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Daily Archives: August 21st, 2012


Published 7:30 AM, 21 Aug 2012

The Shadow Minister for Communications, Malcolm Turnbull, hopped into your correspondent yesterday for describing Coalition policy on the NBN as “madness” (The Coalition’s NBN policy is madness, August 20).

Well, I read his response (Alan Kohler’s NBN fantasy, August 20) and we had a long talk last night. Sorry Malcolm, it’s still crazy, and you should still ditch the policy, although of course you’re not, as you argued forcefully to me, an idiot – not that I said you were.

The basic problem, as I see it, is that on this subject the Coalition will go to the election with a plan that won’t be very popular, based on saving money. Everybody’s looking forward to getting fibre: Malcolm Turnbull is going to be the party pooper, coming just as things are getting interesting and pulling the plug on the stereo.

Worse, the money saved – Turnbull estimates $20 billion – can’t be spent elsewhere or used to bring down taxes, because it is capital expenditure, not operating expenditure.

Campaigning on saving money is not usually recommended, and I’m not sure the next election will be fought on the need to bring down government debt, since it’s not too high in Australia to begin with. “Labor waste” might be an issue, but then you have to argue that connecting 93 per cent of Australian homes and businesses to a 21st century optic fibre network is wasteful, which of course is what Malcolm Turnbull does argue.

The Coalition’s policy is based on the proposition that Telstra will quickly agree to hand over its copper access network to the NBN Co for the same money as it is currently getting for transferring customers from it and renting ducts and pipes.

I must admit that is possible. Telstra chief executive David Thodey is a very nice man and it probably wouldn’t enter his head to use the fact that the new minister has made an election promise to screw him for more money.

Indeed, Turnbull argues that Telstra will get its money earlier because a fibre to the node network would be faster to do than fibre to the premise, so Thodey will jump at it. Maybe. But it took years of intensive work to negotiate the existing deal and changing won’t take a couple of days. And in any case the NBN will be a gigantic machine in full flight by this time next year and turning that particular Queen Mary will be not be easy or fast.

So then it comes down to a question of how far advanced the NBN will be by the time Malcolm Turnbull can become its minister and can stop the rollout and negotiate a new deal with Telstra.

It’s true that the latest corporate plan says 54,000 premises will be “connected” by July next year. The election will be held in the second half of next year and I’d say the earliest the rollout could be stopped – unless Turnbull simply declares force majeure, “down tools” – is the following July, when 487,000 homes will be connected.

My estimate of more than a million comes from another definition: “commenced or completed”. It seems to me that’s a more relevant number since the Coalition has said it will fulfill existing contracts.

The plan says 758,000 premises will be commenced or completed by 31 December 2012. There is no estimate for that figure by the middle of next year, but I understand the internal forecast is 1.2 million. The number of premises to be “passed” by July 2014 is 1.1 million, and since it takes 12 months to build each module, that’s consistent with that same number being commenced in July 2013.

It’s possible, I guess, for the new government to pay the contractors to go away and leave those million or so homes and businesses with copper access instead of fibre. But those people will all know they are about to get fibre and might regard paying to have them NOT get fibre as pretty wasteful too.

So Malcolm Turnbull will have to argue that, yes, 1.2 million homes and businesses have fibre available but they can’t use it because we’re going back to copper to save money, although Telstra will get the same amount as before (maybe – if they’re nice, that is).

The other problem, which I forgot to mention yesterday, is that maintenance of the copper access network is now $600-700 million a year as it deteriorates. Over 20 years that adds up to about $15 billion, wiping away most of the savings from using the copper in the first place. The $20 billion in savings is just a guess anyway: it probably won’t be that much because savings never are what you think they’ll be.

The final thing to remember is that the Coalition is not proposing to go back to the way things were. The NBN Co would still be a monopoly provider of wholesale broadband access – it would just do it with fibre only as far as neighbourhood cabinets and then copper the rest of the way – for most but not all, since more than a million premises will already have fibre all the way.

Also, the new minister would have to sack the entire senior management of the NBN Co and hire a whole new team because Mike Quigley and the rest of them all believe passionately in fibre to the premises. And he would have to tell all the service providers that have been gearing up to FTTP, including Telstra, that – terribly sorry – you have to change all your planning to FTTN now.

Very messy, it seems to me. Lots of pain, little gain.



Malcolm Turnbull

Published 12:52 PM, 20 Aug 2012 Last update 12:52 PM, 20 Aug 2012

Alan Kohler’s column today “The Coalition’s NBN policy is madness” is pure fantasy.

He says that by the time of the next election the NBN will have “about a million” connected to its fibre to the premises network.

Yet the NBN Co’s own corporate plan, released with great fanfare only a few weeks ago, says that by June 30, 2013 there will be 54,000 premises in total connected to FTTP with only 341,000 premises passed. So even if he confused “connected” with “passed”, he is out by a factor of 3.

So where does the 1 million figure come from? Alan should explain it or publish a correction.

Further, it is far from certain that the 54,000 figure target will be met by June 30 next year – after all as at May 2012 the NBN Co had less than 4,000 premises connected to the FTTP network.

As far as Telstra is concerned a move to FTTN does not require major revisions to the deal with NBN Co (other than securing access to the D side copper) and would advantage Telstra because more customers would be switched over to the NBN network sooner and so the payments to Telstra would be accelerated with a consequent higher NPV. As an example BT in the UK passed 7 million households with its FTTN rollout in just the last year.

His argument about a “two tier internet access regime” fundamentally misunderstands the nature of the internet, the whole point of which is to enables the propagation of signals over a range of networks and channels. The internet is a network of networks – fibre, copper (of many varieties), HFC, wireless, satellite – and it is that interoperability which is one of is greatest strengths. The issue for customers is not the particular medium of communication connecting their device to the internet but rather the quality of the experience. If bandwidth is sufficient for their needs, then whether it is on HFC or VDSL or GPON or wireless or a combination of some or all of them is not particularly relevant if it is relevant at all.

It has to be remembered that the speed of connection is determined by the slowest segment of the network between the customer’s device and the server with which they are connecting which in many cases may not even be in Australia.

And as for saying I should ensure the NBN is delivered “on budget” – if only there was a budget! The NBN Co has no budget. It has a project the scope of which was given them by the government and they regularly provide estimates of what it will cost. There is no budget in the sense of a cap or ceiling on what they can spend. It is exactly like asking a builder to build you a house with no contract other than to pay him what it costs.

Malcolm Turnbull