Time to scrap the NBN?

The Coalition’s revised broadband plan leaves the fundamental aims of high speeds and regional access as afterthoughts, but will still cost billions. Meanwhile, the private sector is already starting to fill the gaps.

It has been a good while since then-opposition leader Tony Abbott said Malcolm Turnbull's job was to "demolish the NBN". That rather negative line was unpopular, given that even up to the last election support for the Labor national broadband network was close to 60 per cent.

And yet the NBN has all but been demolished already.

Or rather, it certainly should be, given the dire fiscal constraints outlined by Treasurer Joe Hockey in the Mid-Year Economic and Fiscal Outlook yesterday (Roll up for the MYEFO horror show, December 16).

Okay, so nobody believes Hockey's heavily-massaged numbers, but even under the more balanced Pre-Election Economic and Fiscal Outlook scenarios published in August, things are tight.

So we are now faced with a $41 billion project in the tightest of times that will not deliver the unique benefits of the 93 per cent fibre-to-the-premises Labor NBN.

We know this because, day by day, the Coalition project starts to look more and more like the clunky 'competitive' environment that has failed to deliver decent broadband to Australians ever since the three-stage privatisation of Telstra in the late 1990s and early 2000s.

As newish NBN Co chairman Ziggy Switkowski gets to work reducing the cost of the build, but also reducing the download/upload speeds it will deliver – including refusing to guarantee any base level of service – one has to wonder what, exactly, is the role of government in this sector.

Labor's plan, which this commentator initially attacked in a series of articles in 2010 before realising the scale of the benefits it offered (Time to untangle the NBN, December 2010), contained clear objectives to justify a massive government intervention.

To recap, Labor had effectively asked Telstra to pull its finger out and deliver decent internet speeds. It put money on the table to do this – $4.7 billion, for which several players were expected to bid, but which Telstra was most likely to win.

When Telstra, then lead by Sol Trujillo and his deputy sheriff Phil Burgess (no relation), failed to even make a bid that conformed to the tender requirements, a frustrated Kevin Rudd and Stephen Conroy assembled a panel of experts to advise on what the government could do to 'bust the asses' of those two American executives.

The '$43 billion' government monopoly NBN Co was the result. The Commonwealth would own and operate wholesale telecommunications (with some slim possibility of privatising that asset in the distant future), and Telstra would become a retail service provider, just like everyone else.

That project went down in cost, to $36 billion, and more recently went up in cost when Malcolm Turnbull's strategic review of the project worked out it would really cost $73 billion.

Turnbull's project, outlined in the strategic review (Turnbull dodges the worst from a damning NBN review, December 12), will comprise FTTP for around 20-26 per cent of connections; fibre-to-the-node for around 44-50 per cent; and uses existing hybrid fibre-coaxical (HFC) networks for around 30 per cent of connections. The small remainder will be covered by fixed wireless and satellite.

The problem is, despite its still massive expense, this plan does not buy some of the key objectives of the Labor scheme – particularly the ubiquitous user-experience, which would give a new level of online 'shop fronts' to consumer-facing businesses.

The Turnbull plan promises speeds up to 50 Mbps – which, if it worked properly, would deliver just about anything those consumer-facing businesses could wish to deliver.

But hang on. The market is already awash with "up to" speed offers. A high-level developer of online "user environments", working for clients such as major banks and telcos, told me last year that his "up to 25 Mbps" ADSL2 really only delivered between 5 and 15 Mbps depending on the time of day. 

With half the Turnbull NBN being delivered over copper – remembering that most Australians don't live in the clean, dry apartment blocks in which 'fibre-to-the-basement' offers such a neat copper-based solution – the "up to 50 Mbps" promise feels dodgy already.

Moreover, the government monopoly is already being called into question – having paid $41 billion, there is a good chance that the private sector will finally get off its 'ass', as Trujillo might have said, and deliver decent broadband.

As Tony Brown, a senior analyst at Informa Telecoms & Media, wrote last week in the Fairfax press:

"Aside from technology, the other major question overhanging Turnbull’s NBN is what are the implications for competition in HFC areas now that these areas will not be getting new FTTN or FTTP networks installed?

"Does this mean that we will see the likes of TPG be allowed to push on unopposed with its fibre-to-the-building network to around 500,000 homes in capital cities and, if so, will other private operators now seek to fill the void in potentially profitable areas by launching their own high-speed networks to compete with HFC?"

So we pay $41 billion to do something the private sector can do for itself?

The other missing element in the Coalition NBN is the "roll in" insisted on by former independent MPs Rob Oakeshott and Tony Windsor. They wanted the rollout to begin in regional areas, and outer metro areas, because that's where the worst blackspots were.

As I argued three years ago, Turnbull's best plan would have been to split the NBN in two – use taxpayer dollars to kick-start regional and outer metro communities, and let the inner cities be provided for by the private sector. (Turnbull must cut the NBN in two, September 2010).

What we have now is neither one nor the other. Do we really need to spend so much on creating a public monopoly, on addressing regional and out-metro disadvantage, when both these rationales have been lost in the rush to do it cheaper, and sooner?

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