Telcos stop worrying, learn to love NBN

Summary:Once you look past the amazingly heated, persistent antagonism towards the NBN, things are far less troublesome than we have been led to believe.

According to the Bible, some say, the world ended on 21 May. House of Yahweh leader Yisrayl Hawkins pegged the date back on 12 June 2008, after previous incorrect guesses of 12 September 2006 and 12 June 2007. Even that was a decade longer than The Terminator's Skynet, which extinguished the world on 29 August 1997. The Mayans have given us a bit more time — until December next year.

Telstra's world ended on 7 April 2009, when Rudd decided to pursue the current National Broadband Network (NBN) model, and redirected Telstra onto a very different path than the one it had set for itself. Ask your local Liberal member, and the world actually ended on 24 November 2007, when Kevin Rudd was elected and the Coalition was forced to confront its humiliating loss and learn how to sit in Opposition after 11 years in the driver's seat. And with respect to the NBN — or just about everything else — every Liberal Party pronouncement since then has been in a pitched, hysterical tone, with the party acting like Labor's NBN will send the country broke, cause your pets to do unnatural things with wildlife and make your bum look big in those pants.


Critics predicted that the NBN was a doomsday scenario for competition, but reality seems rather less apocalyptic. (Castle Bravo image by US Department of Energy, public domain)

In truth, once you look past the amazingly heated, persistent antagonism towards the NBN, things are far less troublesome than we have been led to believe. We know why the project has been delayed — it is, of course, ambitious — but in recent weeks, we've seen the commercial world warming to the NBN in a very real sense, offering pricing and service bundles that suggest that the network really will do for our telecommunications industry exactly what the government has promised.

The first signs that the NBN was more than just a massive white elephant came as M2 Telecommunications, Platform Networks, Nextgen Networks, AAPT and Eftel joined Optus and Telstra in moving to offer aggregated wholesale services that will help ISPs to avoid the complex requirements of the ACCC-imposed point of interconnection (PoI) model.

In recent weeks, we've seen the commercial world warming to the NBN in a very real sense, offering pricing and service bundles that suggest that it really will do for our telecommunications industry exactly what the government has promised.

Such services will help ISPs to rapidly expand their service footprint across the country, resolving many of the issues with wholesale services that have caused Internode's Simon Hackett so much mental anguish despite NBN Co's efforts to placate him. Hackett came out against the Nextgen Networks aggregation plan soon after it was announced, but Internode's recent price rises — which it blames on a Telstra wholesale "price squeeze" — suggest that even that successful ISP may need to be looking at the appeal of third-party aggregation services.

Call me crazy, but the rapid entrance of more than half a dozen wholesale aggregators sounds like an enthusiastic and highly competitive market to me. Prices tend to come down, and services improve in such markets, so we will all watch with interest. It certainly doesn't sound like the high-priced, exploitative and anti-competitive market that Turnbull has argued will be created by what he keeps calling an incompetent, spendthrift government. Perhaps the key is to judge the NBN not by how much it changes what came before, but by how well it motivates the kind of market behaviours now seen as desirable.

We're seeing similarly promising signs when it comes to NBN pricing. The critics wasted not a nanosecond in descending after Internode revealed retail NBN prices ranging from $59.95 per month to $189.95, with sensationalised headlines and the inevitable Malcolm Turnbull press release claiming that the NBN had been proved as expensive and generally wasteful as the Coalition had been saying all along.

Never mind that Telstra was, until recently, charging similar prices for the 100Mbps service that it offers over the HFC network that Malcolm Turnbull so desperately loves; Internode, first off the post, had proved that the NBN was going to suck money from our wallets at an unprecedented rate.

Yet those same critics went curiously quiet a few days later, when Exetel revealed its own pricing, starting from just $34.50 per month for a 12/1Mbps plan or $49.50 for a 100/40Mbps service.

Those two prices are introductory, of course, with 20GB of data; if you want 200GB, you'll pay $79.50 and $99.50, respectively. But they're far better than Internode's, and have made it very clear that the NBN is hardly going to be the rip-off that its opponents suggested. Indications that Dodo will offer introductory NBN services at under $40 per month confirm that ISPs still see room to move on pricing.

And all this, with the NBN roll-out barely out of the gates and the actual market just a miniscule fraction of a fraction of what it will be in several years. In fact, given how early in the NBN roll-out we still are, it's unprecedented for pricing to have been set so low so early on — and for a user base so small that market-based economies of scale are still a long way from kicking in. This early into Telstra's ADSL roll-out, we were still being screwed seven ways till Sunday on broadband pricing.

In some places, we still are.

While change is never easy, it appears as though the Coalition's core conceit — that Labor's market reforms will destroy private sector investment and competition — is being progressively proven to be further and further off the mark.

Now, it would be foolish to say that there aren't any challenges with the NBN: as I and others have often said, it's a massive project and much can go wrong. But the emerging reality seems to be one of fierce competition, improving services and lowering prices that will make the new telecommunications environment a much more dynamic, progressive place than many opponents have alleged it will become. Even chronically anti-NBN outlets like The Australian have had to rephrase their attacks on the network, choosing most recently to portray Conroy as "pledging" that NBN prices will fall as more competition is introduced in the future.

Whether prices will fall or not, of course, is not Conroy's promise to make — but in this context, if they fail to fall, as quickly and as far as some feel they should, you can bet that Conroy will be blamed. Yet pricing is, exclusively, an issue for the market to determine; the government is only enabling the climate of competition, and — while all signs are that prices will decrease — not even Conroy can guarantee where the chips will fall when all is said and done.

While change is never easy, it appears as though the Coalition's core conceit — that Labor's market reforms will destroy private sector investment and competition — is being progressively proven to be further and further off the mark. Competitive, dynamic private-sector markets are built on the idea that participants will adapt or die off. Australia's telecoms service providers are clearly determined to adapt and survive — and indications are that they're doing so on terms that are, in fact, pretty good for consumers.

What do you think? Has the recent market activity proved Labor's NBN vision to be right? Or is this truly the end of the telecoms industry as we know it?

Topics: Broadband, Government : AU, NBN, Telcos

About

As large as the US mainland but with a smaller population than Texas, Australia relies on ICT innovation to maintain its position as a first-world democracy and a role model for the developing Asia-Pacific region. Award-winning journalist David Braue has covered Australia’s IT and telecoms sectors since 1995 – and he’s as quick to draw le... Full Bio

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