China's FttH an inconvenient NBN truth for Libs

The foaming-at-the-mouth, anti-National Broadband Network troops at The Australian were so excited to hear that China is planning to build its fibre-to-the-home (FttH) network for around $10 billion that they plastered the story on the paper's front page in a sort of presumed comeuppance to the spendthrifts over at NBN Co.

While this announcement may seem to suit the Coalition's ongoing ideological NBN warfare, it is a double-edged sword: given more than a cursory examination, the project is not only technically different to Australia's, but profoundly contradicts the messages that the Coalition's NBN attack dogs have been espousing.

One of those messages, of course, is that we should be looking to overseas examples of other nationwide broadband deployments for inspiration on how to model our own. Turnbull's presumption in making this statement is that everybody in the world is supposedly deploying VDSL, just like the Coalition wants to; nationwide FttN. He therefore concludes that the NBN is a frivolous waste, and if we could just see what's happening in other countries, we would see the light.

But how does his argument compare when overseas countries are, in fact, replacing copper with fibre? What will Turnbull make of China's FttH investment? Will Australia's "so-called specialist" and "parochial" journalists continue to be harangued as — how Turnbull put it — "unbelievably uninformed" by Liberal Party stalwarts if they point out that by the time China's project is finished, nearly one in seven people on earth will be using FttH?

By the time China's project is finished, nearly one in seven people on earth will be using FttH. This is hardly a minority opinion, and it's truly an inconvenient truth for those arguing that FttH is unviable as a universal last-mile strategy.

This is hardly a minority opinion, and it's truly an inconvenient truth for those arguing that FttH is unviable as a universal last-mile strategy. Even more, however, it's an indication that the real cost factors behind Labor's NBN are not only completely unrelated to the choice of FttH technology, but will also be factors in any Coalition Fibre-to-the-Node (FttN) plan.

Those costs, in the main, relate to anything but the actual fibre and switching equipment; the costs for these components of the network are well understood and subject to economies of scale that will, of course, suit China's rollout.

I'd wager that the lion's share of the cost differences between our rollout and China's relate to several very obvious factors — most importantly, the yawning gap between workers' wages in China and Australia.

I have never employed a Chinese labourer to dig a ditch in China, but if I did, I bet it would come in at around one-twentieth of the cost of paying a labourer in Australia. There is a reason, after all, that the Western world shifted its manufacturing to China.

I addressed the issue of relative worker costs last year, noting that in most Asian countries, the obvious plan of action for a civil-works project of this magnitude would be to import tens of thousands of workers from India, Bangladesh, Indonesia or elsewhere, then keep them in appalling conditions, while paying them substandard wages to work long hours with few safety protections.

Given the storied history of Chinese worker protections, I would suspect that a similar approach will be taken in building China's NBN.

Australia, of course, long ago decided that it would simply not tolerate anything resembling these kinds of working conditions; toeing the other side of the line, our workplace policies have evolved to such a point that we nearly have to find someone with three postgraduate degrees to dig a hole.

The net effect of this workplace environment is, ironically, seen most obviously in the relatively high expenditures of NBN Co: it turns out that people with the skills to build a 21st-century fibre network are, in fact, commanding healthy salaries, even when the government is paying them. These costs are trickling right down the food chain, to the point that even NBN Co subcontractors are said (in a report that generated considerable controversy and rebuttals from all involved) to have been complaining that their staffing costs were taking all the fun and profit out of their contracts.

Another salient point about China's rollout is the market structure in which it's occurring: as even The Australian report concedes, China's telcos are state-owned. This means that they have very little recourse but to implement the technology they're told to, at as low cost as possible. Conventional private-sector profit margins don't apply here, nor does the NBN Co's less-than-commercial 7 percent profit target. Having two strong domestic producers of cost-competitive networking gear, in Huawei and ZTE, doesn't hurt either.

China's telcos are state-owned. This means that they have very little recourse but to implement the technology they're told to, at as low cost as possible. Conventional private-sector profit margins don't apply here, nor does the NBN Co's less-than-commercial 7 percent profit target.

Not even BT, Turnbull's oft-lauded FttN darling, can lay claim to that sort of flexibility. Certainly, our own government might have stronger leverage if Telstra were still government-owned — but it is not, thanks to 15 years of pushing the pendulum well and truly away from state ownership. The government must now negotiate, mano-a-mano, with Telstra around every aspect of the NBN build and transition.

It's also worth mentioning that state ownership will save China's telcos from having to navigate a morass of local planning laws, conflicting and politically-driven state governments, or a dysfunctional government and opposition. The project will simply be designed, implemented, and completed for a price that will, I would venture, probably be a tad more than the predicted $10 billion.

Then there's the issue of technology: the Chinese project, according to reports, will target speeds of 20Mbps in urban areas and 4Mbps in developing regions. This suggests a much higher rate of backhaul contention and premises bandwidth-splitting, just to deliver speeds that are well below what many Australian customers already get over copper. And by the Coalition's maths, replacing this infrastructure with fibre is a waste from the get-go.

So why, then, are they doing it? We could all probably come up with a dozen of different answers, but the most interesting ones will no doubt be those that come from Turnbull himself.

What do you think? Do China's FttH plans support or repudiate the Coalition's anti-FttH position?