It's time for Turnbull to swallow his NBN pride

It's time for Turnbull to swallow his NBN pride

Summary: It's not too late for Malcolm Turnbull to do the right thing – and not just the cheapest thing – for Australia. First, he'll have to accept the Strategic Review's damning indictment of Coalition NBN policy – and its suggestion that it will cost just $800m more per year to build a network that will last 100 years, not five.

SHARE:

Malcolm Turnbull's first instinct, naturally, was to frame the findings of the NBN Strategic Review (download it here) as being an indictment of the failings of the previous Labor government. But as the dust settles and people realise just how thoroughly the new government is about to shaft them on broadband, one hopes that Turnbull can be a big enough man take time over the Christmas break to seriously and openly consider the implications of the review – and that the Coalition's current policy may not actually be the best way forward.

Turnbull has wasted no time pushing forward the headline figures as some sort of bottom-line red-light-green-light indication of the best way forward. Yet for those with any sort of memory, those figures put him in a most difficult situation.

Turnbull
Turnbull must decide whether he's a telecoms visionary or just a political bean-counter. Screenshot by David Braue/ZDNet

The bottom line is this: we now face the prospect of spending $41 billion for a piecemeal upgrade that will leave around one-quarter of Australians with future-proof broadband and relegate the rest of us to making do with a best-effort service based on networks with still-unknown access issues and a big question mark around the cost of obtaining that access.

Apart from managing the capital costs of the network, the Coalition will have to author and push through massive legislative change, take the unprecedented step of forcing Optus and Telstra to open their HFC networks to competition, browbeat a sceptical construction industry into reskilling its workers and rushing through the implementation of FttN at breakneck pace, and do everything it can to prevent Telstra from using the policy changeover to re-establish its network monopoly.

There are numerous other obstacles, as highlighted by NBN Co in its confidential report to Turnbull during the caretaker period.

All of this, just to get a network that even the new chairman of NBN Co, Ziggy Switkowski, has said won't need to be replaced for at least five years after it's completed around 2020.

In other words, by 2025 the government of the day will be planning the upgrade of our Frankenstein NBN to be completely based on the same fibre-to-the-premises (FttP) technology that Labor is implementing now.

The average cost difference between the Coalition's retrograde FttN broadband plan and the current future-looking FttP broadband plan – the difference between nation-building and nation-crippling – is just $800 million per year.

As was already revealed in its confidential 'blue book' guidance to Turnbull, NBN Co has been aware of this requirement for months – warning that the FttN model won't generate enough revenues to justify the expense of implementing FttN, and that he should start planning FttP now.

Given that even the chair of NBN Co agrees with this, the public cannot and should not accept a policy based entirely on the findings of the Strategic Review without a companion costing for the eventual fibre-optic upgrade.

That NBN Co itself should be taking this posture raises significant questions about the wisdom of spending $41 billion for a substandard outcome that will offer no clear benefit to Australians and need to be upgraded shortly after it's implemented.

If such a massive project is to be undertaken at all, it needs to be done with consideration for the outcomes we can deliver in 20 years, not just to meet arbitrary and ill-conceived political timelines. And, if we are going to be up for another $30 billion in expenditure for an FttP upgrade from 2025, even the Coalition government needs to concede that it may be better to simply do the network right the first time.

It's not even that hard to justify the extra expense. If you stop a moment to do the maths, you'll realise that the Strategic Review has actually indicated that the average annual costs of the FttN and FttP models aren't as different as Turnbull wants to believe.

Spending $73 billion on a fully-FttP network that will, by the review's own timing, be complete in 2024 – eleven years from now – works out to an average of $6.64 billion per year.

Spending $41 billion on a mixed-technology network that will, by the review's estimates, be complete seven years from now – and reflects an average spend of $5.85 billion per year.

In other words: the average cost difference between the Coalition's retrograde FttN broadband plan and the current future-looking FttP broadband plan – the difference between nation-building and nation-crippling – is just $800 million per year.

That extra expenditure would guarantee Australia is at the forefront of the world in terms of communications outcomes. It would give Australians access to cutting-edge services in healthcare, e-government, and even entertainment – which is often dismissed by naysayers but, objectively, represents a multi billion-dollar, tax revenue-generating business in Australia alone.

Spending that extra money would guarantee a broadband infrastructure that does not, unlike the Coalition's current plan, need to be upgraded as soon as it's complete.

It would help keep Australian researchers on level footing their their broadband-guzzling peers around the world.

It would facilitate improvements in the government's own back-end systems by boosting reliability and service delivery, and allowing fibre-enabled citizens to interact with their governments more robustly than ever before.

The Coalition's policy looks nowhere but into its own navel. It will hamstring Australia's economy and impact our ability to move forward....It will keep Australia dragging its feet in the 20th century rather than giving it the opportunity to be relevant in the 21st.

It would attract new providers of telecommunications services; help convince businesses that they don't have to apologise for Australia's continued status as a communications backwater; lure investment by multinationals who have shown they are all too willing to overlook us for our cluier, more progressive Asian neighbours in places like Singapore – where a fierce commitment to prudential integrity has long been matched by a willingness to invest in technology and to look to the future.

It would allow the Australian government to invest in a network that will have a very real net present value when it's complete – and could potentially be sold off to a private sector that won't touch the Coalition's revenue-crippled network with the proverbial ten-foot pole.

To make this happen, the Coalition needs to fundamentally understand that making the NBN pay is not only about minimising capital costs; even NBN Co said the more important objective is to build long-term revenue streams – and in the world of broadband, that is all but impossible over FttN.

The Coalition's policy looks nowhere but into its own navel. It will hamstring Australia's economy and impact our ability to move forward after the increasingly devastating consequences of the loss of companies like Holden and Toyota, and the inevitable others that will follow in their wakes. It will keep Australia dragging its feet in the 20th century rather than giving it the opportunity to be relevant in the 21st.

Turnbull still has the discretion to do the right thing in postulating his new strategy. All it will take is the insight and willingness to accept that the Strategic Review has presented a damning indictment of the Coalition's alternative policy – and the willingness to put what is morally, technologically and economically right for Australia, over what is politically right for the Coalition.

What do you think? Will Turnbull prove to be big enough to do the right thing? Or is this the beginning of the end for Australian broadband? And, more broadly, what did you think of the Strategic Review?

Topics: NBN, Broadband, Fiber, Government AU

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.

Kick off your day with ZDNet's daily email newsletter. It's the freshest tech news and opinion, served hot. Get it.

Talkback

58 comments
Log in or register to join the discussion
  • A bit like Kim Jong-un

    Just like North Korean leader, Kim Jong-un, Turnbull needs to step back for the good of his nation.

    Well, I didn't dislike Turnbull, until this NBN farce. In fact, maybe I could have voted for him, until this NBN farce.

    Does Turnbull realise his NBN stance is really damaging his political prospects? If he's going to change course, he should do it quickly, rather than do it in the month before the next election. I'm sure his PR gurus can conjure up some good excuses to go back to fiber. Even blame the other political party for allowing the copper network to degrade worse than expected.

    Whole new industries can sprout up with a 100% fiber NBN. And old industries will find new ways of doing things. For example, people involved in video creation can work in cottages in different locations and collaborate. Even take on clients in other countries. It won't happen with hybrid-copper, because the upload speeds are so bad.

    The ZDNet journalist on this story deserves a lot of credit for crunching those numbers and giving the first real analysis of the price differences between the two systems (FttN Vs FttP). Good work.
    Vbitrate
  • I wish Turnbull'd take your advice David

    But he won't because he can't.

    There are too many luddites in his party in key positions. Even if they had more geeks, the problem is the party has this fundamental belief that small government is better. Deep down these guys beleive private enterprise should fund the whole thing.

    That is why their intent with the NBN has made the closure of Holden & Toyota so unacceptable. They are closing the door on a part of the economy that served Australia so well in the past, and at the same time, walking past the door to a solution that'll enable a new part of an economy that everyone agrees is the future.

    The fact is, with the numbers and pholosphy prevalent in the conservative side, Turnbull did well to get FttN. Remember, their default position in the begining was to not build it at all.

    It doesn't help that the NBN has not enthused the Nationals like the Graincorp issue.

    If I was really cynical, I'd say the other big thing holding FttP back is the lack of a good photo op like standing on a big thing like a bridge or road they could put a sign on at the end of the project.
    NZO893
  • It's not going to happen.

    As much as we might all like to think that Turnbull will just turn around and say, "Yes, Labor had the right idea. We should continue to roll out FTTP." - IT - WILL - NOT - HAPPEN. It is completely against Liberal party ideology to build anything for the tax payer. They are only prepared to encourage the private sector to do it, and since Telstra have absolutely no reason to do anything, this hodge-podge, vastly inferior network is all we're going to get (if they can be bothered even building it at all). A quarter of Australia will be on the cutting edge, while the rest of us will be lucky to get that 25mbit download figure that Malcolm's so fond of. You can forget 50mbits down or higher. You can forget upload speeds in excess of 1mbit. You can forget any hope that Australia will move into a digital-based economy and become a technological world leader.

    This country had its chance to upgrade its broadband in September. It failed. Miserably.
    trish01
  • So where's the money coming from?

    That's a serious question before all the anti-Liberal crowd started squealing.

    While the report wasn't complimentary of the Coalition's policy it was incredibly damning of how the NBN was faring. It is a veritable black hole of money and has been shockingly badly run to date. How the author can make any claims about the future cost comparisons between the two options is beyond me. What is abundantly clear is how nonsensical all the financials claims have been.

    And claiming that a fibre network will be around in 100 years? Laughable claim based on nothing more than pure speculation.
    Christo the Daddyo
    • It comes from revenues, obviously.

      The strategic review presumes steady state revenues are practically the same: $6.6-7.5bn for Scenarios 1/2, and $6.3-7.2bn for Scenario 6. This is a difference of just $0.3bn between Scenarios 1/2 and Scenario 6. This is surely erroneous or based on false assumptions.

      Meanwhile, the strategic review also presumes that the steady state operational expenditures are practically the same: $2.4bn for Scenarios 1/2 and $2.6bn for Scenario 6. This is a difference of just $0.2bn between Scenarios 1/2 and Scenario 6. This is surely erroneous or based on false assumptions.

      Ref: Exhibit 4-6, page 102 of the NBN Co Strategic Review Report
      Eumenes
    • Eumenes

      Forgot to add, the claim that fibre will be around for at least 50 years and probably 100 years is based on our understanding of materials science and the technology and physics of fibre-optic communication. Fibre-optics is the end-game, in which you transport light as a digital signal. You need only upgrade the end-points (at the distribution point and at the premises) to increase the bandwidth capacity. The fibre that is being rolled out today is capable of terabit and even petabit speeds in the future, based on the results of trials by a number of vendors. It is truly future-proof.
      Eumenes
      • That means fiber costs less money

        If fiber can last 100 years, it is obviously the cheapest alternative.

        Previous reports this week said Telstra would need to be paid $1 billion a year for maintenance of the aged copper network which forms that backbone of Turnbull's FttN.

        When you take that into account, plus the fact that the electronics and equipment for the FttN will need to be replaced in only 5 years time, the economics stack in favor of 100% fiber (FttP).

        Turnbull has now got himself into a bog. By his comments yesterday, he is not reversing out of it. In fact, he's digging himself deeper.
        Vbitrate
    • A better question is, where's the money going?

      The whole idea of the NBN was that the government would build it, issue shares on the NBN corp, and sell it back to shareholdersin a public company after it was complete. Whether they did this by something like a Telstra sale, or accepted a bid from a merchant bank who subsequently publicly traded it or whatever ... that was the plan.

      The sad fact is that given the current design, the government would be lucky to be able to sell it for 1/10 of its cost to the Australian taxpayer ... because on a revenue basis, and an operational cost basis, and a depreciated value basis, and a simple upgradeability basis it simply wouldn't be worth it to any private/public owner. They would be better served simply ignoring the NBN, starting again, and laying fibre to the home. In other words the loss the Australian taxpayer would take as a result of making the (demonstrably) wrong decision now would be $40-50 billion. And I don't like seeing my taxpayer dollars wasted like that.

      Fibre to the Premises could take 100Mbs, 1Gbs, 100Gbs or tends of terabits per second ... it has potential to grow.

      Fibre to the Node on the other hand introduces mor complexity by adding 60-80,000 more possible points of failure (each node servicing hundreds of users), offers a maximum (and an ideal which would in all likelihood never be achieved) of about 100Mbs, will still be offering us approximately what we get now (on ADSL2+) in 10 years time ... and will lock us out of the digital economy that the rest of the world is experiencing in a decade. Our businesses will be laboring under yet another disadvantage ... but this time introduced by a government that says its 'open for business'.

      Call it politics, call it a catastrophic failure of imagination, call it a massive missed opportunity ... it's FttN is simply not something this country can afford.
      Frank O'Connor
    • What?

      Did you actually read this article? If you did, were you able to understand the arc of the argument? The figures are not all that obscure - second year high school maths should be adequate - or did you go to school under a Liberal government? If so, it can be understood that you might need cartoons or a Womens Weekly version to get a grasp on the narrative.
      Dr. Ghostly
    • Christo asked the key question - who pays?

      Christo, you nailed it. Where is the money coming from.

      Turnbull's estimate is that FTTN will yield an average of $18 per customer per month. FTTP yields an average of $38 per user per month (cf. Senate Hansard repeatedly over the past two years). A copper network that brings in massively capped revenue will not pay for itself. A fibre network that allows about a quarter of users to purchase massively dearer services subsidises the build for all.

      And yes, fibre in ruggedised gel-filled tubing is estimated to give a useful life of around a century. BT officially considers it to be guaranteed for service for sixty years, and probably over a century, for instance.

      Copper has a service life of thirty years, according to Telstra, after which its maintenance cost rises sharply.
      umbria
    • So where's the money coming from????

      Based on what has happened in the last 15 years when I payed a lot of money for a computer that was in its time leading edge is now 200 times slower than the phone I use every day. With Fiber can adopt with new technology LIKE our phones have in years to come. Tell me how well telstra would be now IF it didn't make its mobile network as good as it is now. I can see the telly marketer saying hold the line so we can find the nearest phone box !!!
      Andy Timms
    • A little late...

      Coming into this late, but why is it laughable to expect fibre to be around for 100 years? The technology its replacing, copper, has been with us for 150 years.

      If you dont understand, or refuse to understand, what fibre represents is a clean slate. It resets the clock by replacing copper, which has served us wonderfully for that 150 years, but has reached the end of its capabilities.

      You dont hang on to an old car thats full of rust, or replace most of the bits but keep the old rusty chassis, you replace it with a new, modern car. Thats all a full fibre rollout is - replacing the trusty old car because its gotten to be too unreliable.
      Gav70
  • Has he read his own article?

    >Spending $73 billion on a fully-FttP network that will, by the review's own timing, be complete in 2024 – eleven years from now

    >Spending $41 billion on a mixed-technology network that will, by the review's estimates, be complete seven years from now

    >And, if we are going to be up for another $30 billion in expenditure for an FttP upgrade from 2025,

    So we can *eventually* spend the *same*, reduce CapEx costs on our already in-deficit budget, and have a system that's serviceable 4 years earlier? I'm seeing more and more issues with FttN each day, but has this guy done much thinking with this article?

    Oh and BUSINESS HUBS, HOSPITALS, SCHOOLS, etc WILL GET Fibre-to-the-Building. I wish people would stop saying that they'll only be getting FttN...
    Andrew Hargrave
    • Spending the same

      That's one way to look at it. But the other way is that we can spend $73 billion to have a national fibre network in 2024, or we can implement FttN now, then spend the rest later and end up spending say eight years and what will likely be more than $73 billion for a national fibre network by, say, 2033.

      The former option would be significantly more beneficial for the economy and the growth of our nation because it would allow Australia to tap into the myriad benefits of an all-fibre infrastructure nearly a decade earlier than under the alternative plan. Given that the expenses will ultimately be similar or greater to defer the FttP rollout, you must also consider the opportunity cost of NOT having that infrastructure available sooner.

      Every indication is that it will be significant.

      PS Given that the government may well end up leasing access to Telstra's copper at an estimated $1b+ per year, you also have to factor in an extra $13b or so for those rental costs during the FttN network's five-year lifespan, as well as while the FttP is eventually being implemented. Does FttN still sound like such a bargain?
      braue
      • I see that...

        and don't disagree that doing MTM would mean the eventual FttP type internet would come a while after a straight FttP install now. however the report does say that its actually likely to be cheaper to rollout later, than install now. (Exhibit 4-4, 4-5)

        now the important part for me is here: choosing to upgrade over time gives improved speeds to more people, in a shorter time frame. (Exhibit 4-3)

        By 2016, double the amount of people will have 25+Mbps, choosing MTM over FttP.

        By 2019 over 90% of premises in the fixed line footprint will have access to 50Mbps or more via the MTM route. Apparently by this point in time, the FttP route would be accessible by just a bit over half of all premises in the fixed line footprint (57%).

        Those figures (if true) aren't anything to sneeze at. I know we all think of the final outcome but an equally big issue here is the journey.

        The above also has the benefit of having provisions for future alternate technology upgrades.
        Andrew Hargrave
  • FTTN - FTTC - FTTP

    FTTP or not, the cable must be pulled from the mainframe to the node (FTTN), which will lasted for 100 years. so let's just get the government finish what they promised to do. elect a new government to then continue FTTP you want.

    The main arguments is that, in 10 years time (not 100 years), there will be technology that could deliver a better speed and more cost effective than current FTTP to the premises. why spend 100% FTTP to connect to all premises, if there is not data that suggest 100% of Australians wanted to have FTTP connection speed. understand this, stop saying "Australia" wanted FTTP, unless you have some done survey on all Australians. no, a lot of people don't even use internet, and a lot of people would be happy to have what the FTTN could deliver.
    drkusnadi00
    • Why build fibre to all? Here's why.

      drkusniadoo asks, why build fibre to all when only some want it? This is a frequent question. The cost of revisiting streets to lay fibre later is very high. If trucks roll to lay fibre to all premises, it is much cheapr than selectively rolling them again later. People move. A house occupied today by a resident not seeking fibre will be occupied by someone else with a few years. The operational cost of maintaing part-fibre, part-copper is huge. The best outcome for taxpayers is for the government to oversee building universal fibre in urban areas, then to wholesale at standard rates nationally. In every fibred area, a large subset will purchase high-end services, subsidising the rest. The result is future proof communications for all Australian towns and cities - good for city and country alike.
      umbria
  • So many people don't understand that simple point!

    Your standard Australian family does not and will not for the foreseeable future need FttP speeds. The largest reasoning I've argued over so far, was that some fool wanted to watch at least two 4k HD TV streams at his house at one time, or heaps of 1080p streams. What sort of AUSTRALIAN FAMILY needs that? One 1080p stream, or at most two, is what households may want, and that requires at most 16Mb/s, at current compression rates.

    FttP (or building, or basement, or whatever) is a necessity for businesses, industry, public service, and other critical areas, but I've read nowhere (in my limited reading) that these are forcibly going to be served by FttN. Can some one show me that?
    Andrew Hargrave
    • and...

      On top of providing speeds the majority of Australian households will need coming in to the near future, the MTM will apparently cover more households sooner, for less CapEx (over valued compared to previous reviews), all whilst still allowing a cheaper upgrade path to a majority FttP compared to smashing out the FttP now. Now I know its hard to believe numbers when politicians are involved, but surely its the best attempt at providing as transparent as possible figure on the scenarios. Maybe you lot think not, but I'd still believe those experts over my or your hunches.
      Andrew Hargrave
    • and...

      On top of providing speeds the majority of Australian households will need coming in to the near future, the MTM will apparently cover more households sooner, for less CapEx (over valued compared to previous reviews), all whilst still allowing a cheaper upgrade path to a majority FttP compared to smashing out the FttP now. Now I know its hard to believe numbers when politicians are involved, but surely its the best attempt at providing as transparent as possible figure on the scenarios. Maybe you lot think not, but I'd still believe those experts over my or your hunches.
      Andrew Hargrave