Turnbull's NBN confusion softens Libs' case

Turnbull's NBN confusion softens Libs' case

Summary: I'm all for a healthy and robust opposition that works to keep the NBN roll-out on the straight and narrow. Yet, while Malcolm Turnbull looks healthy enough, his latest opposition to the NBN has been far from robust.

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I'm all for a healthy and robust opposition that works to keep the National Broadband Network (NBN) roll-out on the straight and narrow. Yet, while Malcolm Turnbull looks healthy enough, his latest opposition to the NBN has been far from robust.

This became hugely evident in Turnbull's response to Tasmanian Premier David Bartlett's decision to mandate connections to the NBN. "I don't understand his reasoning," The Australian reported Turnbull saying on talkback radio soon afterwards. "This is basically designed to make sure that every house is connected to it. If consumers want a fixed line for telephones or internet access they are going to have to use NBN's line, like it or not."

Surely this cannot come as a surprise to the opposition; Stephen Conroy has made it very clear that this is the NBN's design premise. He even went to the trouble to negotiate an $11 billion payout for Telstra to make sure it happens, and he was rumoured to be working on a similar deal with Optus. Yet if you're still unsure about the NBN's design parameters — as Turnbull seems to be — watch even just the first 12 seconds of this video, which was shot after Conroy's July AIIA speech in the lead-up to the federal election.

"What you've got to remember is that Telstra signed a deal to close the copper network down," Conroy said. "So take-up isn't an issue. We will have 100 per cent of all fixed line customers using the NBN. It's not an issue any more, the take-up."

Turnbull has repeatedly attacked the idea that the NBN will substitute one monopoly for another, and seems to believe that forcing people onto the NBN will limit their choice of providers in an act of "compulsion". But this is not true: while some people have the option of Telstra or Optus' hybrid-fire coaxial (HFC) networks, they only reach around one-quarter of the country's homes — and zero per cent of Tasmanian homes. Neither Telstra nor Optus rolled out HFC on the Apple Isle, and they never will. In fact, Tasmania — like most of the rest of the country outside Sydney, Melbourne, Brisbane, Perth, Adelaide, the Gold Coast and a few pockets in the ACT and country Victoria — simply has no fixed-line alternative to Telstra.

And what happens when Telstra's copper network is decommissioned? Turnbull argues that forcing people onto the NBN will restrict consumer choice, but it's actually the only way to ensure Tasmanians can retain fixed services given the apparent fate of Telstra's copper loop. If NBN connections aren't mandated, households that aren't connected to the NBN will have absolutely no fixed-line service at all, once Telstra's copper network is decommissioned. Turnbull's opposition is thus as tenable as telling residents of rural towns they don't need TVs capable of receiving digital TV signals.

The fixed line really isn't the place for telecoms competition; rather, it's a vehicle for lock-in and market abuse. Under the current Telstra regime, most consumers don't really have any choice now about which infrastructure they use to connect to the internet. Sure, they can go all revolutionary and commit themselves to the living hell that is wireless broadband, but even then their dwellings still have a copper connection to Telstra's network. And if they want fixed broadband, they'll be using it.

Telstra will still have customers, as will Optus; the only difference is that they'll be handled by a retail organisation forced to play by the same rules as all of its 600-plus competitors.

How can Turnbull say customers won't be able to choose Telstra if the NBN is in place? Telstra will still have customers, as will Optus; the only difference is that they'll be handled by a retail organisation that's forced to play by the same rules as all of its 600-plus competitors. And, by the way, customers anywhere in Australia will be able to choose any ISP, telephony and pay TV provider they want — regardless of whether they happen to live somewhere that provider has rolled out its network. If that's not better competition, I'm not sure what is.

Much of Turnbull's opposition stems from his initial assertion that the NBN is a private company rather than a government-supported infrastructure provider that has been set up to provide the level playing field that 13 years of (coalition-dominated) private-sector competition has failed to do. In reality, the NBN's ultimate fate is still up in the air: it may be privatised eventually, or it may not. In either case, it doesn't change the fact that Telstra was handed a monopoly fixed-access network and proved that it cannot be trusted to fairly administer that network for the good of the whole market (nor, I should add, should it have been expected to).

If the Coalition wants to attack the NBN on financial grounds, it's more than welcome to; there are certainly questions to be answered and issues to be addressed. But going on radio to say that he doesn't understand what is a clear and rational policy move, discredits Turnbull's case and suggests that he is only willing to fight battles based on his own terms of engagement. The NBN has always been about all the things Turnbull says it is — yet while he says them pejoratively (and, in some cases, incorrectly), the rest of the industry is saying them with an undertone of hope.

Then, there are the blatant falsehoods — such as his radio comment that homeowners face additional costs to wire their homes to take advantage of the NBN. This is a flat-out lie that either shows Turnbull will stop at nothing to scare homeowners off the network — as The Australian did when it ran a similarly incorrect front-page story the day before the election — or that he bought this furphy hook, line and sinker. There's no reason that homeowners would need to wire up their entire homes when connecting to the NBN. After all, if you sign up for cable-modem internet, or for Foxtel, or even for a Telstra local line, you already have a service person who comes to your house and makes sure everything is set up correctly; this includes the wiring of additional access points as necessary.

If you sign up for cable-modem internet, or for Foxtel, or even for a Telstra local line, you already have a service person who comes to your house and makes sure everything is set up correctly; this includes the wiring of additional access points as necessary.

Tasmanians, and everyone else, can expect the same thing when they get actual services connected over their NBN connections. Sure, they may need to pay for it, but that's no different to the situation now. Installation fees have long been an accepted part of setting up a new service, and that's not going to change just because your internet or pay TV are carried over the NBN. Indeed, installation costs may even be lower since residents won't have to pay for the last 20 metres between the kerb and their home, as they currently do with Telstra and Optus HFC connections.

Turnbull has been tasked with stirring up dissent about the NBN, but when he fervently repeats arguments that are baseless supposition or simply inaccurate — well, that can't really help the Coalition's credibility, can it? The NBN is, after all, going ahead, and if the Opposition wants to complete its real role in this government, it needs to stop spreading easily repudiated misinformation and focus on getting some hard facts with which to attack Labor. And if those facts aren't available, perhaps Turnbull needs to stop trying to stop the NBN, and focus on making sure it's done correctly — rather than not done at all.

What did you think of the opt-out announcement? And do you agree with Turnbull's NBN angles of attack?

Topics: Broadband, Government, Government AU, NBN

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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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36 comments
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  • Very nice article David. I like to think that Turnbull still has some of his vaunted integrity and that the comments he made about requiring a re-wire were from misinformation he received (though I would have hoped that MPs were better informed than that).
    viditor
  • I,m Sorry,haven't you looked at the scale of wireless or satelite ONLY coverage provided by this Sell job, supposedly FTTH 95% + of Aust. is to be "cable free",NBN.
    EVERYBODY, outside a major cenre will be in wireless hell, regardless of who they choose as an ISP,when this is finished.Towns with less than 1,000 pop.Will not get any fibre,People living in outer areas and rural areas will still get crappy unreliable wireless or satelite,and if your unluckier still remote rugged areas will only get satelite coverage when there happens to a satelite overhead.The Australian public have been sold a lemon.And the libs version is even worse.
    pete196600
  • This is exactly the kind of misinformation that the article is refering to...
    NBN will include 93 % of the population directly on fibre, 4% on wireless, and 3% on satelite. This will include most of the outer and rural areas on fiber, though many of the farthest will be on wireless and satellite.
    viditor
  • Don't judge WiMax or LTE wireless based on the performance of 3G/3G+, the newer services will be far superior.

    "... and if your unluckier still remote rugged areas will only get satelite coverage when there happens to a satelite overhead. ..."

    Perhaps you should consider a service based on geostationary satellites, such as Inmarsat (Telstra) or Thuraya (Optus).
    FiberLover
  • The only confusion in this article is from David Braue. I was asked on Tasmanian radio by Andrew Moore "Well referring to the opt-out scheme in Tassie, the Premier David Bartlett is saying its going to save taxpayers' money, is that the reality." My response was "Well I honestly dont understand his reasoning there. It will involve the NBN spending more money because they will connect houses unless people expressly decline to take it. This is basically designed to make...the NBN...a monopoly provider."
    So far from being confused about Senator Conroy's plans to create a monopoly I noted that is exactly what he is doing. After all as the Implementation Study notes on p. 60 the objective is to "accept an enduring monopoly on passive infrastructure."
    I can understand that in his enthusiasm for the NBN Mr Braue does not want to have any discussion of the implications of this monopoly but the risks of such a monopoly are discussed even in the NBN Implementation study as significant and needing to be addressed.
    His comments about the householder costs following connection to the NBN are contradictory. First he claims any suggestions householders may have costs of rewiring in their homes as a blatant lie, then he says that is okay if they do "Sure they may need to pay for it." More confusion from Mr Braue.
    On this point, the fact is that NBN's responsibility ends at the ONT. After that any connection costs are up to the householder and the relevant RSP. It is high time that NBN and those RSPs working with set out some detailed cameo case studies showing what costs may be incurred depending on the circumstances of a particular house and the various devices sought to be connected.
    Malcolm Turnbull
  • On the whole rewiring thing, it really depends. The ONT doesn't have ADSL2+ emulation (its not in the specifications released by NBNCo) which means that RSP's will have to a cable from the ONT into your house (or I assume in most circumstances). The ADSL2+ emulation would have really helped NBN penetrate into the market, since people could have just used their existing ADSL2+ modems and copper line within their house without having to worry about additional costs

    The issue here is, if you want to actually use 100mbit internet to its potential, you would need to rewire your house with Cat5/6 (or have LAN cables running throughout your house). There isn't a user grade wireless router that can support 100mbit constant throughput (thats even disregarding the hardware that needs to be upgraded to support 8.0.211.n 2.2/5ghz) especially when you consider walls of the building

    I highly doubt that RSP's would even consider rewiring your house, as it costs quite a bit of $$$. So realistically speaking (unless you have your house already rewired for Cat5/6), you will have one computer that can use Fibre to its full potential and the others will be somewhat gimped if you try to use a Wireless Router

    How this issue will be resolved in regards to old buildings, apartments and town houses is a question and a half
    deteego
  • Welcome Mr Turnbull...one simple question please?

    If the NBN CBA, which you are demanding, is carried out and it's findings suggest the NBN should proceed, will you and the coalition then give full bi-partisan support to the NBN?

    I look forward to your reply...thank you.
    RS-ef540
  • Actually one was conducted by one of the chief economists of the OECD in April 2009 (and it concluded that in order for the NBN to make profit, it would have to cost at most 17 billion dollars). The CBA did also reveal the reasons why NBN wouldn't profit from itself, and the issues in Tasmania are in certain way mirroring what the CBA modeled

    You can view it here
    http://ssrn.com/abstract=1465226
    deteego
  • Thank you for the URL deteego, very interesting indeed.

    I particularly found this sentence of interest... "We also find that it is inefficient to proceed with the project if its costs exceed $17 billion, even if the alternative is a world in which the representative consumer cannot obtain service in excess of 20 Mbps and even if demand for high speed service is rising relatively quickly".

    I guess that's the arguable benefit part... do you pay the extra for the extra benefit or just say, it's not worth it financially.

    In the end it would appear that's where the 2 parties have their differences.

    Thanks again...I have certainly learned something new today and really, isn't that what these forums should all be about, not narky politicking!
    RS-ef540
  • Remember that a CBA is not designed to say "do/do not build X", all it does is detail its implementation and the problems and the costs of whatever the project is and the returns of the project depending on how the project effects the economy/society. In this case, this CBA stated that as [the government planned] to roll it out, it needed to be less then 17 billion to be financially efficient.

    At this point, what a [good] government would do, is realize "hmm, maybe putting Fibre everywhere so quickly isn't such a smart idea because there are clearly areas of people which will have little use of the benefits of the NBN will provide". What [should] happen at this point is the government would deploy Fibre in the areas where people are WTP (willing to pay), implement different strategies for installing the NBN (instead of forcing the NBN onto people, this will save money for the taxpayer). Probably doing it as a monopoly straight off wasn't the smartest idea

    The CBA is in Labors best interests, and In my opinion an accurate CBA would say that an NBN (the way that Labor plans to do it) is one of the worst ways to do it. If the NBN was for example stretched over 20 years and careful research was done in deploying the Fibre to the people and areas that needed it, it would (at least in my assumption) cost much less money, put less stress on the economy, and make little difference for the consumers in the long run (since most people will be using 25mbit plans anyways). Alternately it could have involved the private sector in the FTTH rollouts, as was done in Japan/Singapore and South Korea (and even in America with Verizon before they stopped their FTTH rollout at 40%)

    Im glad that you have learned something new
    deteego
  • Regarding this CBA, I would mention the following.

    1) They've modeled the cost of capital based on a CAPM beta of 0.825 based on an upper estimate of Telstra's CAN beta, reasoning that the network has a high level of systematic risk. I'd argue that this is unreasonable, given the nature of the earnings wouldn't be market sensitive (people don't stop using the internet just because the stockmarket drops), the equity wouldn't be traded on stock markets anyway, and the government has said they require a utility-style rate of return, not a commercial rate of return (6-7% vs 13%).

    2) If the deal with Telstra goes through, it takes away the uncertainties regarding customer take-up rates, deployment methods etc, would ensure the cost per customer is below, or at the lower band of their estimates

    3) It's compared to a base cost that assumes an indefinite lifespan of existing infrastructure. We know that HFC is no longer being expanded, copper is only being maintained, not extended, and has a finite useful life. The base cost also ignores savings made by not having to maintain legacy networks.

    4) The study assumes that end-user pricing will increase versus the base cost, at a low-ball estimate $75/m for the average user. This ignores the above 2 points, and reductions in RSP margins as a result of a level competitive playing field.

    5) The willingness to pay is derived based on the assumption that willingness is diminishing rather than linear, since the incremental benefit a person would see shrinks at higher speeds, especially for offshore content. While this is on the whole, reasonable, this assumes that only one application will be used at a time, as opposed to multiple applications running over a single connection (e.g. a family of 4 simultaneously using the internet). And secondly, the willingness to pay as an increment to the base costs assumes that existing technologies are technologically comparable – i.e. 20mb/s on ADSL2+ = 20mb/s on FTTP, which, as we know, is rarely true.

    6) The study assumes all usage will be consumer usage. No provisions for SMB / corporate / government connections, or any non-internet applications of the NBN, which would have a higher willingness to pay.

    7) Productivity gains are excluded because that would be accounted for in the willingness to pay. Would a person really be willing to pay more for their internet if they were able to work from home, for example?

    8) The paper then goes on to say that wider economic and social incremental benefits of having access to internet speeds greater than that currently available (assuming that the majority of people have access to an upper range of 20mb/s) are too difficult to quantify, and then goes on to list the incremental social costs??

    9) Sovereign risk on private investment is not an issue (for telecommunications infrastructure owners, at least), due to the agreement with Telstra, and possibly Optus. The paper's second point is odd. It says that a social cost would be imposed if the NBN and (effectively) Telstra were to collude to create a virtual monopoly, i.e. as opposed to competing head-to-head, when the base scenario the paper compares it to is an existing monopoly, owned by Telstra??? Third point seems valid enough; we know there will be uniform national pricing, so this could distort resource allocation...... except for the fact that the market is already distorted due to the monopoly provision of infrastructure. My last point would be invalid if Telstra's pricing reflected true cost-of-delivery in rural areas, which I admit, I have no evidence of whether it does/doesn't.

    10) The paper claims that under existing market conditions, those that want higher speeds already have them, and that if not, then in future, they will... move... somewhere where they will be able to get the speeds that they want?

    I understand that a lot of the assumptions in this are outdated, so it would be interesting to see what the results were if up-to-date parameters were used.
    zackee-11da3
  • "The CBA is in Labors best interests, and In my opinion an accurate CBA would say that an NBN (the way that Labor plans to do it) is one of the worst ways to do it." - All the CBA will do is shutup the Liberals about 43 bill dollars and move Turnbull onto another trashy argument. Why don't we do a CBA on the liberal's maternity leave payments?
    deteegoisfunny
  • Dear Mr. Turnbull, I have some fundamental arguments with your position in a number of areas. Firstly the "free market" that is so much a bastion of conservative politics has not served and never will serve regional areas or even outer metropolitan areas where it is not economical to build and maintain infrastructure. Your policies condemn these areas to second rate services. Unfortunately, wireless will never be able to deliver the speed and reliability of fibre. No ifs buts or maybes. Unless someone works out a way to deliver broadband by light, then it will never compete. Unfortunately the laws of physics don't allow it. Therefore the only alternative is to have a government entity as a wholesaler of the services simply because their charter can be to deliver the service not to provide a return above the cost of capital to shareholders. The structural separation of Telstra is the only way that I can see that Telstra can move forward and provide value to shareholders as they will not have the burden of maintaining an outdated, unreliable copper network. A smaller, slicker Telstra could become more responsive to customer requirements and provide a significant improvement to customer service and service delivery rather than being burdened by regulation such are universal service delivery when they are trying to compete against other telcos who don't have this additional burden.
    Lets build the NBN, make sure it is done properly and then place our energies into making the most of this incredible enabler of innovation and productivity.
    dickster-e7b60
  • Good article. Personally I feel that 43B is way too much. 20 Mbps for around 15B would make more sense. It would still be much better than the current speeds most people get and at a reasonable price. I'm sick of our internet speeds being compared to Japan and Taiwan. Smaller landmass, bigger economies and populations mean that they should have faster internet. It would be like comparing our freeways to Germany's!
    mwil19-a34f7
  • So why don't they do it then?

    If Labor government is so convinced that the NBN cannot fail, and they are using CBA's from other countries (and IBM lols) as defence in not doing a CBA, why don't they do one to shut up the Liberals

    Labor literally have ZERO excuse for not doing a CBA
    deteego
  • Actually, none of these assumptions are outdated (apart from the Telstra deal, which added $9 raw cost to the NBN). The deal with Telstra will collapse (confirmed by CEO) if Telstra is forced to maintain its copper network if NBN doesn't get the uptake rate if needed. The NBN is still combating current infrastructure as free market, so that assumption still applies (no legislation has been passed through, as yet, to change this). Considering the take up rate in Tasmania was only 50% (which had the highest WTP compared to other areas) those assumptions still apply. This will create that virtual monopoly

    The CBA did assume an average universal wholesale price for the NBN
    The CBA did do multiple models for WTP for people up to 100mbit (similar model to Japans)
    The figure CBA used for economic/social benefits was overly generous FOR the NBN, not the other way around
    The CBA did factor in buisness/hospitals/universities (it specifically stated, providing figures, that almost all schools/hospitals are already on Fibre and barely use the bandwith, and most business parks already are Fibre connected)

    Yes some things have changed (really only the Telstra deal), those some things have also added to the cost of the NBN. Those (couple) of changes have to justify a 2.5x increase in the maximum bound of profitability figure given by the CBA

    Remember that a CBA is always done before implementation of the project, or right at the start. Doing one in the middle of the NBN is pointless, because at that point its "too late"
    deteego
  • Because it won't shut up the Liberals, they will move the attack to the NBN's assumptions and the eyes of the audience will glaze over all the more.
    Listohan
  • Richard, of course it won't shut the Liberals up; they are in opposition, it's their job. What it might do is minimize the amount of people who listen to them. If they go forward without due diligence, lobs will be free to attack them all the way to the next election.
    mwil19-a34f7
  • Come on Mr Turnbull!! If you think houses are going to incur costs, how do you explain Telstra's current HFC offering? Free modem, free installation of one connection point in the house, $50 for each extra connection you want!!

    Why won't the hundreds of RSP's that every Australian will be able to choose from provide the same? See with the vast increase in competition coming our way, It will only take one of them to give free access points (if needed) on 2 year deals and they will all have to. It's the beauty of competition in the fixed broadband sector, something we will never have if you get into power and leave Telstra as it is.

    As for Liberals stopping the waste!! Ha!! You would encourage an opt-in system that would mean cablers having to return to the same street multiple times? Why not get the job done in one go? Surely a stop the waste opposition would be in favour of this? Maybe it just scares you that opt-out will make the NBN profitable and show up your opposition for oppositions sake policies?
    glass_snowy
  • Your response glass_snowy is contradictory, on one hand you state that the Telstra current HFC offering is a 'free connection and modem', then you state that is 'something we will never have if you get into power and leave Telstra as it is'!
    Telstra is doing it now - huh?

    You also to omit to say that in order to get the so called 'free installation and modem' you have sign a contract with BigPond for 24 months.

    It's interesting you also say that RSP's will do for it nothing because of 'competition', well the RSP's need to get paid, they won't do for nothing, what you mean is that some ISP's might and I stress the term 'might' waive the cost if you commit to a long term contract with them and or take other products.

    The ISP's get the installation cost and the cost of the so called 'free modem' back off you eventually, they have a bottom line that needs protection like any business.
    advocate-d95d7