Is cable the answer to our broadband woes?

Is cable the answer to our broadband woes?

Summary: Somewhere along the line, it became assumed that xDSL technologies -- which run over the last-mile of wiring so tightly controlled by Telstra -- were the only way forward for Australian broadband.

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Somewhere along the line, it became assumed that xDSL technologies -- which run over the last-mile of wiring so tightly controlled by Telstra -- were the only way forward for Australian broadband.

This curious anomaly has of course set Australian broadband into complete disarray, and hindered the development of viable content delivery models.

What many of us may have forgotten is that there is already a perfectly acceptable technology for delivering triple-play services -- voice, TV and data over a single cable -- and doing it cost-effectively and at high volume.

It is, of course, cable. A decade ago, it was the whipping boy of the day as media beatups and outraged consumer groups caused so much trouble for Optus and Telstra that they decided it just wasn't worth the bother of rolling out a decent nationwide infrastructure.

The rollouts were terminated, leaving Australia with billions of dollars' worth of hybrid fibre-cable (HFC) network that fell far short of its potential just because people didn't like having another wire running alongside their already crowded telephone poles.

We're still suffering from that policy disaster. Telstra is stonewalling on network access while the government wrings its hands and funds competitors to build a competing network. All the while, consumers are suffering -- especially those in rural areas where there is effectively no competition whatsoever when it comes to broadband services.

Ian Fry knows this. As CEO of Ballarat based Neighbourhood Cable, he's the head of perhaps the only company that has been able to effectively use cable to offer data, voice and video services at commercial scale.

At a cost of just AU$65 million, Neighbourhood Cable has successfully run cable past nearly 20,000 homes in Ballarat, Mildura and Geelong and is now using Data Over Cable Service Interface Specifications (DOCSIS) 2 technologies to offer 30Mbps downloads (and 2Mbps uploads), as well as pay TV and VoIP services. DOCSIS 3, currently in the pipeline, will increase speeds over the cable networks to 100Mbps (Telstra has also reportedly begun trialling DOCSIS 3 but there are no clear rollout plans).

"We have a fairly good relationship with councils and local governments," he said. "The advantage of cable over ADSL is that we don't have degradation of service with distance. And with cable, you haven't got a lifespan on the network, because you know DOCSIS is always upgrading. No one else can provide triple play in these regions."

At a cost of just AU$65 million, Neighbourhood Cable has successfully run cable past nearly 20,000 homes in Ballarat, Mildura and Geelong and is now using DOCSIS 2 technologies to offer 30Mbps downloads (and 2Mbps uploads), as well as pay TV and VoIP services. DOCSIS 3, currently in the pipeline, will increase speeds over the cable networks to 100Mbps (Telstra has also reportedly begun trialling DOCSIS 3 but there are no clear rollout plans).

This all sounds good -- so why aren't we seeing more cable investment? Cable is far less expensive than fibre, can be laid underground or along existing phone lines, and is well understood from a maintenance perspective.

Cable is considered a basic service in the US, and infrastructure rollouts in Singapore and many other countries have favoured cable as the access technology of choice.

Australia's access technology of choice, on the other hand, is a decrepit copper network that the Telstra monopoly has been allowed to run into the ground.

It has become clear that xDSL is little more than a jury-rigged solution to a pressing problem.

Had the government taken a gutsier approach to the rollout of cable -- for example, by mandating shared access to a single cable infrastructure instead of allowing Telstra and Optus to waste their money duplicating services -- we would have a nationwide triple-play network more than capable of meeting our needs into the future.

Of course, such a heavy-handed approach would have run contrary to the free-for-all mentality the Howard government was hoping to introduce with its newly deregulated market. But only Telstra has benefited, since the decision to abandon cable for xDSL saved it countless capital costs.

Yet, still Sol Trujillo bleats about government favouritism. In a speech last week to an AIIA meeting in Sydney, Trujillo blamed a history of government incompetence for the current situation -- but then went on to say that "giving away a billion dollars ... won't deliver Australia a fixed high-speed broadband network for consumers."

No, it won't. But it's the best chance we have right now, after the rollouts of cable and ADSL were so categorically and completely stuffed up.

And I don't recall Telstra complaining about government funding a decade ago, when the government was still its majority shareholder and it enjoyed a regulatory monopoly that remains, in spirit if not in law, largely similar to the one we faced at the dawn of deregulation.

Both the government and Telstra are guilty of chronically poor infrastructure strategy (in the spirit of fairness, I should also mention Optus, who did also ditch its cable rollout).

The only companies that have been able to make a difference are those that have innovated despite this strategy, such as Neighbourhood Cable.

Couldn't Optus, or someone else with deep pockets, fund similar rollouts in other regional areas and just get on with the progress? The technology has been there for years; all we need is the will.

This piece was written before the announcement that Telstra may be upgrading its cable infrastructure.

Topics: Broadband, Telcos, Optus, Telstra, NBN

About

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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13 comments
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  • Cheap?

    $65 million for 20,000 homes?

    That works out at $3250 per home which doesn't sound cheap to me.
    anonymous
  • Cost

    Equipment cost is often minor in comparison to costs like labour and installation, licensing, etc. The differences between the cost of FTTH, HFC, etc. are probably not great in Australia. Wireless is cheaper and faster to roll out, but obviously don't wouldn't provide the performance of FTTH.

    The "right" decision will depend on the relative importance you place on factors such as cost, performance, future expansion, etc.

    So far none of the public discussion has even attempted to compare different options in terms of these factors. Telcos, politicians and commentators alike all seem to be interested in promoting their own "pet" solution.
    anonymous
  • Crappy Australian infrastructure

    This neglect is not unique to telecommunications.

    "people didn't like having another wire running alongside their already crowded telephone poles."

    All metro areas should have had wiring for phone & electricity put underground years ago. Plenty of countries laugh at our "above ground power".
    anonymous
  • The answer is "No!"

    Cable, or Hybrid Fibre Coax (HFC) to give its proper name, is actually a form of FTTN, but it is optimized for video distribution rather than two-way data. HFC employs fibre from the Master Headend to optical nodes, then coaxial copper cable for the remaining distribution and access layers. Amplifiers are used to compensate for attenuation in the coax, and these mask the distance speed tradeoff which is so evident with ADSL. The access method is by tapping into a multidrop cable rather than individual twisted pairs. This means that the available bandwidth (about 40 Mbit/s for DOCSIS2.0) is shared by all subscribers on that section of coax. Providers could configure multiple channels for data, but as far as I know they don't. If most homes take up the service, performance would be very disappointing. HFC is not the answer!
    anonymous
  • It's not really that bad

    when you remember this is talking pure infrastructure where there was none before. There's capital equipment, installation costs, manpower, and so on. If such a home were to generate, say, $1200 in revenues a year -- that's $100 worth of Internet, cable and phone service per month -- that connection would produce a profit in less than three years and, from that point, keep delivering a profit indefinitely. Still sound expensive?
    anonymous
  • Howard government not to blame?

    "..such a heavy-handed approach would have run contrary to the free-for-all mentality the Howard government was hoping to introduce with its newly deregulated market. But only Telstra has benefited, since the decision to abandon cable for xDSL saved it countless capital costs."
    First, although the Howard government has many failings in communications policy, I believe it was the Hawke-Keating government that presided over the disastrous dual cable rollout in the 1990's. Second, if abandoning the cable rollout in favour of xDSL has saved Telstra so much in capital costs, why was it such a bad choice? ADSL is a good technology whose time has almost passed. Data over HFC is just a bandaid whose defects would be evident if it was heavily used. The fact is that neither ADSL nor HFC provides a good foundation for a future broadband network. Australia needs a good FTTN or FTTH network.
    anonymous
  • Umm...

    HFC *is* FTTN...
    anonymous
  • It's not really that good

    David, you've forgotten to include any of the day-to-day costs of doing business. You need to do your calculations on profit, not revenue. Assuming a margin of 5%, $100 per month revenue would translate to only $5 per month profit, and break-even would take about 50 years!

    I don't know what Telstra's margin is like, but about 5% is reasonable in most industries. Even if Telstra's margin is ridiculously high - say 30% - it would still take 9 years just to break even. Not an attractive proposition, if one considers that chance that 9-10 years from now they may well need to upgrade the network again.
    anonymous
  • Also part of my point

    If this small regional company can successfully roll out a hybrid fibre-cable network, why is the rest of the country so hung up on the assertion that the only possible fibre solution is one built on the speculative fibre network with which Telstra is trying to blackmail the government?

    Why can't other regional areas be served by similar models, constructed by similarly independent organisations? I think carriers looking for a good new opportunity should study Neighbourhood Cable's business model carefully and see if perhaps there just might be another way.
    anonymous
  • I would hope margins would be higher than that

    You're right, and it would also be interesting to know what margins NC is operating on as well. Obviously they're not 100% but I would certainly hope they're healthier than 5%! If not, Neighbourhood Cable's investors could be doing better by just putting their money in the bank.

    Telstra's margins must be higher than that because, surely, its more successful products are subsidising its less successful and speculative ones. I'm guessing 30% would actually not be unreasonable at all.

    Can anybody inject some more realistic numbers into this discussion?
    anonymous
  • Infrastructure

    I agree with Peter that most players seem to think there is only one way, one technology that will fit all. In the process of trying to put together universal solutions, nothing gets done! ISDN and HDSL are good examples of technology that could have provided partial solutions in the past and were overlooked. HDSL can still deliver 2Mb to 14kms from the exchange without any issue with bridge taps etc. I'd be happy to have HDSL (Central Coast) as it is better than dialup and should be cheaper than adsl.
    There are a range of solutions suited to different situations and it's more an issue of universal management tools than the carriage technology.
    Maybe the Govt should be looking to fund point solutions for remote areas and force decent backhaul rates to allow these Sps to operate profitably? Personally I dont care if its a tin can and string if I get service now instead of some uncertain future date. There is no excuse for large metro areas not to be world class.
    anonymous
  • Some data

    I bothered to look up some numbers. As a really, really, really rough guide, Telstra's 2007 annual report give revenue as $23.7 billion, and profit as $3.2 billion. That's a rate of about 14%. My personal belief is that this is probably higher than what other telcos could afford, given what I suspect about Telstra's business practices!

    (As for investor returns, 5% might not be unreasonable for NC investors; remember, they get a return from capital growth as well as dividends.)

    Disclaimer: I'm not an accountant so could be barking up the wrong tree.
    anonymous
  • Bring on 1Gbps FTTN internet with a 500MB download limit!

    Yeah, like what I really want is my internet to be even faster. I want it to be 1Gbps!

    But then of course I would need to be capped, to stop me downloading too much naughty data off the network, so maybe I could have a usage allowance of say 500MB which is enough for any sane person. And I could download that amound of data in one minute on the first day of the month and spend the rest of my time surfing the ultra fast 1Gbps FTTN network at dialup speed!
    anonymous