Spectrum fail could help Libs fight Labor's regional NBN

If it wasn't already clear that Australia's regional towns and cities were going to be an election battleground, Labor has been busy spruiking its National Broadband Network (NBN) credentials to make it that way; after all, nothing buys votes better than improved services. But with mobile spectrum auction results falling far short of the government's expectations, and the spectre of contractor shortfalls feeding voter scepticism, is it a battle that Labor can win?

Such questions wouldn't have been far from Stephen Conroy's mind as he continues what is likely to be an intensifying flurry of NBN switch-ons around the country. In recent weeks, he's been travelling to spruik the commencement of construction or switch-on of services in Blacktown, Gosford, Newcastle, Perth, Adelaide, Darwin, and elsewhere. These are all locations well beyond the boundaries of the usual Brisbane, Sydney, and Melbourne CBDs, where market density is such that even private operators like FirstPath — revealed today by CommsDay to be building its own VDSL network in those CBDs — can envision a suitable ROI.

Labor's publicity campaign around such launches is a full-court press to convince regional Australians that it will bring them fibre services — as long as they vote Labor. That's tantamount to heresy in many regional areas, and Conroy will have an uphill battle over the next few months to spread the message far and wide.

In regional areas, the cost will increase significantly. This puts Turnbull in a difficult position, whereby rural customers of the Coalition's user-pays fibre services will face significantly higher costs. That could swing many of them toward Labor, come September.

In regional areas — where properties are often located farther out of town, and fibre-run lengths are therefore many times longer than in the cities — on-demand fibre-to-the-premises (FttP) costs will increase significantly. This puts Turnbull in a difficult position, whereby rural customers of the Coalition's user-pays fibre services will face significantly higher costs than in urban areas. That could swing many of them toward Labor, come September. It may make many of them prefer Labor's election vision.

The latest-released areas, which are now being promised FttP NBN services by mid-2016, read like a verse from I've Been Everywhere, though Conroy will no doubt pass out from exhaustion before he can push that orange button in Bolwarra, Bomaderry, Bombala, Bombira, Bombo, Bomen, Bonnyrigg, Boorooma, Calala, Campbelltown ... you get the idea.

Efforts to fast track the NBN in a broad spread of regional areas will not only be designed to strengthen voters' Labor proclivities, but also to boost subscriber numbers toward the targets that Labor so desperately needs NBN Co to hit before the election. The design of the network necessarily means that properties will come online several thousand at a time as each fibre serving access module (FSAM) is powered up, so each switch-on represents one more halting step toward those ever-elusive targets.

Conroy is no doubt optimistic that word will spread far and wide — boosting subscriber numbers and convincing generally Coalition-friendly country folk that a Labor vote is a ticket to broadband heaven. "Kiama is not a noted geek town," Conroy said during the Blacktown launch, arguing that the 60 percent NBN take-up rate in that town reflects "what we're starting to see come through in the real evidence from real users".

In the other corner is Malcolm Turnbull, who risks losing the support of dyed-in-the-wool Nationals that may see Labor's FttP rollout as the best thing to hit the bush since the stump-jump plough. Turnbull must show those voters that the Coalition's alternative won't leave them hanging, and will deliver services faster and better; however, there are two standout problems for him to overcome before he can do so.

Turnbull needs a way to reliably deliver solid NBN services to properties far from regional centres. If he isn't eyeing that extra 700MHz spectrum as a way of solving this problem once and for all, he's not half the master planner he wants us to believe.

The first is that Turnbull's alternative NBN policy depends on unfettered access to the existing copper network, an unchallenged monopoly that's held to be poorly maintained in regional areas. I have already addressed the challenges that the Coalition faces in getting free access to this network — unless, of course, they've already made a handshake deal with Telstra.

The second is that technical limitations of the FttN VDSL technology mean it is unlikely to deliver the kinds of speeds that Turnbull wants, when applied to the longer runs and poorer quality of the Telstra copper in regional areas.

Turnbull's regional fight will also suffer because of the market realities of fibre delivery: In making his argument that the Coalition will still offer FttP to those who are willing to pay for it, Turnbull has been skewered by Conroy over the approximately AU$5,000 per property the Coalition would charge for an FttP installation.

Turnbull keeps arguing (fictitiously, it should be noted) that the cost is more like AU$2,250, but we all know this is a figment of his imagination, even in metropolitan areas. The real cost is likely to be many times that in regional areas — where properties are often located farther out of town, and fibre-run lengths are therefore many times longer than in the cities. This puts Turnbull in a difficult position, whereby rural customers of the Coalition's user-pays fibre services will face significantly higher costs than in urban areas.

Turnbull's wireless lifeline

And, yet, this is not a showstopper for one simple reason. That reason, as both Conroy and Turnbull will be painfully aware, is that the recent 4G spectrum auction fell well below expectations, leaving a not-insignificant swathe of prime spectrum lying fallow.

Conroy has said that the government will return it to market in a few years, but perhaps the Coalition will find a better use for it.

By assuming control of the unsold 700MHz spectrum — and using it to force faster broadband outcomes with longer-distance services — the Coalition could break Telstra's stranglehold on regional broadband, while delivering pervasive broadband that meets the Coalition's service objectives.

You do the maths: Turnbull needs a way to reliably deliver solid NBN services to properties too far from regional centres to be serviced reliably via fibre to the node (FttN), or cost effectively by FttP. If he isn't eyeing that extra 700MHz spectrum as a way of solving this problem once and for all, then he's not half the master planner he wants us to believe he is.

Since the private sector has already shown that it's not interested in more spectrum — a substandard result linked to Vodafone's decision not to bid — a new Coalition government will have latitude to plan what to do with what Conroy has repeatedly described as the radiofrequency spectrum's waterfront property.

Given that the Coalition's policy depends on utilising rural and regional FttN infrastructure that is: (a) potentially in disrepair; and (b) owned by Telstra — why, then, would Turnbull not move to enshrine government control of the remaining 700MHz spectrum, then either grant a perpetual licence to NBN Co or set up an independent fixed-wireless operator that uses the 700MHz band's superior signal propagation to blanket regional areas with the 25Mbps or better coverage that Turnbull has promised?

Doing so would reduce the Coalition's dependency on access to Telstra's copper access network (CAN) — access to which, as I and many others have repeatedly pointed out, is going to be far more difficult than Turnbull seems to appreciate.

Sure, current network plans include a fixed-wireless component for rural and regional areas — but this is planned for a higher frequency with inferior propagation capabilities, which would require a higher concentration of base stations and a more extensive fibre-backhaul network. By using the unsold 700MHz spectrum to force faster broadband outcomes with longer-distance services, the Coalition could break Telstra's stranglehold on regional broadband, while delivering pervasive bandwidth that meets the Coalition's service objectives.

Sure, it would have an opportunity cost in terms of the AU$1 billion in sacrificed forward auction revenues — but since that money is going to be spent on FttN anyway, perhaps it would make economic sense going forward. It could limit potential future expansion of Telstra, Optus, and TPG — but those carriers are already executing plan B strategies in other frequency bands. Nationalising the remaining 4G spectrum might be a trade-off that Turnbull would be willing to make, if only to minimise his exposure to Telstra's negotiating hardball.

What do you think? Can regional FttP help Labor win the bush? Would it be worth sacrificing unsold 700MHz spectrum to deliver long-distance fixed broadband to regional centres, more quickly and with fewer base stations? Or should the government retain that spectrum for future 4G expansion, and focus on the fixed-line solution wherever possible?