09 September 2015
by Rod Tucker
The NBN: why it's slow, expensive and obsolete
We didn't get a good deal from Malcolm Turnbull's NBN
The Abbott Coalition government came to power two years ago this week with a promise to change Labor’s fibre to the premises (FTTP) National Broadband Network (NBN) to one using less-expensive fibre-to-the-node (FTTN) technologies, spruiking its network with the three-word slogan: "Fast. Affordable. Sooner."
But with the release in August of the 2016 NBN corporate plan and in the light of overseas developments, it is clear that the Coalition's broadband network will not provide adequate bandwidth, will be no more affordable than Labor's FTTP network and will take almost as long to roll out.
With the benefits of two years' hindsight since 2013, let's look at the Coalition's performance against each of the three assertions in their 2013 slogan.
Malcolm Turnbull and Tony Abbott announcing their NBN.
The graph (below) shows funding estimates for the NBN from December 2010 to August 2015. Labor's funding estimates for its FTTP NBN rose from $40.9 billion in December 2010 to $44.9 billion in September 2013, an increase of 10 per cent. By comparison, the Coalition’s funding estimates, both for FTTP and the so-called multi-technology mix (MTM), have fluctuated wildly.
Labor and Coalition peak funding estimates from December 2010 to August 2015. *December 2013 data adjusted to account for different contingency.
Labor and Coalition peak funding estimates from December 2010 to August 2015. *December 2013 data adjusted to account for different contingency. Rod Tucker, Author provided
The estimated funding required for the Coalition's NBN has almost doubled from $28.5 billion before the 2013 election to between $46 billion and $56 billion in August. Before the 2013 election, the Coalition claimed that its proposed multi-technology-mix network would cost less than one-third (30 per cent) of Labor's FTTP-based NBN.
But in new estimates released in the 2016 corporate plan, the cost of the multi-technology mix favoured by the Coalition blew out and rose to two-thirds (66 per cent) of the cost of a FTTP-based network.
Also, the cost of repairing and maintaining Telstra's ageing copper network was likely underestimated, as was the cost of retraining and maintaining a workforce with the wider range of skills needed to install and maintain the multi-technology-mix network – costs that are unique to the MTM.
In the space of two years, the lower-cost deal the Coalition spruiked to Australian voters has turned out to be not so affordable after all.
The Coalition probably underestimated the predictably lengthy delays in re-negotiating the agreement with Telstra as well as delays in re-designing the network the new IT systems needed to manage a more complicated network with multiple technologies.
The graph (below) shows the actual and planned number of premises passed (or in today’s parlance – ready for service) for the original FTTP network and the Coalition’s network.
Premises ready for service, plans and actual, as published by Labor and the Coalition.
The Coalition’s original target was to bring at least 25 Mbps to all 13 million Australian premises by 2016. That target has now been quietly dropped and replaced with a target of more than 50 Mbps to 90 per cent of premises by 2020.
At the end of July 2015, almost two years after the 2013 election, only 67 premises had been served by multi-technology-mix technologies. In the meantime, as shown (in the graph above), the roll-out of FTTP has continued, albeit at a lower rate than Labor originally intended.
This lower roll-out rate has led to fewer connected customers and lower revenue. It will be interesting to see if the newly released targets for premises ready for service will be achieved (blue broken line in the graph above).
Labor certainly had its problems when it was in charge. For example, slow negotiations with Telstra and asbestos in Telstra's infrastructure caused delays of around one year. The funding requirements for Labor's FTTP network crept up by about 10 per cent from 2010 to 2013.
But the delays and cost blowouts have been very much worse under the Coalition than under Labor.
Australia's broadband capabilities are falling behind its international peers. According to internet companies Ookla and Akami, Australia's broadband speed lags well behind other advanced and even emerging economies.
In 2009, Ookla ranked Australia's average broadband download speed as 39th in the world. Since then, our international ranking has steadily declined and slipped to 59th place earlier this year.
What's worse, my studies of trends in internet speed in Australia and in a range of developed and developing countries show that FTTN technology – a key part of the Coalition's MTM – will not be enough to meet the needs of Australian broadband customers.
In short, FTTN technology will cement Australia’s place as an internet backwater. Our world ranking could fall as low as 100th by 2020.
In many forward-looking nations, fibre-to-the-node technology has never been entertained as an option. In some countries where it has been installed, network operators are planning to move away from FTTN in favour of more advanced broadband technologies like FTTP. In doing the opposite, Australia is moving backwards.
If FTTN magically appeared on our doorsteps by 2016, as originally promised by the Coalition, there would certainly be a short-term advantage. But the 2016 target has been missed and the FTTN component of the network will be obsolete by the time the roll-out is completed.
Of course, there is no point in speed just for speed's sake. Studies in Europe and the United States have shown a strong correlation between GDP growth and internet speed.
In the US and elsewhere, increasing numbers of homes and businesses are receiving services at 1 Gbps and higher. A recent study presents evidence that communities served by 1 Gbps and more are faring better economically than communities with slow-speed broadband.
If in 2013 the Coalition had simply allowed NBN Co to get on with the job of rolling out its fibre-to-the-premises NBN, rather than changing it to an inferior multi-technology mix, it may well have ended up spending less money and delivered Australia a much better network.
The Coalition sold the Australian public a product that was supposed to be fast, one-third the cost and arrive sooner than what Labor was offering us. Instead the Coalition's NBN will be so slow that it is obsolete by the time it's in place, it will cost about the same as Labor's fibre-to-the-premises NBN, and it won't arrive on our doorsteps much sooner.
By my reckoning, we didn't get a good deal.