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.
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.
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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?
