NBN is uncompetitive: pundits

NBN is uncompetitive: pundits

Summary: A number of Australia's most senior business and economics commentators have opened fire on Labor's flagship National Broadband Network (NBN) project, claiming that the NBN Co's corporate plan released on Monday was based on flawed assumptions and demonstrated the project would wind back competition in the telecommunications sector.

TOPICS: NBN, Broadband

A number of Australia's most senior business and economics commentators have opened fire on Labor's flagship National Broadband Network (NBN) project, claiming that the NBN Co's corporate plan released on Monday was based on flawed assumptions and demonstrated the project would wind back competition in the telecommunications sector.

University of Melbourne economics professor Joshua Gans claimed on his blog that the nation should be "outraged" by a clause in the NBN plan which states that if NBN Co did not sign a deal with Telstra to transfer the telco's customers to the NBN and shut down its fixed broadband networks, then it was "likely" that one or both of the country's hybrid-fibre coaxial cable networks (the other one is owned by Optus) would be upgraded to allow speeds of up to 200 megabits per second (Mbps) in competition with the NBN.

"We should be outraged at this. More to the point the Australian Competition and Consumer Commission should be outraged with this. Where is Graeme Samuel on this?" demanded Gans, pointing out the clause constituted a "clear statement" that three broadband networks would change into two or even one as a result of the NBN roll-out.

"This is as substantial a lessening of competition from an agreement that we can imagine," he added. "And yet our independent competition regulator — whose independence is there because government business entities are subject to the Trade Practices Act — appears to have abdicated its role."

Business Spectator columnist Stephen Bartholomeuz, one of the nation's longest-standing and most respected business commentators, picked holes in NBN Co's financial reasoning in several articles on the matter.

"If the actual NBN Co performance over the period 10 to 30 years out actually looks anything remotely like the business plan it would be a miracle and Mike Quigley would emerge as a 21st Century Nostradamus," he wrote.

Veteran business journalist Matthew Stevens, who writes for The Australian, was even harsher on the NBN. "Love it or loathe it, the unavoidable fact is that the NBN business case is pretty miserable," he wrote, bringing up many of the same points as Bartholomeuz in discussing the cost of capital required to build the NBN in relation to the company's calculations on its financial return.

Communications Day publisher Grahame Lynch is more concerned about the real impact of NBN Co's multifaceted pricing approach, which is a bit more complicated than the "$24 per month" headlines suggest. However, Lynch is also concerned about competition. "I suspect that while the NBN may achieve many things it will not make a thousand competitors bloom," he writes.

However, not everyone was as negative about the NBN's prospects, with Business Spectator columnist Alan Kohler leading the case for the affirmative in several columns on the matter written yesterday:

"Not only will the NBN not be a white elephant, it will almost certainly prove to be a great investment", he said. "In fact, without wishing to get carried away (too late do you think?) it could represent, on its own, a huge national savings plan. When it's finished the asset will be worth several times the government's investment of $27.5 billion."

Topics: NBN, Broadband

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  • Basic plans looked too expensive, but the higher end plans look to give SMBs real almost-symmetrical speeds at a huge saving compared to any of Telstra's symmetrical plans.

    I think that the government ought to work out ways of encouraging businesses to settle in areas where the NBN rolls out. It would go a long way to showing what the real benefits of the NBN will be. I would imagine each SMB resettling or setting up regionally would take several people out of the cities (and keep others in the regions).

    It is the moving of SMBs and their employees out of cities that will substantially lessen already expensive city infrastructure costs.
  • Let's have a look.......... Telephone only, current copper line rental $29:00 - $39:00. NBN line rental $0:00. So knock that amount off what these FUD spreaders are saying for starters! For a professor, Mr.Gans needs to do some research. Hybrid Fibre coax serves less than 1% of the population and neither Telstra or Optus has had any plans to expand it for years. (Well before talk of an NBN.) As for Stephen Bartholomeuz comments, he appears to have very little understanding of business plans. Ask BHP, NAB, AXA or any other business what their plan looked like 20 or even 10 years ago, compared to today. Business plans are NOT a static document. They evolve as the business evolves. A lot of FUD being thrown around with plenty of noise, but no substance to back it up. Or perhaps these peoples comments have been cherry picked for the best story, rather than the factual story. (That would make a good story ;-) )
    Why Knot
  • I am not sure moving people from the main cities to regional areas is a good idea. That could result in lower property values in cities and lower the net value of those who own houses in those places.
    Blank Look
  • Where do you get that Hybrid Fibre coax statistic? Those cables run through most of the capital cities. The coverage has to be more than 1 percent.
    Blank Look
  • Telstra HFC coverage passes through 29% of Australia's premises
  • Am I correct that the Committed Information Rate is only 1 Mbps (guaranteed throughput) with the Peak Information Rate is 12Mbps?
    If so, this means if there is no contention in the network, a user can get transmission speeds up to 12 Mbps, but...... all data OVER 1 Mbps is marked to be discarded (DE) when/if there is contention.

    If this is the case, that moron Conroy is deceiving the general public who I'm sure don't understand how data is transmitted across networks. In my experience there is ALWAYS contention in data networks, especially ethernet. These guys should tell the truth!
  • rodf2 ... It is called the Dunning Kruger effect. The less you know the more likely you are to think that you are an expert. So in your eyes Conroy is a moron and Australia's best and brightest who Quigley has recruited to design and implement the NBN and are advising Conroy do not know what they are doing.
  • To Mr Gans and Mr Turnbull. Here is an idea. Let us privatise our telecommunications carrier and allow other companies to setup broadband networks and cable networks. The ensuing competition will ensure that we will have an affordable and world class broadband network. Hang on. We did that - in fact we have had that policy for 10 years and it was a unmitigated failure. Nevermind - idealogical purity and a committment to neo-liberalism is more more important than actually achieving nation building infrastructure.
  • Hear hear MikeH2
  • Well... that just leaves a mere 71% not passed through then...!
  • Telstra is a government created monopoly, whether or not they are privatised made no difference -- they need to be broken up. However, the limited amount of competition that we have had is what has brought prices down. Smaller ISPs installing their own ADSL2+ DSLAMS into the exchanges is what has put pressure on Telstra and Optus to improve their services.

    So yes, we have had an uncompetitive, government controlled system since 1901, with about a decade of limited competition since the introduction of ADSL2+.... but without that, Telstra had been limiting ADSL to 1mbps, when it can offer up to 8mbps... and they had no ADSL2+, they wanted people to use Telstra cable. So I really don't see that we would have been better off with Telstra having complete control over the past 10 years (in contrast to the few minor chinks in their armour that we have seen)
  • Yes, it should like Soviet Russia. The Government can decide where people should live and where businesses can be based, this will all be for the greater good, as determined by Government.
  • Competition has been getting better and better. We were finding companies willing to invest in their own infrastructure and prices have been dropping tramatically for YEARS. Yes there are areas were improvement was required but don't lie and say that it was broken. It was STILL in the stages of being fixed... Telstra need a new generation before a lot of their old habits were gone. As each year went by the were becoming less and less dominant as companies started to price them out of new estates (running their own fibre) It was legislation in a lot of cases which was in fact stopping competition. Many of the perceived problems could have been solved rather easily with out all this over spend.
  • Yeah.. because affordable housing in cities would suck.

    oh.. wait..
  • MikeH2, no not at all - I'm sure the best and brightest designing the network know exactly what they are doing. It's the rubbish coming out of Conroy's mouth that I'm objecting to - which makes him the perfect example of the Dunning Kruger effect in that case!
    In my opinion the general public should be given the facts in simple to understand terms, and not hoodwinked into thinking they are getting something special.
  • "prices have been dropping tramatically" ?? In Melbourne and Adelaide maybe; nobody else has them.

    More seriously, prices have been dropping fairly dramatically all round the world because fibre/electronic backbones have far more capacity, and are much more reliable, than the old copper/mechanical systems.

    Telstra hung onto it's CAN monopoly for as long as possible, and as a result was able to hold prices significantly higher than comparable companies overseas. So it wasn't current legislation that was keeping prices high, it was the original legislation that created a vertically structured monopoly.
  • Actually no. The NBN Co Corporate plan has announced a $20 Mbps charge for the CVC and predicts that the average 12/1 user will require less than $1.00 worth of CVC charging.

    So the contention ratio NBN Co is anticipating is $20 x 12 Mbps : $1.00 = 240:1. This means the average 12/1 PIR will receive anticipated CIR of around 50kps.

    The key question is whether NBN Co has dimensioned its network in line with this contention ratio. If so it will be a victim of its own success and won't come close to 100Mbps .
  • @ Renai LeMay: This is an invalid argument from an economics and more points of view, you can't call two networks in two different locations (each have monopoly in their suburbia locations) competition. don't make me laugh.
  • but it passes my house, so i am alright!
    Blank Look
  • who wants affordable housing, this is a capitalist society, we all bow to those who have the water front home.
    same with facilities, if i have the best who cares about the rest!!
    Blank Look