TECHNOLOGY SPECTATOR: Turnbull delineates the details

Technology Spectator

Steve Jenkin published a piece recently in the Technology Spectator which, like many articles written about the NBN, is full of indignation that the Coalition would dare to criticise the NBN Co’s fibre to the premises strategy.

Mr Jenkin did not take time to discuss why it is that thousands of people in greenfield estates, around Australia, have no wireline service at all because the NBN Co simply hasn’t turned up, nor did he discuss why the NBN Co is so woefully behind even its own very long schedule. Disturbing the dream is always uncomfortable, better to focus on the Opposition.
However, he does pose some questions and I thought I would restate them and respond to them.

1) Just who is going to own the company that will do the FTTN-NBN roll-out?

The NBN Co will continue as a government owned company – it far from ideal that it was set up as a government owned company, but it has been and is probably unsaleable in its present state of development and for the forseeable future.

However, we will remove as many of the barriers to competition with the NBN Co as possible – for example we would seek to reverse the arrangement whereby Telstra and Optus are obliged not to use their HFC to compete with NBN Co on broadband data and voice, the extent to which that is possible obviously depends on negotiation. In every other country of which I am aware, government policy seeks to encourage and promote facilities based competition, including by HFC, not suppress it.

We will certainly remove the obstacles to private sector fibre deployment companies operating in greenfields estates.

2) Is Turnbull prepared to guarantee that NBN Co will be left with a competitive business model, able to service debts and commitments already entered into?

If the NBN Co completes its network build more quickly and at less expense, it follows that it will have much less capital to service. Accordingly its financial position should be better relative to that of the NBN Co on its present plan. The experience in other markets (US for example) is that FTTN networks enjoy comparable ARPUs to FTTP networks – the very high speeds (100mbps-plus) available on FTTP are not sought after by sufficient customers at sufficiently high premiums to justify the additional investment. That, at least, is the feedback I have had from telcos in the US, UK, Canada and several other countries.

i) If NBN Co are forced to take on the FTTN, what arrangements will be made for existing staff who may not want to continue under the altered circumstances?

I am not sure what he means by this. Is he suggesting that the FTTP strategy is some sort of religious cult and were the NBN Co to change its build strategy to incorporate more FTTN, that would be a moral outrage? If he means will the NBN Co comply with its contractual and other legal obligations to its employees, then the answer is obviously yes – just as any Australian company should.

ii) Will he be giving the contract to Telstra? What then of the SSU?

I am not sure what contract he is referring to here – the network would continue to be owned by NBN Co and built by whatever contractors it selects.

iii) Give the contract to NBN Co? How will that integrate with their work?

See above.

iv) Create a new entity for the FTTN-NBN and would such an entity be wholly Govt owned for shared with Telstra?”

See above.

3) Where is he going to get the detailed FTTN deployment plans?

i) Will he acquire them from Telstra or rely on Telstra to give up in-confidence commercial data and intellectual property?

FTTN deployments, because they follow the pattern of the existing lay out, cost much less and take less time to plan that FTTP – as I have been advised by people who are actually doing FTTN and FTTP rollouts. I anticipate a thoroughly constructive co-operation with Telstra on this, and their management has made public statements indicating that. However, the network would be NBN Co’s – there is no change to the objective of structural separation which I have supported for many years.

4) Will he make any guarantees about the service provided?

ii) And will ASIC or the ACCC regard those promises as mere political puffery or commercial statements, misleading, and actionable, if false?

Services offered should be described factually. The Openreach (BT’s functionally separated network company) approach is before a premise is signed up, a line test is done so as to show the would be customer what speed service they are able to get.

5) How can he guarantee "$20 billion in savings” if they don’t appear on the federal government balance sheet?

I have been careful not to nominate a particular sum of money as the difference between what we would do and Labor’s current plan. For a start there is enormous scepticism that the NBN Co project can be completed within the cost and timeframe of their business plan. Several very experienced civil contractors and engineers have said to us recently that they think the actual build cost is likely to be $80 to $100 billion for example.

These more recent comments compare with Cliff Gibson’s estimate cited in Commsday 16 May 2011:

"I do know that the two partner organisations that we work with would have put tens of millions of dollars worth of work in to put the bid together and our experience on this exercise, and the costing involved, would lead me to think that the cost of roll- ing out the optic fibre to 93% of the homes around Australia is going to cost between 60-80 billion,” [Mr Gibson] told an ATUG industry gathering in Melbourne.

What we do know is that FTTN is cheaper and faster to deploy than FTTP. The experience around the world is that FTTN costs between 1/3 and and 1/4 of FTTP and that it takes much less time to deploy. As I have noted elsewhere by way of example, BT passed 7 million homes in the UK with FTTN last year alone.

The argument against FTTN is obviously that it does not offer the same very high speeds of FTTP, but if you can deliver speeds capable of supporting the services people actually need now and in the forseeable future and you can do so quickly as opposed to many years away then the trade off is worthwhile. If money and time were no object you would do FTTP everywhere, but sadly in the real world, rational people do have to take into account how much things cost and how long they take to deliver.

I might conclude this blog with a reflection on my visit this week to Western Australia. I have now met dozens of people here (as I did last week in Queensland) with inadequate broadband services who would dearly like the NBN to come along and fix their problems.

But it simply isn’t happening. Some people, in greenfields estates, have no wireline services at all and the NBN Co can give them no assurance as to when it will turn up to connect them. Others are told they will be dealt with some years in the future. For them a faster upgrade is a very compelling proposition. The growing gap between Labor’s FTTP nirvana spin and the reality of nothing happening is causing more and more bitterness especially in greenfields estates where the NBN no-show is a growing catastrophe for more and more Australians.

As far as the balance sheet point is concerned, let us just cut through the fog of spin and nonsense here. A dollar saved on the NBN Co build is a dollar less for the Commonwealth to borrow and service with interest. Under the accounting rules the expenditure on the NBN does not count towards the budget outcome – so much deficit or surplus – but it is cash, real money, nonetheless and it does add to the debt burden of Australians.

Malcolm Turnbull is the shadow minister for communications and broadband. This post was first published on Mr Turnbull's blog on September 6. Republished with permission.