Turnbull laying cable over cable laying

Turnbull laying cable over cable laying

Summary: Malcolm Turnbull has come back from his Asian fact-finding mission with a renewed love of cable and its competitive value against fibre. But he seems to be forgetting the many differences between our cable market and those in Asia.

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TOPICS: Broadband, NBN
149

Let Malcolm Turnbull talk about broadband for long enough, and he's guaranteed to mention cable — the hybrid fibre-coaxial networks that Telstra and Optus have laid throughout our major cities in suburbs where population density was high enough to ensure a commercial return. The networks were an early example of broadband cherry-picking, and Turnbull loves to highlight their imminent (and forced) retirement as an example of everything that's wrong with the NBN.


Whatever competitive tension exists between cable and fibre in Asia, is lacking in Australia. (Screenshot by David Braue/ZDNet Australia)

This became clear in a radio interview with 2UE this week, where announcer Mike Smith gave Turnbull an unquestioned run at the NBN in which he reiterated one of his favourite lines: "At the moment, there is the HFC cable — the pay TV cable — that goes past 30 per cent of Australian households," he said. "The way you get an affordable price is through competition, so why [should NBN Co] seek to stamp out the competition from the HFC cable?"

Smith, who perhaps had something else on his mind, had no intelligent questions to ask and signed off with "I can't dispute a single point you've made with that and we'll continue to give this issue prominence on the radio".

You know what? I can't dispute it either. NBN Co could significantly speed and cut the cost of its roll-out by convincing Telstra and Optus to let it piggyback on their networks to access 2.5 million captive homes. NBN Co could offer wholesale access to their customers, and NBN Co could focus on laying fibre across rural and regional Australia — which is crying out for better broadband and has no cable, as are those millions of metropolitan-area homes that weren't included in the 2.5 million.

In fact, every third-party fibre operator in Australia that's currently complaining about stranded investments, could open up its network and provide wholesale services to enable real nationwide competition. Half of NBN Co's work would be done already.

There's only one problem: this dream scenario has nothing to do with the current reality of our broadband infrastructure; as Sol Trujillo told the government for years, this sort of thing would happen over his dead pay packet. There is no real competition in our cable, and neither Telstra nor Optus — nor TransACT, which bought rural cable monopolist Neighbourhood Cable years ago — sells wholesale services that would enable real competition. Cable was the heavily protected refuge of the would-be monopolist long before the internet arrived on the scene, and nothing in past, proposed or future legislation will change that.

  Cable was the heavily protected refuge of the would-be monopolist long before the internet arrived on the scene, and nothing in past, proposed or future legislation will change that.

Indeed, it was Optus' and Telstra's inability to negotiate facilities sharing agreements that drove them to chase each other down the streets of suburbia in the first place, double-wiring the most profitable areas and ignoring others altogether. For Turnbull to point at them as examples of competition is just silly: it doesn't take a genius to see that if Telstra were allowed to maintain its HFC network, the company would have shifted its entire base of copper-based customers from one monopoly network to another, long before the NBN came anywhere near them. And this would help the situation how?

The whole point of Labor's NBN is to be one massive telecommunications reset — to break down proprietary walls and give every service provider access to every customer in Australia on the same terms. Once this has happened, service providers will fight for customers based not on the size of their capex budgets — a battle Telstra will always win — but on the innovation of their products and the quality of their customer service. The NBN is all about socialising broadband, not giving specific companies the right to continue stranding customers on proprietary, closed networks.

It's worth noting one most amusing irony about cable: in the US, where cable has been a basic and ubiquitous home service for over 20 years, it became that way because it could deliver clear television signals to people in rural areas where geographical restrictions blocked conventional analog TV broadcasts. Its ability to carry hundreds more channels didn't hurt, either, and its subsequent expansion into internet services has helped it retain its strong footprint there. In other words, cable in the US succeeded largely because wireless transmission was not up to the task.

Turnbull recently returned from Asia where, apart from participating in a cringe-worthy TV appearance in which he christened himself "Malcolm T", he learned that cable has an extensive footprint even in areas where fibre has taken hold. This point has been lost in the constant cries that Australia needs fibre to get 100Mbps like Asian geographies, and many peoples' assumption that those speeds are delivered via fibre.

Yet Turnbull is barking up the wrong tree when he notes "a degree of tension and competition" between cable infrastructure providers. This is a key difference between Australia's cable networks and those in Asia: ours were laid down in a poorly regulated, supposedly competitive market that saw roll-out trucks chasing each other down the same streets and entire areas left unwired as the carriers ran in their dash-for-cash, cherry-picking ways through the most-profitable suburbs.

Asia, by contrast, is apparently chock full of competing cable and fibre operators, the likes of which Australia will simply never see. Treating our existing HFC networks like facilitators for competition is simply incorrect — and if Turnbull believes for a second that Australian providers will mirror their Asian counterparts by overbuilding competitors in times to compete, he's sorely deluded. Let's not forget that neither Telstra nor Optus are expanding the footprint of their cable networks; not one bit. They laid their cable a decade ago, stopped when it became too expensive to continue, and that was the end of that.

Competition between fibre and cable might happen in occasional sites where cherry picking is worth it — for example, high-density areas like Chatswood, North Sydney and South Melbourne — but for most Australians our two cable networks remain an irrelevant, closed, anti-competitive bastions of 1990s-era "competition". Whatever market incentives were in place to Asia to deliver the competition Turnbull claims to have seen, are most definitely not in place here.

In suggesting our HFC networks should be left alone, Turnbull is simply arguing for maintenance of a status-quo duopoly that offers absolutely no benefit to the supposedly competitive market.

In suggesting our HFC networks should be left alone, Turnbull is simply arguing for maintenance of a status-quo duopoly that offers absolutely no benefit to the supposedly competitive market. Real competition in the NBN world won't come from competition between physical networks, but from service providers that can drive down prices through internal efficiencies and scale. And it will be NBN Co, not Telstra or Optus and their tangential HFC networks, that brings broadband competition to rural Australia — and to the many homes in our capital cities where cable does not reach.

Why should Telstra and Optus customers not be able to benefit from the competitive markets the NBN will enable? And why, while we're on this point, will it matter, since both Telstra and Optus will be able to service their HFC customers via the NBN with better speeds than they can deliver now? Remember my testing of Optus' 100Mbps service revealed that performance dropped and ping times increased when accessing servers outside the immediate area: this is a function of the underlying network backbone capacity and the number of router hops between networks and nodes; the flat topography of NBN Co's nationwide network should improve this performance significantly.

If Turnbull is suggesting that its Liberal Party policy force Optus and Telstra to offer wholesale cable products so other ISPs can access their customers over the same infrastructure, well, that would be something new indeed and I'd love to hear about it. However, given the Liberals' history of hands-off Telstra regulation, I'd suggest pigs will indeed fly before they muster the gumption to force that kind of outcome. And while it's all well and good to talk theoreticals, even Turnbull must admit that a network that's actually open is the only way to deliver the kind of nationwide competition the private sector has so far failed to do.

What do you think? Is NBN Co right to liberate users from closed cable networks for the greater competitive good? Or is this just one more step in winding back a decade of competitive improvements?

Topics: Broadband, 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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Talkback

149 comments
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  • I think Turnbulls ignorance on this topic cannot be disputed anymore, he says "30 per cent of Australian households" can get HFC, ok so what about the other 70%?

    Turnbull and his zoo crew chums clearly don’t care about regional areas and once again he still hasn’t addressed the issue of upload speeds either.
    Hubert Cumberdale
    • @HubertCumberdale

      Just because 30% can get cable doesn't mean the other 70% cannot get BB at all, it's not a either or situation.
      You also fail to mention that the vast majority who can get cable don't actually want it, the comparison to the NBN FTTH is stark, but always conveniently overlooked.

      You also mention the so called 'issue' of uploads speeds, which is YOUR issue, which doesn't translate into therefore it is everyone's issue.
      advocate-d95d7
      • @advocate, you seem to be somewhat at odds to your hero Mal below...

        He wants the HFC networks ("yes the networks you claim most don't want anyway") left operational...

        Curious...leave a network operational that most don't want or use... seems one of you is either wrong or again spinning that FUD roulette wheel (in-joke from Delimiter, where advocate uses yet another posting name...sigh)!

        After reading Mal's comment below and agreeing with a lot of what he says, guess what?
        RS-ef540
      • "Just because 30% can get cable doesn't mean the other 70% cannot get BB at all, it's not a either or situation."

        We are talking about HFC, just like Mr Turnbull said.

        "You also fail to mention that the vast majority who can get cable don't actually want it"

        That makes no sense, only people that can get it want it? is that right? or do they just not want it now because they know fibre is coming? That would actually make sense. Congratulations for stating the obvious???

        "You also mention the so called 'issue' of uploads speeds, which is YOUR issue, which doesn't translate into therefore it is everyone's issue."

        Actually it is. I may get for example get a 40mbps service but unless everyone else has comparable speeds then the value of my connection becomes lessened, I dont expect you to understand this basic concept as clearly you have trouble even reading but I have always said upload speed are the most important thing... how does HFC compare?
        Hubert Cumberdale
  • The point comes to this: We had a government monopoly (Telecom Australia - now Telstra) and look how much people complain about it.

    The point was it was built like a monopoly and acted like a monopoly. The NBN is Telecom Australia Mk II. They're even eliminating "inferior" technology (copper/HFC) to ensure it's monopoly. With the only potential competition coming from wireless.

    If telstra wasn't good first time around, what makes things different now? Oh and no matter how much service level competition you have, if you HAVE to buy something off NBN Co for $x then your minimum price will be > x.

    Nothing will drive that price of x down... as there will be no fixed line competition.

    Regardless of your views on the NBN itself, the elimination of the competition serves no useful purpose. If the NBN was going to be better at EVERYTHING (not just speed/capacity/availability but also price) then the government would have no need to mandate the closure of copper/HFC. I'm sure Telstra would still agree to the government agreement worth $9 billion (whatever the exact figure is) even if you removed the requirement for them to destroy the networks. Make it optional and i'm sure we would get the same outcome if not better...

    So it's not about the future, it's about knowing the past. And this project stinks of ignorance.
    AWY-7dfd5
    • Umm, no... (as I said to another @CW)..

      You conveniently ignore the retail side or simply don’t comprehend and are swallowing the BS being fed you…

      At the moment when we sign up for a plan with an ISP we deal with their retail side (even if Telstra). We don’t deal with the wholesale/network owners directly. So in essence nothing changes there with the NBN, as we will deal with RSPs, not NBNCo.
      Regardless, currently apart from a few HFC networks in Sydney, Melbourne and Brisbane, Telstra have the last mile monopoly. As such, many people throughout Australia can only buy Telstra services from Telstra (no, not because Telstra are great guys who have invested – because they inherited the PSTN – otherwise they wouldn’t be there either)!

      Please don’t try to tell me companies placing a few DSLAMs in Telstra exchanges and using Telstra’s network is them constructing infrastructure!

      Also speaking of competition at network level, do you really believe that multiple companies are willing to invest $b’s in competing infrastructure? And if they did should we have multiple cables from multiple companies, in our homes? And these companies digging up our footpaths every couple of months or dangling many cables from poles? If your answer is yes, then we should also have multiple water pipes, sewerage pipes, electricity cables, all in the name of competition…

      Ridiculous, these are natural monopolies!

      Anyway, RSP’s/ISP’s and even comms companies, aren’t (or shouldn’t be) in the business of construction (that’s strangely enough, for construction companies). How many airports has QANTAS built, how many roads has Toll built.

      The NBN makes it so by building the network, which then creates competition at retail level. By supplying a network where all RSPs are able access and offer services (if they choose) to everyone. Opening up feverish competition. I.e. RSP’s will be able to concentrate on their core business of selling comms, not building networks – “the way it should be”…IMHO!

      Seriously…
      RS-ef540
      • Sorry RS, but you've seemed to have made several assumptions that i did not intend.

        Firstly that i was suggesting we should build more than one new wholesale network. I wasn't suggesting that at all. I'm well aware that nothing will change when we swap NBN Co as the wholesaler instead of Telstra. My point was actually that maybe something should change. Which is keeping (aka- allowing Telstra to keep, and optus too, if we're also talking HFC) the old networks to compete on a wholesale level. This would offer the best competition. You would have RSP's competing on a retail level, and Telstra, Optus, NBN Co + possibly others (like TransACT) competing on a wholesale level. The only one atm capable of competing on mass would probably be Telstra, but i fail to see how the CONSUMER loses out in this scenario. Obviously it's not as commercially attractive to the government. I am making the assumption that these businesses are structurally seperated, which seems like the most likely result at this point in time. So there are no advantages to Telstra retail buying from telstra wholesale as they'll get the same rate as optus retail or iinet retail etc.

        So it becomes a competition between wholesalers. Each will have strengths and weaknesses and they'll have to manage those well in order to succeed. Basically what i'm getting at is the fact that market economics should be applied to both the wholesale and retail side of the equation. Especially as the capital cost is mostly spent already.

        I don't think you can argue that telecommunications is a natural monopoly. There are many successful examples overseas of a multitude of telecommunications companies providing services over different wholesale systems in an effective manner. That doesn't mean we should or shouldn't have the same here. Just that we shouldn't say never.

        If we weren't open to new ideas, and possibilities we'd all be stuck in that stage where children think that the only things that exist are directly in front of them (hence why peek a boo works).

        Finally don't resort to personal attacks. I've not insulted you and it would be nice if the same courtesy was given in return. Personal attacks do not contribute substance to a discussion.
        AWY-7dfd5
        • I have often wondered why NBN Co did not take into account the 30 percent of homes that have cable in the street. Upgrading this infrastructure should reduce the overall cost of deploying the NBN, speed the process up, also reduce the amount of civil works needed to be done in the streets.
          Blank Look
          • Visionary, but NBNCo certainly DID consider those with HFC! It is a decade-long rollout, and will seek to deliver early fibre to those with nothing, and late fibre to those with pretty good service already. By 2019-20 the HFC customers will be desperate for an upgrade of their 1990s last-mile copper HFC service.
            umbria
          • wow on fore and against, I am the winner over AWY, a record for me -41 yippee!
            Blank Look
          • I have -62, so I deserve a medal too...LOL!
            RS-ef540
        • @ AWY. There was no personal attack intended...

          Although I can see how you may come to this conclusion (as this approach is needed with some). Therefore if I have offended, I apologise...!
          RS-ef540
        • @AWY, I agree with your comments regarding the wholesale side. I cannot fathom how prices are meant to be improved unless we allow competition on the wholesale and retail side.
          mwil19-a34f7
          • @mwil19, imo, you need to look beyond your own front door.

            Look to rural people who currently have the option of nothing or expensive Telstra wireless/satellite...! Once the NBN is present there (whether it be fibre, but more likely wireless or satellite) and multiple RSPs have the ability to resell, these people will then have the option of not only Telstra (and their monopoly prices) but many others RSP's!

            Of course these RSPs will then offer various plans. Some RSPs may for example offer premium plans with 24/7 phone support and charge accordingly. Whereas other will have bare bones plans, where there is no support and charge less, then the median of the two etc, etc.. Just off-the-cuff possibilities...!

            It is then up to the customer to decide their budget, their needs (speed/data usage) and buy according to their skill level. A novice may want and be willing to pay a premium for 24/7 support, where as someone tech savvy may not...

            But they will have choice/competition, which they currently do not have, which will immediately bring them improved prices and competition will lead to better ongoing prices!

            As I said above, we don't currently deal with the network owner directly anyway (who are you with currently and whose network do they use?). So what does it matter if the network we access belongs to Telstra, Optus or the Government? Even if the company owns the network, we deal with their retail side now...! So nothing changes, just those who currently do not have competition will and those who currently have competition will continue to, but with more options (I currently can't obtain TPG's cheap ADSL2 deal or any cable) but WILL be able to receive the NBN equivalent!

            In saying that, my current ADSL2/100GB Telstra plan is suffice (FOR NOW)...but we need to look beyond the front door and beyond now...!

            The NBN means, greater equality in Australia's comms for all Australian's and "while the NBN certainly isn't perfect", I believe it is the best and fairest option we have.
            RS-ef540
          • I agree that we need to look beyond the front door and beyond now, which is why legislating a monopoly on the wholesale side is such a bad idea. If the marketplace is as you say, a natural monopoly, then why legislate it. At the very least we would still have the threat of another wholesaler should NBN make their prices too high.

            It is a farce that people are being sold the NBN as a competitive improvement and yet have a government legislated monopoly. NBNco should stand on it's own two feet here, If NBNco is faster and cheaper, then the market will reward them with the business.

            Market protectionism never results in a competitive marketplace.
            mwil19-a34f7
          • We've been here before and have disagreed...on the monopoly.

            Ideological cart blanche refusal of the NBN in it's current form is shortsighted imo, as a nationwide comms network (critical infrastructure) probably should be in the hands of the government.

            Surely looking past the merits or not of a monopoly wholesaler, you can see how retailers will compete and compete in areas they never could/would previously, being advantageous all round?
            RS-ef540
          • Left unregulated, a monopoly will always charge as much as the market will bear. Once privatised (5 years after construction according to Conroy), any benefits made on the retail side will be eaten up by price rises on the wholesale side.
            mwil19-a34f7
          • As I said, we've been here before mwil19 (circles)... and we will always disagree! Imo, a governmental monopoly who wholesales only is far superior to what we have now, with Telstra... yes or no?

            In years to come, once sold, it will need to be done so with stringent legislation to protect consumers from gouging (even if it means receiving a bit less for the NBN).

            We obviously need protection from the sort of gouging we have been subject to under Telstra and as a consequence other ISP's (who whilst deriding Telstra publicly, would have actually been ecstatic at the high prices, as they could simply undercut Telstra and claim to be great guys, whilst still gouging us, "almost as much")...

            That was of course, as everyone is aware (apart from one or two...LOL) UNTIL the announcement of the NBN, when prices tumbled...(enter FUDster #1... now to A G A I N suggest otherwise...LOL)

            As for the retail side, according to you the wholesale monopoly will impact upon this, which is contrary to the analysis contained within the Corporate Plan.

            Seriously now, if Labor are re-elected (which appears unlikely at this stage, but...) do you really think that if the NBN retails prices are exorbitant they will be re-elected again? It is in Labor's/governments, NBNCo's/Quigley (as his reputation is on the line too) and consumers (half of which are Coalition voters, Labor are trying to woo) to get it right!

            Until such time as the Corporate Plan and NBNCo are proven "intentionally wrong", they deserve the benefit of the doubt, imo... and don't think I won't turn against them (was that a double negative...LOL?). Being one who has vehemently supported the NBN/government, if they bite the hand that feeds them, they will cop a serve from me, just as they now receive my praise, rest assured...!
            RS-ef540
          • Not disagreeing with most of your assessment. As you'll note in my post, my concerns are for later down the track. In the short term, I don't think there would be price gouging, but without constant vigilance, NBNco could easily become Telstra Mk2.
            mwil19-a34f7
          • mwil19 a URL supplied below by HazTechDad (thank you)!

            http://nbnconcerns.wordpress.com/2011/03/09/will-the-nbn-be-a-new-monopoly-just-like-telstra/

            I do not know the author, but Michael Wyres' (a regular at Delimiter and occasional poster here) name is on the blogroll???

            The article is basically saying exactly what I have have been previously and again did above!
            RS-ef540