Turnbull's NBN French KISS is right, but so wrong

Malcolm Turnbull has been caught investing in a telco that's rolling out fibre to the home, despite opposing such a move in Australia.
Written by David Braue, Contributor on

The usual intellectual sparring between Malcolm Turnbull and Australia's technology media took on a different tone this week, after the shadow spokesman on communications told The Australian Financial Review that "too many [tech journalists] ... have become zealots" in what he sees as one-sided promotion of the National Broadband Network (NBN).

The confusion that Turnbull and like-minded Liberal pollies have perpetuated around this debate has been truly mind-boggling. So if repeatedly pointing out that the Tony Abbott-led Coalition has so far failed to elucidate a realistic alternative to Labor's fibre-based NBN makes me a zealot, well, slap on those cuffs and take me away.


(Turnbull image by Adam Carr, public domain; Sven Palmqvist image by Familjen Palmvist, public domain; baguettes image by Amarant, CC BY-SA 3.0)

Turnbull also claimed that the technology media should look at "what is going on around the world" with relation to next-generation broadband roll-outs. I know he meant that we are supposed to look at the raging successes of fibre to the node (FttN) in places like the UK — a roll-out that Turnbull conceded cannot be replicated here — but he inadvertently focused our attention on a completely different project after it was revealed (by rival Stephen Conroy, of course) that he had bought personal shares in France Telecom.

This investment — detailed right there in documents lodged with parliament's Register of Members' Interests — effectively meant that Turnbull, a vocal proponent of FttN, had chosen to invest his own money not in an overseas FttN roll-out, but in a dominant French telco that is spending over €2 billion to put itself at the vanguard of fibre-to-the-premises (FttP) roll-outs.

That's right; France Telecom has been rolling out FttP since 2007 in major French cities, and is aiming to have 10 million homes online with 100Mbps fibre by 2015. By 2020 — two years before our own NBN roll-out will be complete — France Telecom expects to have 15 million homes connected. This represents just over 60 per cent of the approximately 23 million homes in France.

When I asked Turnbull about his investment — and whether it signifies that he believes an FttP roll-out promises better commercial returns than FttN — he replied that the France Telecom roll-out is "pretty modest", and that he "thought the shares were good value".

Modest? In the immortal words of Inigo Montoya: "You keep using that word. I do not think it means what you think it means."

Just so I get this straight: France's incumbent telco is investing heavily to push fibre out to 15 million premises by the end of this decade, and Turnbull calls it a "modest roll-out" and "good value". Our own NBN Co is investing heavily to push fibre out to 12.2 million premises in around the same timeframe, and he has variously called it "insulting", "unwise" and loads of other adjectives that don't merit repeating here.

Turnbull has even called the NBN an artefact of Julia Gillard's "socialist paradise", which is laugh-out-loud ridiculous, given France's historical leanings in this regard. Turnbull's position on socialism is now clear: Australian socialism is evil, but French socialism is a great investment.

Saving grace

It's not all bad for Turnbull, however; he does have a point, and it's a good one — if you gloss over some devil-is-in-the-detail showstoppers that make it irrelevant in Australia.

The thing about France Telecom's FttP roll-out is that it's not only based on running fibre all the way to your house or apartment; in many cases, the roll-out will bring fibre to the building and span the last few metres with existing cable infrastructure — long ago installed in a significant percentage of French houses and apartments.

France Telecom is also reselling access to that fibre to partners like French ISPs Free, SFR and Bouygues Telecom, which are free to install their own last-mile fibre technology (such as G-PON) or piggyback on existing cable.

The operating parameters of the French NBN are so far removed from our own that comparisons are meaningless.

From an infrastructure point of view, it's an entirely sane approach, and has been feted by French regulator ARCEP as a way of ensuring competitive access to customers; ARCEP's latest annual report notes that 39 per cent of France Telecom's 1.475 million FttH premises are currently "passed by at least two operators".

Here's another interesting point: to prevent lock-in, ARCEP mandates a three-month waiting period between when fibre is installed to a particular premise and when the operator can actually market that service. This is to ensure that competitors have the opportunity to install their own last-metre infrastructure, so that customers have as many choices as possible when it comes time to switch on the actual service.

This is all good and well, and it supports Turnbull's contention that the France Telecom model is "utterly unlike Conrovian Australia — no universal FTTP, and facilities-based competition encouraged, not banned".

Yet, here is where Turnbull's comparisons with France fall flat on their proverbials. If you dig a bit deeper, you find that France Telecom's contract with Free will only see that operator service around 1300 municipalities, with 5 million homes, by 2020.

In other words, the "facilities-based competition" that Turnbull so heartily applauds is actually allowing competitive operators to cherry pick the most profitable areas of France's broadband population, and ignore the rest — presumably because the areas are too expensive to service.

Indeed, figures from ARCEP's very interesting annual report (PDF) confirm that 88.2 per cent of FttP in 2011 and 2010 covered French municipalities "located in very high-density areas". If you look at a heat map of France's current FttP roll-out, it includes one dense spot in Paris, a large area around second city Lyon and a few spots around the countryside.

For the rest of France's population, broadband appears to be the same as it ever was — whatever it ever was. ARCEP figures suggest that only 11.8 per cent of FttH and 29 per cent of cable services reach homes outside of France's most heavily populated areas. Everyone else, presumably, gets ADSL. Or dial-up. Or sits watching flames licking in the fireplace.

Sound familiar?

This is why Turnbull's statements about France are both right and wrong. They are right because France's FttP strategy will bring facilities competition to residents in the country's most heavily populated areas, which are already well serviced with cable infrastructure.

If Turnbull wants to be taken seriously by our media "zealots", he must stop arguing speeds and feeds, and kick off a new wave of competition in an industry that has no interest in it.

But they are wrong, because the operating parameters of the French NBN are so far removed from our own that comparisons are meaningless. Australia experimented with facilities-based competition in the 1990s, and it got us two now-stranded HFC networks running down the same street, with no compulsion for Telstra or Optus to allow any other operator to share their services.

Were a company like iiNet allowed to lease Optus HFC to a customer's premises at competitive rates, and then install its own head-end connection, this sort of facilities-based competition might work here. But the Howard government's complete failure to mandate any kind of access provisions on HFC operators preserved them as outdated monuments to 1990s-era competition optimism.

Fixing that disaster is a major, and often glossed-over, goal of Labor's NBN. If Turnbull wants to be taken seriously by our media "zealots", he must stop arguing speeds and feeds, and explain how he will implement regulatory change to force the opening of closed HFC networks, open access to Telstra copper and fibre, effect swift and effective separation of Telstra and combat private-sector malaise to kick off a new wave of competitive infrastructure investment in an industry that has almost no interest in it.

In the absence of such substantive policy declarations, Turnbull's rhetoric about speeds, feeds, foreign roll-outs and promises of cheaper broadband are utterly and totally irrelevant to the current discussion.

Another distinctive feature of France's roll-out is, by my reading, what appears to be a complete lack of retail competition. I am happy to be corrected here if my research has missed some fundamental point, but I don't see any mention of pure retail competition in France.

Little wonder why; the market is extraordinarily top heavy. If Wikipedia figures are to be believed, France Telecom, Free and SFR account for 90 per cent of internet subscribers. Those are the same operators that are deploying infrastructure that all but eliminates the possibility of French customers accessing internet plans from small, niche, specialist or other providers.

Turnbull has called the NBN an artefact of Julia Gillard's "socialist paradise", which is laugh-out-loud ridiculous, given France's historical leanings.

Australia's NBN model is totally different, because NBN Co has taken lessons from the past failure of facilities-based competition and shifted competition to the retail sector. Mandating a consistent price for all serviced premises not only ensures that robust retail competition is available to sparsely populated areas where Telstra copper is woeful and HFC unavailable, but it also fuels cross-subsidies that ensure the NBN can reach all Australians, rather than only those whose location makes them commercially attractive to French operators that return profits to Turnbull's pockets.

Labor's NBN may indeed be a socialist paradise — but it's the only rational, actionable model for next-generation broadband that's available to us without massive fundamental market restructuring that Turnbull has so far yet to outline. And as long as he refuses to detail how he would whip Australia's infrastructure into an open, workable shape, Turnbull's French dalliance is just another inconsistency in a policy platform riddled with them.

What do you think? Is France doing FttP better than Australia? Have I missed any important facets of France's telecoms market? Is Turnbull right to crow about the merits of overseas models, or do they simply not apply here? And what would Turnbull have to do to get his policy taken more seriously?

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