Turnbull's NBN gets a gift from the past

A just-surfaced document from the ACCC validates the Coalition's view that hybrid fibre-coaxial technology is capable of providing an adequate end-user broadband experience.

There’s a report in the respected telecommunications industry newsletter Communications Day today that would have brought a smile to Malcolm Turnbull’s face.

According to CommsDay a letter from the then Australian Competition and Consumer Commission chairman, Graeme Samuel, to the Department of Broadband, Communications and the Digital Economy released under the Freedom of Information Act (CommsDay didn’t say who sought the information) rated the various available broadband technologies.

As CommsDay said, the letter came at an important moment in the history of broadband in Australia, after Telstra had been kicked out of the request for tender process for a fibre-to-the-node network but just weeks ahead of the shock announcement by Kevin Rudd and Stephen Conroy that the federal government would go ahead with a fibre-to-the-premises network and that Telstra would either be forced to cooperate or lose access to wireless spectrum, among other things.

In the current context of the competing government and opposition proposals for a national broadband network, the ACCC rankings back in 2009 are of consequence.

The commission was asked to rank broadband technologies according to their end-user speeds, track records, ability to be upgraded, their reliability and their suitability for remote and regional areas.

It is no surprise, given that the ACCC analysis didn’t include a cost-benefit assessment, that fibre-to-the-premises ranked first on counts other than its proven track record. There is no disagreement on the view that FTTP represents the Rolls Royce of available broadband technologies.

What is of interest, however, is that HFC (hybrid fibre-coaxial) technology ranked first in terms of proven technology and second on all the other criteria.

Under the government’s NBN, of course, Optus has been paid $800 million to decommission its HFC network and Telstra has agreed not to use its network for anything other than delivering Foxtel as part of its $11 billion (in net present value terms) deal with NBN Co and the government.

The two HFC networks pass about 2.5 million homes in the capital cities, have been upgraded to deliver download speeds of up to 100 Mbps in Sydney and Melbourne and are technically capable of being upgraded to deliver download speeds of up to 320 Mbps.

The deals Conroy and NBN Co struck with Telstra and Optus to shut down the cable networks, at least in relation to broadband services, were purely about protecting NBN Co’s economics – its monopoly – in the areas of Australia where competition would most impact its ability to cross-subsidise broadband services in regional and rural Australia.

While that is understandable in the context of the economics of the existing NBN, it does mean that perfectly useable broadband infrastructure, and billions of dollars of sunk investment, would be made redundant and broadband users in metropolitan areas – users who might be satisfied that the speeds over the HFC networks were fast enough for their needs – would pay more for their services than they might have had the HFC networks been allowed to compete with the NBN.

Turnbull, of course, has said the Coalition, if it wins government, will construct a fibre-to-the-node network (which the ACCC ranked behind FTTP, HFC and, mostly, wireless 3G) and wouldn’t build over the HFC networks as part of its plans to use a mix of technologies to deliver a cost-efficient national broadband service.

With the ACCC, according to CommsDay, saying that a number of the available technologies were capable of providing the same end-user experience in terms of speed, reliability and upgradeability, Turnbull would feel vindicated that a key element of his plan has been effectively validated by one of the strongest proponents (some might say the architect) of the NBN.

With Optus and, one assumes, Telstra (as part of its holistic deal with NBN Co) having been paid for their HFC networks (or, in Telstra’s case, the potential broadband capacity of the network) a Coalition government could presumably hand the HFC networks over to its version of NBN Co and instruct it to develop a wholesale offering based on it.

Turnbull hasn’t ruled out eventually building over the HFC footprints, of which those 2.5 million homes within the capital cities represents about 30 per cent of the population, but has indicated they would be towards the end of the priorities in the building of his version of the NBN.

If there is to be a shift in the nature of the NBN from a comprehensive FTTP network covering 93 per cent of Australian premises to a FTTN network that does use a range of technologies to significantly lower the cost  – on NBN Co’s numbers the peak funding commitment for its network will be about $44 billion while Turnbull has said he can build his version for far less – the HFC networks could play a significant role as an interim technology pending a FTTN rollout in metro areas once those regions without access to adequate broadband have been serviced.

InvestSMART FORUM: Come and meet the team

We're loading up the van and going on tour from April to June, with events on the NSW central & north coast, the QLD mid-north coast and in Perth, Adelaide, Melbourne, Sydney and Canberra. Come and meet the team and take home simple strategies that you can use to build an investment portfolio to weather any storm. Book your spot here.

Want access to our latest research and new buy ideas?

Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.

Sign up for free

Related Articles