Turnbull's whiter-than-white elephant?

As Malcolm Turnbull pivots from thorn in Tony Abbott’s side to saintly NBN demolisher, some weak points in the Coalition’s broadband plan are being overlooked.

Malcolm Turnbull is a smart cookie, but figuring out what he's been up to since late last year is not easy.

Readers may recall that in that last quarter of 2012 Turnbull was having a wonderful time, running about offering small-l liberal assessments of his own party (Turnbull's smile that wins, 18 September 2012).

Many Australians with an aversion to authoritarianism delighted in hearing him put the case for gay marriage (an issue Tony Abbott still cannot budge on, despite his daughters' public support for the idea), critique his own side's Question Time tactics and, with that beguiling grin, drop in the odd reminder that carbon pricing (the policy that brought him unstuck in December 2009) isn't such a bad idea.

All good stuff in the spirit of Menzies. The Liberal Party is a broad church, even if half the party chose to lay his political leadership to rest in a narrow casket.

But what happened in the new year? Those little jibes and taunts vanished, and party-faithful Turnbull focused all his talents on filling his place in the front bench line-up (even if, on the cover of the Coalition's 'Our Plan for Government' document, Turnbull sits a little to one side of his colleagues, and just a bit out of focus).

His part in the plan is to disrupt the not-yet-established monopoly of the NBN and, apparently, to replace it with a hybrid system of competition between a state-owned monoply and Telstra – as detailed by Alan Kohler yesterday (Coalition to end the NBN monopoly, April 3).

In this role, Turnbull and his sharp-witted staff are very effective. Too effective in fact. Because the reality, should an Abbott government be formed, is that Turnbull is too intelligent to want to go down in history as the man who set back Australian telecommunications by years, if not decades.

Browsing through the many astute comments from Business Spectator readers yesterday, one is reminded of the parts of the Coalition's soon to be released plan that won't be foregrounded by Turnbull. They most certainly will be mentioned by Communications Minister Stephen Conroy, but who will hear his baying while he does time in the Labor doghouse for botching his government's attempt at media regulation?

Here are a few of the nasties:

– It's just not true that private fibre cables can be cheaply run from the fibre-to-the-node cabinets Turnbull wants to install in every street. The technology to convert a fibre backbone signal (light fired down a fibre optic cable) into digital electrical signals that travel along copper wires is not the same piece of kit as is being installed to provide the Conroy NBN. In simple terms, every FTTN cabinet would need one technology to split the backbone light signal into numerous FTTP signals, and one to send electrical signals along all the copper loops emanating from the 'node'. Both technologies would have to be installed in every node, just in case one premises in the street wanted fibre.

– If a team of NBN contractors rolling down a street can connect each dwelling for an average cost of $2,000, reduced economies of scale will make it more expensive to call contractors out on a piecemeal basis to connect single dwellings. Much more expensive. Even if a Coalition government mandates a fixed price for connections, the cost of the hauling a team out to install single fibres, over and over again, will cost the taxpayer a fortune.

– The patchwork nature of a Coalition plan will help preserve technology-based monopolies, with cable TV being the big one. The variable quality of copper-based technologies, which vary in data speeds not only by area but by the often degraded nature of each single copper loop (so that speeds fall away in the rain, for instance), means that reliable cable-TV requires a reliable high speed link. At present, that is available to 600,000 homes through HFC cable, or via satellite. The Conroy NBN plan overbuilds the HFC capacity, but also effectively gives every premises (and, at the other end of the fibre, every small media start-up) the means to reliably transmit/receive on-demand video. As Business Spectator reader Scott Fraser pointed out yesterday: "Full speed FTTH would allow (heaven forbid) sports organisations to broadcast their own programs/games". To say that undermines a few lucrative broadcast rights deals is an understatement. Conversely, it opens up a new world of business opportunies – 'sports club as media owner' is just one example.

Turnbull, and his advisers, understand all of this very well. The main selling point for NBN 2.0 is that it would be delivered more quickly, and at less cost than the Conroy plan.

While that is certain to be true of the initial rollout, what will be the cost to the nation of adding FTTP connections, one by one, as the benefits of limitless bandwidth and lack of network congestion become apparent? The principle of user pays (where users can afford to pay) is a good one, but not if a $2000 installation ends up costing $5000.

Moreover, what will be the cost to the nation of those thousands of new business models (not just 'sport club as media owner', but 'small health clinic as online locum' or 'offshore Mandarin speaker as local tutor') never getting off the ground? It's hard to do a cost-benefit analysis for applications that will never be built.

Conroy has long argued that a uniform user experience, at a uniform price, is a pre-requisite for the innovation that will give birth to productivity enhancing business models in e-health, online education and e-commerce.

All of which makes it hard to understand why a man with Turnbull's knowledge of technology and media markets wants to be the guy who put his name to a network that (if the actual policy reflects Kohler's description) will stifle innovation and end up costing taxpayers/private broadband customers a lot more than 'Conroy's white elephant'. 

Turnbull's too smart for that. His seamless transition from thorn-in-Abbott's side to committed NBN demolisher (to use Abbott's unfortunate word) is all too convenient. Just what is Turnbull up to?

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