Refresher - The National Broadband Network

  • Still heavily political
  • FTTH vs FTTN
  • Turnbull and LNP have a viable, though inferior alternative

NBNco, the government corporation installing the National Broadband Network, has begun running television ads to raise awareness of the project. The ads hint at a communications revolution, in which TV and education will be delivered over the internet in the form of floating 3D holograms, like something straight out of science fiction. How accurate is all of this, and what are the facts  - when stripped of partisan hype and technological jargon?



What is the NBN?

The NBN is a government project to replace the telecommunications infrastructure connecting individual homes and offices around Australia. Mostly this means replacing copper telephone wire with optical fibre, all the way to each home.

The project is extensive, and current estimates suggest it will take about 9 years to complete, though 40% of homes should be connected within the next 4 years. Currently, about 70,000 homes that already had access to traditional copper lines have access to the NBN. Within 18 months of fibre being pulled through an area, the copper will be pulled out.

By the time the 2013 election rolls around, the government wants to have access at 300,000 households. At that stage the NBN will be hard to reverse in favour of the Liberal Party’s alternative.

What alternative?

telstra RIM

A typical Remote Integrated Multiplexer or RIM, used to connect short-run copper to fibre optic in new estates and remote locations

Shadow Communications Minister Malcolm Turnbull has been put in charge of devising an alternative to the Labor initiative. The original position from the LNP was anti-NBN, with little to back up that opposition. It was just labeled as an abuse of taxpayer money, and an attempt for the government to intrude on markets.

Turnbull, a former banker and telecom executive (he was the Chairman of OzEmail in the 1990’s) has crafted a more nuanced and substantial case against the NBN, which still enjoys popular support. His alternative would see fibre optics pulled to cabinets servicing a street, and then using existing copper cables to the home. This technology is shorthanded to Fibre-To-The-Node, of FTTN. The Labor plan is known as Fibre-To-The-Home or Fibre-To-The-Premises (FTTH/FTTP). For this article we will use FTTH.

The Labor plan, currently being implemented, has been costed at 39 billion with some conservative estimates expecting that to blow out a bit to $43bn (opponents have leapt straight to a $100bn estimate).  The LNP plan has not been costed, but that’s not unusual – in opposition, Turnbull cannot sign contracts or take meetings on official agreements with the relevant companies involved. But Citibank has independently estimated the FTTN plan at $16 or 17 billion. Turnbull has also cited evidence on FTTN rollouts in the UK and Germany, suggesting that it would take only 5 years at the most, to have the entire network implemented.

That means it’s better, right?

telstra pillar fttn

This wouldn't go away under FTTN

Turnbull’s plan is significantly better than any opposition party has come up with, including the original plan put forward by Labor under the Howard Government. But it has severe limitations.

FTTH would see speeds bolster dramatically. To almost the same ratio as going from dial-up to broadband. For example:

Dial up speeds are a maximum 56 kilobits per second. The minimum speed for early broadband services was 1500 kbps – a leap of 30x. Current technologies can deliver speeds of 24000 kbps, or 100,000 kbps (100 Mbps) on Cable – but most people only get a fraction of those potential speeds.

FTTH will deliver a maximum 100 Mbps initially, with plans to up that to 1000 Mbps, and the potential to do 10 times that again. Fibre optic technology is significantly more suited to data transmission than copper wire.

Turnbull’s plan still has a bottleneck in that last few hundred metres of copper wire connecting to your home. Bringing fibre within a few hundred metres (right now most people are more than 1km from their local exchange) will allow for speeds 2 or three times faster than our current maximum, to more people. But that’s it. There’s nowhere to go from there, and re-wiring Australia isn’t something you can do very often.

So Turnbull’s plan might only cost one third to rollout in one half the time, but that still means spending $17bn and 5 years to roll out something with little room to grow, and which might need upgrading 5 years later. At which point, you need to go FTTH anyway. Why not do it right the first time?

wireless nbn

Much of the opposition to the NBN centers around the idea that the market is moving away from fixed-line broadband anyway, with the rapid take up of wireless services. Some of this is completely misplaced – a good proportion of the population thinks they’re ‘wireless’ and simply aren’t. They’re wirelessly connected (via Wi-Fi) to their modem, which their 15 year old son or daughter knows is connected to a phone or cable line. So they’re still on a fixed line connection to the internet – they’re only wirelessly connected to their modem.

But still half of all internet connections are still genuinely wireless, connecting over 3G or 4G radio to a Telstra, Optus or Vodafone mobile phone tower. Wireless connections are quicker to setup, contain no messy wires and are of course, portable. They seem like the best solution. But most people using a mobile broadband connection can probably tell you about the limitations with this service.

The most glaring problem is that the technology is not terribly good.
4G speeds might be excellent, but that’s only if you get signal. And because a broadcasted signal is shared, your speed will take a hit at peak usage times, as everyone in your area gets online and overloads the network.

The other problem is that high speeds and portability lose their appeal if you can’t use them – and getting an affordable plan with enough data to satisfy a household isn’t just hard – it’s actually not available. The average Australian consumes 21GB of data a year. The biggest mobile data plan available is a recently released Telstra plan with 25GB of data – at $160 a month.  And in many cases, the amount of data on offer is going down, as Vodafone, Optus and Telstra struggle to keep their mobile networks running under such a heavy load.

Delivering 4G to every Australian with consistent speeds of even 25 Mbps, and uncapped data limits, would require several times as many mobile transmission points as there are right now – maybe as many as one for every 50 people, or 240,000 transmitters – about twenty times the current number.

In short, mobile broadband has been sold as a viable alternative to fixed-line broadband for a while now, but now even the telcos themselves have stopped suggesting that it is. They are now advertising it as a broadband solution for when you’re on the move, or otherwise using prices to keep demand down. Sooner or later people will realize that the mobile network should be used as a last case, mobility-focused data network, and not as a primary connection for the home.

But the cost…

The NBN has been costed as a Capital Expenditure, meaning that it is being built as an investment with an expected return. These returns would come from a monthly line rental that retail service providers would pay to link your home to the NBN (consumers wouldn’t deal with the NBN directly – it will be a wholesale company only). It is estimated that over time, possibly 30 years, those line rentals would pay off the initial investment – even while also paying for ongoing maintenance costs along the way.

This baked-in profitability has attracted investors, and as such much of the initial spend is being funded with bonds, rather than with direct taxpayer contribution. Some of that investor interest comes from the fact that the NBN will be a highly valuable asset with several decades of potential to turn profit. An FTTN network fails to deliver the same valuable asset, and would attract less interest from investors – leaving more burden on the taxpayer.

In the end, one way or another, FTTN will probably be faster to be completely installed, but will not likely be any cheaper.

Why the government though?

karl marx nbn

Alright, settle down

In 2003, the Sydney Morning Herald reported that a Telstra executive (Tony Warren) had given the Senate broadband enquiry board a damning evaluation of the copper network that it still owns and operates. In it, he had denounced the network as being ‘five minutes to midnight’, with maybe 15 years left before requiring replacement.

Assuming he was right, that means that the copper network will experience big failures in five years, even more than the regular failures it experiences now (Telstra spends about $1bn a year maintaining the network in its current shape). This isn’t unusual – the copper network is 100 years old in places.

Telstra could have implemented an FTTN rollout for the entire nation from then, and we’d have Turnbull’s vision already in place. Instead, FTTN was implemented only in new estates, where it was cheaper than traditional full copper lines to the exchange. And even then, it locks those customers into exclusive wholesale connection to Telstra, eliminating the competition.

Having a private retailer like Telstra in charge of the wholesale backbone connecting every home and office is mostly good for Telstra and its shareholders – but it’s not great for everyone else. The problems that have stemmed from this outcome of privatization are well known, so no point in going over them – but needless to say, enough has happened to convince the government that communications infrastructure is too vital a commonwealth asset to leave to the demands of the market.

Buying back from the copper network from Telstra would be a proper waste of taxpayer money, which is why the government settled on the plan that they did, and to keep it a commonwealth asset. But they have pledged to open up to privatization in 30 years, ameliorating concerns for those who wish to leave these things to the market.

Who to believe?

In the end, these are the irrefutable facts about the NBN:

- The Labor plan (currently being implemented) offers the best technological option currently available. Even the LNP admits that when calling it ‘the gold plated NBN”.

Aaaaand…that’s about it.
The rest is entirely debatable. It might indeed cost way more than the government has estimated. It may indeed be a white elephant that no-one is truly interested in by the time it is completed. It may get run into the ground by government incompetence.

But in the end, it’s a relatively straightforward infrastructure project that will deliver on its intended aim – to deliver the absolute best long term technological solution for a utility that is rapidly becoming key to 21st century economy and culture. It will be the most ambitious and impressive utility broadband network in the world, fitting for one of the world’s most advanced and robust nations.

By contrast, the alternative being promoted by the LNP will update Australian broadband standards to those of the rest of the world, even if only temporarily. It will fail to improve upload speeds, keeping Australia as mostly a consumer of online services rather than as a producer of it. It will fail to wrest main control of the utility from a private company, thereby dampening competition for the long term future. And despite short term savings, it may cost the same or more in the long term with no tangible benefit.

So the next time you read a report or opinion piece on the NBN, first ask the question – should Australia continue to play catch up when it comes to telecommunications, or do we have an opportunity to lead the world, with a relative assuredness of success? When all talks of cost and politics are over, that question should still inform the debate.

NBN-based connections are not yet widely available. For those who want to take advantage of great value plans with short or no contracts, we recommend:

Club Telco has an unlimited phone and internet connection for $70/$90 (depending on location) with no contract- Call 1300 106 571

TPG’s Unlimited $60 ADSL2+ Bundle (6 month contract) – Call 1300 106 571;

Internode has a 200GB Easy Bundle for $80 with no contract, call on 1300 106 571.