This afternoon Malcolm Turnbull was in Wodonga at an NBN Forum to sell the opposition’s policy. He begun by explaining that they are not opposed to the National Broadband Network and that faster broadband for Australia is a good thing. As we know the coalition’s policy has come a long way since then, now moving to a predominantly fiber-to-the-node approach. He claims they never planned to rip it out of the ground, that was simply made up by Julia Gillard. He followed that up by explaining that that the way the government is going about building the NBN is “needlessly expensive, recklessly expensive in our view and will take too long. I’m not going to give you a rip roaring speech full of political spin.. I’m just going to give you some facts here’.
In 2007, the government commissioned report showed that 2 million premises, business and residential had thoroughly inadequate broadband that couldn’t download a YouTube video. According to Turnbull, we’re 6 years on and that is still the case. The labor plan is to connect 12 million premises or 93% of the population with fiber-to-the-premises by 2021. Right now, NBNCo has passed around 160,000 but only 1/4 of them can not be connected.
According to a revised business plan at the end of 2010, that the NBNCo planned to pass and be able to connect 950,000. He says they are way off track and are missing targets by 90%.
Turnbull says he visited South Perth last week, where NBNCo claim they have passed 1,000 premises, but only only 87 can get a connection if they want it. In Townsville it gets worse, with the Chamber of Commerce reporting that only 4% of the CBD that the NBN has passed can get a connection. The reason being that NBNCo has not worked out how to connect multi-tenant, multi-dwelling buildings like apartments and office buildings.
In terms of cost, the government has said the peak funding requirement is $44 Billion. The opposition has calculated what it would look like with some more reasonable assumptions in the business plan in terms of revenue and construction costs. Turnbull referenced the recent contractor problems where unpaid employees walked off the job and says they are going broke.
It seems to me that if a private business is willing to sign up to fulfill a contract that’s their responsibility to fulfill and definitely their responsibility to pay their employees. Adequate exit clauses and breaches of contract conditions should be in place to protect both parties.
Turnbull repeated their cost estimates of what labor’s NBN plan will actually cost, he says the peak investment is actually $94 Billion and an irresponsible use of tax payers money. He went on to say that based on the current rollout, it’s likely to take decades and with inadequate broadband now, waiting another 10 years or longer is cold comfort.
In analyzing how Labor arrived in the current situation, Turnbull claims it was a result of having no business experience. Labor politicians apparently have nobody who has actually ran a business. They all came up through trade unions, law firms, politics or political staffers, so they have no business experience.
Naturally the issue of Cost Benefit Analysis came up again. When Rudd was last in power he had a policy of not engaging in a new project without a CBA. While Turnbull once again stuck the boot into Labor for not doing this when for the NBN, there is no plan for the Coalition to do a CBA should they be in power. The biggest issue with a CBA being applied to the NBN is that it’s not possible. A CBA is only valid if you can measure the benefits and assign a monetary value to that. In the case of the NBN we do know that it has amazing earning potential from the consumer and business use, along with new businesses that will end up paying tax to the government. How much money this is, is completely unknown. This means we don’t know the benefits, therefore can’t accurately assess if the cost is worth it. We simply have to take an educated guess and based on previous internet generations, my guess is that Australia could spend a massive amount on this infrastructure as it will continue to make returns on that investment not just for a year or two, but for decades.
There were plenty of analogies to building a house, building highways and the like, but the problem is, all analogies break down at some point. Turnbull says that the government figures are simply an estimate and he’s right they are, as are the coalitions. With only some of the construction contracts at NBNCo, we don’t have an exact final figure, but we know what’s left from the budget and we know how much there is left to build. There’s no doubt the project is behind, but that doesn’t automatically mean there’ll be a cost blowout. A lot of the issues with missing rollout dates has been due to a lack of qualified staff to carry out the huge task. As soon as the project was green lighted, an army of fiber experts around the country needed to be trained. That for some reason didn’t happen. This fiber army would be well rewarded for the next 10 years while the project was constructed.
The biggest difference in cost between the two NBN plans comes from the cost of digging up everybody’s garden, drilling holes in everybody’s walls, installing new electronic equipment in everybody’s house. While backhoes and drill bits won’t break the bank, the real cost comes from the human labor costs and this is true. Going to every household and getting their approval is a huge undertaking. This is also known as the last mile, something Turnbull says they would do very differently.
Turnbull says what you do is replace 90% of the copper between the exchange and the customer’s house. A typical layout might have an exchange about 4 km away, but typically you’ll only be about 4 or 500 meters away from a telecom distribution point (grey column in the street). They would pull fiber to that point and then use VDSL equipment to deliver a 50 to 100% increase in speed to the house, or up to 100Mbps. Some basic maths needs to be applied here.. We currently get 20Mbps on ADSL2+, a 100% increase is 40Mbps, not 100Mbps and that’s in a theoretical best case scenario.
Building in this Fiber-to-the-node method is expected to save 2/3 of the cost and 2/3 of the time which leaves them estimating a project completion date of 2016, instead of labors 2021 date. Turnbull says this is the most common model being used internationally and used examples from the UK and Germany. The coalition say their plan for the NBN, using very conservative estimates will cost $29.5 Billion. Just remember that none of the detail costing has ever been released, if you search for it in their policy, you wont find it. As we’ve heard before Turnbull continued to allege that they will save tax payers over $64 Billion using their solution. He says where relevant, they used the same estimates and by 2021, they expect the average customer would be paying $300 less under the coalition plan.
Turnbull says that fiber is the right technology where you have lots of people using the internet at the same time like business centers because they will need a bigger pipe. Not sure if you’re paying attention Malcolm, but homes are becoming a place where we have a lot of connected devices which is actually the more important number. One person is actually capable of absorbing data across a number of devices, like uploading a laptop backup to the cloud, while downloading a new game on the Xbox while also streaming music on their phone. And what about those of us who run small businesses from home and want to compete with the big guys, under the coalition plan, we’d be faced with financing the cost of connection to fiber.
I agree strongly with one of Turnbull’s points and that is that the benefits that come from broadband come from everyone having it, so rolling it out quickly is important. No question about it, if international services like Netflix are going to come to Australia, they will be much more incentivized if they know most Australians have the network infrastructure sorted. Looking into the future, after all that’s what the NBN’s all about, there’s no doubt television of the future won’t be broadcast over the air, but rather of the internet. Netflix is already talking about offering 4K IPTV, in the next decade, it’s a given.
Turnbull ended his speech with this.. “The biggest barrier to internet usage is not technology, but lack of income. So that’s why we can say prudently, conservatively, responsibly, we will complete the construction of the NBN. We’ll do it sooner, cheaper and more affordably than labor will and that’s why we believe we have a better plan for our broadband future.”
Some more interesting responses came from the Q&A after Turnbull’s speech which will be posted in a follow up. It was interesting to hear just how personal the locals of Albury Wodonga are focused. Some seem to take their personal use and then question the need for the entire project which is completely the wrong way to think about it. More on this soon.