorates the NBN sceptics and gets the pro NBN lobby up in arms.

It is unlikely that anything the government says in its response to Turnbull’s argument will placate those who are against the network and Turnbull is unlikely to ever dent the enthusiasm of the so called “technophiles’ that want a NBN at any cost. So, is there any way to break the impasse? As long as the coalition constructs its criticism purely on the economics of the NBN, the answer is no. What might help instead is an elaboration of its alternative to the NBN, one that not only spells out how it intends to provide a comparable service to all Australians and one that can truly stand the test of time. As I mentioned in last week’s column the opposition needs to walk away from a kill at all costs approach to the NBN, which we know will end up costing the government billions, and instead provide an alternative that goes beyond the rhetoric of a cost benefit analysis.   

Transparency issues 

I mentioned the opposition’s three pronged attack at the start and while Turnbull was again leading the charge, there were also attacks from opposition finance spokesman Andrew Robb, who has demanded that Finance Minister Penny Wong take a more hands-on role to ensure the NBN doesn’t bleed money and more importantly the government release more information publicly on NBN Co’s financials and cost controls. Robb is seeking monthly financial statements for NBN Co to ensure the daily nitty gritty of the company’s financial activities are there for all to see. Wong has fired back, saying that there is adequate transparency and NBN Co representatives have appeared before four parliamentary committees. Now this sort of jousting is what politics is all about and Wong did manage to get the final word in at her National Press Club Address yesterday, berating the opposition for its “habitual negativity” and arguing that the opposition should concentrate on producing “actual policy, not just catchphrases.”

A more interesting dimension to the transparency issue is presented by iTnews’ James Hutchinson, who wonders whether NBN Co is playing the commercial sensitivity and confidentiality arrangements card a bit too often to dodge freedom of information (FoI) requests. The publication felt the brunt of this tactic when NBN co refused to reveal details of the trial of a user-pays upgrade process initiated in Tasmania and Internode has also felt the sting of rejection when it asked for more details on the $11 billion Telstra NBN deal. Both times the reasoning was the same and Hutchinson makes a good point.

A UK model for NBN?

Finally, the Liberal member for Bradfield and former Optus senior executive Paul Fletcher has used his blog to revive the idea of whether Australia should be following the UK’s lead on broadband. Fletcher says that the UK is spending a lot less money on its network, its stage approach is worthy of emulation as is its mixed technology model. Most importantly, there is the clear push that broadband is something best left for the private sector to deliver.  

There is very little factually wrong with what Fletcher is describing and the mixed technology model is being used in other parts of the world, however, what works in the UK may not necessarily work here. According to Ovum’s David Kennedy, Australia could pursue something similar to the UK model but the average cost per user will be different because of our larger geography and lower population. The other thing is that the model Fletcher is suggesting will not give us the whiz bang speeds of 100mbps.

Now, many will argue whether we truly need the luxury of 100 Mbps but if the NBN is going to be our pathway to the future then we can’t sit around hoping that a mix of technology will do the trick.  As Kennedy puts it, “100Mbps may be a luxury item, even in leading Asian markets, but that doesn’t prove that it will always be so.” 

On the flip side, there’s no guarantee that we will see the sort of mass market applications that demand 100Mbps, but the evidence seems to point otherwise. 

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