Libs rewriting the laws of physics and finance

Libs rewriting the laws of physics and finance

Summary: Turnbull can hardly be budgeting for a return on an FttN NBN investment; how could he when he has made it clear that there is no viable business case around the NBN?

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TOPICS: NBN
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Far from its "12Mbps-is-more-than-enough-for-anybody" policies of not too long ago, the Liberal Party is now going to great pains to raise expectations around its alternative NBN policy — Malcolm Turnbull now regularly tries to argue that his FttN alternative is going to deliver most of the speed of Labor's fibre.

Yet, as Turnbull continues to ratchet up the rhetoric, his determination to position his still-vague policy as a viable NBN alternative has gone from the ambitiously misguided to the painfully deluded.

I refer, of course, to Turnbull's claims in delineating what he believes will be the service bands for a VDSL-based local loop: 80Mbps for those living next to an exchange or node, 50Mbps for those a bit further away, and 25Mbps for those living furthest from a node.

Turnbull would, one hopes, be aware that the bandwidth profile of VDSL tapers off dramatically with distance. This would be a death blow for VDSL on Telstra's current local loop, but Turnbull is, of course, arguing that his plan to run fibre backhaul to nodes on every fifth street corner in Australia would overcome these issues.

The thing is, distance isn't the only enemy of bandwidth. Line configuration and quality are also essential — witness those people still on RIMs, who remain unable to get broadband at all, despite brand-new copper. Telstra may be slowly improving its lot with its "top hat" project, but that's just putting chewing gum on top of duct tape in terms of the permanence of its repairs.

Also, witness people such as yours truly, who are (or were, in my case) shoving their broadband through a Telstra copper line so decrepit that they struggle to get 2Mbps downloads on a good day. Uploads are a go-make-yourself-a-cuppa-then-have-a-nap kind of exercise.

I was lucky enough to bail to cable (which, itself, is becoming a spotty nightmare of unreliability), and my copper line is now sitting there fallow, unterminated wires in my roof space. The problem in my case was that the line had simply fallen apart — degraded so much that over time, even repeated visits by Telstra technicians couldn't do more than get me a voice service that was only 20 percent static, rather than 90 percent.

I assume that I am not alone.

The point here is that Turnbull's new habit of claiming that new last-mile technology will magically boost everyone to 25Mbps is politically optimistic, and technologically naïve. There may be some places where Turnbull's speed claims are correct — the VDSL experience of TransACT shows that it's possible, albeit, over correctly qualified lines installed expressly for that purpose — but, in the main, I'd say that he's simply throwing numbers to see what sticks.

He is continuing to make a fundamental error in his FttN argument: assuming that, just because FttN may deliver certain performance to some people, it will deliver equal performance to all people. Across Australia's copper network, this is just not true.

For all his speed claims, he still isn't providing numbers in the one place where it really counts; his repeated refusal to provide even an approximate price for the Coalition's alternative NBN. Asked whether his claim, that it could save three-quarters of the cost of the NBN and equate to a cost of AU$10 to AU$12 billion, Turnbull has still refused to be drawn to commit to anything other than his empty rhetoric.

He is continuing to make a fundamental error in his FttN argument: assuming that, just because FttN may deliver certain performance to some people on some copper networks, it will deliver equal performance to all people. Across Australia's copper network, this is just not true.

The reason for the Coalition's information vacuum, he has said, is because NBN Co won't provide more detail on its contracts.

In other words, it appears that Turnbull has absolutely no idea how much it actually costs to build things in today's market. He has continually slammed NBN Co as being inefficient, over-priced, and wasteful — and this week, went a step further by launching an unprecedented and groundless personal attack on Mike Quigley — but he is now looking to NBN Co's financial modelling to provide guidance for his own policy.

The NBN may have struggled to gain the kind of momentum it needs — and if it never gets that speed, it will fail on its own accord. But for the opposition to repeatedly attack NBN Co's work and the people that run it, and then base its own policy on the supposedly shoddy work of those same people, reeks of hypocrisy.

Surely, Turnbull could draw on the financial modelling done by British Telecom, on which he has repeatedly based his technological design, to get some guidance as to the cost of his policy.

With the NBN far and away his banner policy, Turnbull could expend the energy to get a provisional, high-level design drawn up on which to back his claims of superiority.

There are plenty of independent organisations that would be happy to work through the details, to give him a real number to hang his hat on. The last organisation to do so, Citigroup Global Markets, came up with a figure just south of AU$20 billion; but he has repeatedly refused to confirm or deny that.

The reality is, of course, that there is no way in the world that Turnbull's FttN policy could come in at AU$10 to AU$12 billion. Just buying Telstra's copper network, which it would need to do to make its policy work as described, would cost a Coalition government more than that much — and that's before you even start factoring in the costs of labour, equipment, fibre backhaul, opportunity cost, and interest.

Yes, interest. Because while Labor has intentionally structured NBN Co to deliver a moderate return in the long run, the Coalition's NBN plan is being designed as a subsidy-based handout. Turnbull can hardly be budgeting for a return on an FttN NBN investment; how could he when he has made it clear that there is no viable business case around the NBN?

Turnbull may have taken optimism to new heights with his projections of FttN performance, but his financial creativity continues to degrade his own arguments. The only reason he hasn't been hammered on his financial modelling is because he continues to avoid offering it.

Is he now claiming that an FttN network would generate commercial levels of return? In which case, how much of a return? And for whom will they be generated — Telstra? If the Coalition's policy is really all about pouring money into Telstra's copper network, it could be better summed up with three words: Wash. Rinse. Repeat.

What do you think? Do Turnbull's NBN numbers actually add up? Should he put his money where his mouth is and fund some proper policy modelling? Could an FttN network turn a profit where FttP can't? And if so, why isn't Turnbull promoting its financial value?

Topic: NBN

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Australia’s first-world economy relies on first-rate IT and telecommunications innovation. David Braue, an award-winning IT journalist and former Macworld editor, covers its challenges, successes and lessons learned as it uses ICT to assert its leadership in the developing Asia-Pacific region – and strengthen its reputation on the world stage.

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29 comments
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  • FttN is only cheaper in one scenario!

    FttN is only cheaper than FttH if fibre is NEVER INSTALLED TO THE HOME!
    If FttN is built and fibre is eventually installed to the home it will be MORE EXPENSIVE!
    Turnbull needs to be questioned along these lines, there is no fudgable answer!
    Kevin Cobley
    • sure if you ignore the cost of money

      Seriously this debate ridiculously poor.

      FTTP can be rolled out at anytime, the combined cost of FTTN plus FTTH MAY be more but really depends on contracts and coverage. The $4,000 per connection currently of the NBNCo would take some beating (FTTN network delivering connections @ $300).

      In addition it ignores the cost of the money to fund FTTP upfront, and the massive risk to taxpayers who are guaranteeing minimum $40+b of expenditure.

      The author knocks VSDL2 when it has been trailed in the field (not just labs) in europe @ 300mbps. And the technology keeps improving. Sure speeds diminsh over distance.

      MT was talking about the costs of contracts signed by NBNCo when talking about the lack of information re complete budget not the coet of his alternative.

      A $63b FTTP network doesn't have to be profitible for a NBN lite network to be so. The later is a completely different business case.

      NBN Lite doesn't require nationisation of the Telstra copper network.

      The argument ignores leveraging HFC networks.

      The copper network isn't in as bad condition everywhere.

      The coalition needs to outline a coherent policy, but the points made here and in the article are ill informed.
      Richard Flude
      • 300mbps :/

        http://www.theregister.co.uk/2012/03/07/deutsche_telekom_data_record/
        RS-ef540
      • "FTTP can be rolled out at anytime"

        Great. Let's roll it out now and save a heap of time and trouble.


        "The author knocks VSDL2"

        To be fair VSDL2 is a waste of time and money.


        "when it has been trailed in the field (not just labs) in europe @ 300mbps"

        LOL. 300mbps. Do you even realise what they have to do to achieve those speeds?


        "And the technology keeps improving."

        That's right. It's called FttP.
        Hubert Cumberdale
  • Costs Schmosts

    Even if the Coalition plan cost as little as $12b - (the Citi analysis had it at around $17b) - it is *not* a cheaper plan than the current NBN model. The moment his FTTN reaches the point of "inadequacy", someone will have to roll out and pay for an FTTP network anyway.

    If Malcolm's plan was for $12b, the subsequent fibre rollout would only have to reach $25b to exceed the cost of doing the FTTP rollout now.

    Add to that the projected $600m-$700m added cost of maintaining the existing copper network, above the cost of maintaining the fibre network.

    It is all number fudgery with MT at the moment. He hopes most people aren't smart enough to see through it.
    mwyres@...
  • Why Worry, feed the cat gold fish

    "NBN Co picks three more sites for satellite stations"......Hmmmm, why stop at three, we should all get one. After All, there ' s only 22 million of us. Won't be long before Swan starts printing money to pay for the trifle.
    Vasso Massonic
    • They've spent like drunken soldiers

      I can only begin to imagine how many generations it will take to pay-off the debt. Current debit is $250bn and the ceiling has again been increased - this time to $300bn and we still have another 12 months of this failed government. What will the debt be in 12 months time - $500bn?

      NBN might or might not be a good idea but is it an idea that we can afford at close to $50bn? I think that is the point that Turnbull and the Coalition are trying to make and the reason why they are trying to develop more affordable solutions.. More so, this Labor Government have a reverse Midas touch and they manage to screw-up everything that they touch. Who will ever forget the insulation debacle - $1.5bn to create the debacle, $1bn to fix it, with 3 dead, many injured and nearly 300 houses burn down (so far). Then there was the BER - billions wasted on empty halls that many schools did not need because Labor would not allow the building of resources that many did need - like toilets! Then there are the billions upon billions wasted on failed "green" policies and schemes. Offshore processing of illegal immigrants - billions wasted on closing offshore centres that then needed to be renovated and re-opened. The list is truly sickening and those are just a few examples.

      As I said, the NBN might or might not be a good idea but this Labor Government cannot be trusted to implement it.
      Wakemewhentrollsgone
      • And before the trolls start, as I know they will

        I DO NOT vote Liberal or National!
        Wakemewhentrollsgone
        • :-)

          So it's all YOUR fault then... shame on you.
          RS-ef540
      • Too true. From FTTH to satellite stations to Under sea Cables - no stopping

        the frenzy....... "In Conroy's speech, he also indicated that the Australian government may seek to roll out its own Australia-US subsea fibre-optic cable if international capacity prices don't go down........

        The drunks will have a mighty hangover when they wake up, if they do!
        Vasso Massonic
        • Err...

          It's called "investing" in infrastructure Vasso...

          http://www.arnnet.com.au/article/427619/ibm_fast_broadband_rake_1_trillion_australia_by_2050/#closeme

          But what would IBM know about technology, eh?
          RS-ef540
          • Did you read the link?

            Firstly the report was commissioned by IBM, it was "written by Phil Ruthven, Founder and Chairman, IBISWorld". It is not IBM opinion.

            Secondly the projected trillion dollars relies on productivity growth of 1.7%, almost 3 x the current rate. Such an improvement after decades of near stagnant productivity growth all without legislative and employment changes is unbelievable. Why hasn't current broadband hadd such an impact!

            Having been an IBM business partner for a number of years (cue mocking of experience) I've read more than a few such reports.

            The internet is revolutionising every business. The key is to seperate the NBNCo contribution. The analysis of speed / GDP is at best tenuous.
            Richard Flude
          • Thanks for the CBA

            You have read "such" previous reports (actually from IBM, not just with their rubber stamp) claiming economic benefits and you have even seen the internet revolutionise business, Richard, great.

            Yet you still argue until you are blue in the face that the technologically superior NBN will not improve our productivity and revolutionise... so much for all of this claimed experience eh?

            Oh, you didn't say that did you...strawman. You aid vs. cost. So let's do your sums instead...

            According to your numbers Richard, $1T is about 3x too much... ergo the figure should be $350B ish, meaning the NBN will still have paid for itself almost 10x (or 5x depending upon one's take on revenue and/or accountancy pedantics)...and that's just in "economic benefits alone..." (not including revenue, future profitability and asset value regarding the actual network itself).

            Thank you for your positive NBN CBA, proving the obvious worth of building the NBN Richard...

            And that's coming from someone who claims to roll out comms networks (or was that IT projects - as your career seems to fluctuate depending upon the discussion at any given thread). Who claims to be a Master of Commerce (iirc) and believes he knows more than NBNCo, the Government, McKinsey/KPMG etc previously and now IBM (via IBIS World).

            So it must be so...

            :-)
            RS-ef540
          • again you jump to unsupported conclusions

            Technology alone is not enough to improve productivity, it must be applied. The predicted improvement in productivity would be extraordinary, why it can be so easily dismissed.

            Your analysis is way off. The 0.6 producitivity growth is combined economy wide, not just the IT component. You need to identify the component that is broadband, then identify the componet that is high speed broadband, then further restrict it to NBNCo delivered services.

            The amount required to recover costs is very difficult.

            My career spans 20+ years, starting from the very bottom working my way to the top. I've kept up my technical skills and continue to be hands on. You'll be lucky to have half my career.

            My analysis stands on its own, yours (as above) speaks for itself. The claimed productivity increase would an believably large reversal of actual realworld performance, all due to slightly faster broadband. You must be kidding, my money remains in me.
            Richard Flude
          • Hello narcissism...

            Speaking of jumping to conclusions and many, you know nothing about me yet you claim some baseless, internet hero superiority?

            Makes you wonder, doesn't it?

            And your analysis, like your NBN sentiment, defies the experts and always seems to fall pretty much in line with the Coalition (whom you claim to not support, whilst for ever also bagging Labor).

            The funniest part of your previous analysis was claiming the NBN had ended comms investment and then last weekend you claimed you had just finished yet another comms project that very day.

            So do you roll out IT or Comms? Got any examples for us to peruse since you keep telling us what you have done and how great you are?

            Cough 'em up...

            Then read RealismBias' comment over and learn something. Please take notice to the 1st paragraph, which I believe you fall into and the 2nd and 3rd paragraphs.
            RS-ef540
      • $300B

        Put into context $300b = less than one years budgetary revenue.

        http://www.budget.gov.au/2010-11/content/overview/html/overview_37.htm

        Yes, two separate things debt/budget.. but read between the lines, even once.
        RS-ef540
        • Here is some more context

          When the Coalition last came to power, Labor left a debt of a bit less than $100bn and that took 10 years to pay-off.
          Wakemewhentrollsgone
          • History time

            FFS, stop the politicking, they are all the same...

            Have a read -

            http://blogs.theaustralian.news.com.au/mumble/index.php/theaustralian/comments/labors_debt_and_deficit_problem/

            For someone who isn't you certainly waddle and quack like a duck...!
            RS-ef540
          • Your link proves his point

            The current growth in debt is unsustainable. It isn't the colaitions fault but Labors. Growth in spending the cause.
            Richard Flude
          • Yes

            ... it is Labor's debt I accept that. Just like previous debts and/or deficits were not only Labor's but at times the the Coalition's... which I can accept too

            Can you?
            RS-ef540