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Will the Federal election be able to end the NBN mess?

Over the last few months further information has come to light about the problems the NBN is facing and it is clear that the government will have to step in in order to address the mountain problems of the service. However, in all reality this will not happen till after the Federal Elections.

The regular Ookla ranking put Australia even further down on the international ladder of broadband speeds. It is now sitting in position 60. There have been arguments that this also had something to do with the way the list was produced this time, but it doesn’t really matter whether we are in position 60, 55, or even 40. We are so far down the list that any of those ratings are an embarrassment for the country.

I am just back from the Netherlands where I enjoyed FttH services both at the homes of family members and in the AirBnBs we stayed in and it is just a joy to use the internet at such great speeds. Unlimited speed of 100Mb/s and more at access costs of around E50,  to improve their profitability ISPs also package a range of entertainment, home security and other (telecoms) services into their offerings, so overall packages are sometimes closer to E80.

Back to Australia ……. some of the other problems we also saw mentioned in the media comments include that there are still a large number of NBN connections that have been put in the too-hard basket – by mid-2018 there were close to 1.5 million of them, many in relation to the HFC problems that the company is facing. This put the overall reliability of the NBN in several states below the ACCC standard.

But perhaps we should now stop crying over spilt milk. The NBN is what it is and we should take the current situation as the base from which we need to make improvements. The trouble is that because of the politicisation of the NBN it is very difficult to get a good understanding of the nature of the problems and any new government will need to first examine this with a group of truly independent experts (and not hand picked political favourites).

As mentioned in my previous analysis, back in the period 2005-2009 I was heavily involved in the strategies around the NBN. From the very first I said that we needed an FttH NBN because of the social and economic benefits. Stephen Conroy – first as the Opposition’s Minister for Communications and later in his position as the Minister for Broadband and the Digital Economy – mentioned several times that this was the reason he supported a national broadband plan that was framed around an FttH infrastructure. Also, I have maintained from Day One that people are not going to pay more for an FttH connection. The business model should be based on the economic and social benefits as well as commercial revenue, not just on commercial revenue.

While the government of the day paid extensive lip service to this model they never put a financial model in place that reflected the social and economic benefits. So, yes, the Labor government can be blamed for not setting such a model in concrete.

Malcolm Turnbull hammered this home, asking many times for the cost benefit analysis, but, when he subsequently took charge, he himself – despite promises – failed to come up with one.

In my view this is the root of all our problems. We, as a country, never properly addressed why we implemented the NBN and consequently we never properly linked the national benefits to the business and financial models. If Labor had remained in power it would not have been such a problem if there had been cost blow-outs, as they would have continued to talk up the benefits. The Coalition hardly ever mentioned those benefits, and certainly not within the context of business and financial models. So, by ignoring this, they only dug themselves deeper into the NBN morass.

We need to come back to this and we should get bipartisan support based on the national interest, not on party politics. We need to stress the national benefits and build a proper business model in which that is recognised. Any cost benefit analysis will always be arbitrary, but we should still bite the bullet; however there is no use trying this without bipartisan support, and I think that was the reason subsequent governments didn’t come up with such a calculation as you can shoot down any cost benefit analysis if there is not the political will for bi-partisanship .

If we properly address those national fundamentals then I believe that we can both solve the current situation and address the future needs of the NBN.

But all of that will take a long time to fix. However, any incoming government can, with the stroke of a pen, create a situation where people can use higher speeds at an affordable price on the NBN as it exists today. For this to happen the complex wholesale pricing will need to be simplified. The incoming government could just do that, and this would make higher speed services available at more affordable prices.

The wholesale price system is so complicated that I will not even try to explain it, nor should any incoming government try to descramble that egg, instead just scrap it and come back with a simplified structure. I understand that this will require the government to write off some of its investment in the NBN, but so be it.

At the moment RSPs have to employ extra specialist resources to understand the myriad of complicated wholesale pricing options that the nbn company has wrought together. In general this means that as a result of these unattractive wholesale process the low-cost entry is now too expensive for RSPs to offer this option to their customers. At the same time the higher speeds options remain too expensive for many users. This is contrary to the sprit of the NBN, it should provide all Australians with affordable high-speed broadband services.

What a mess – especially on the financial side! Let’s see how the next government get themselves out of this muddle.

Paul Budde

 

Comment from Stewart Fist

I’m not sure we shouldn’t be looking at the NBN as totally funded government infrastructure, paid for out of tax revenue, with no data pricing, wholesale or retail for usage.

When you get FttH, the vast majority of the costs are in establishing the connection itself.  Look at roads: we put them in and let people use them often or little, according to individual requirements.  This has proved to be the best way to operate the system.

Tolling roads is a hidden form of inequitable tax levied only on some citizens, since tolls aren’t imposed on others.  And the tolling of data can be seen in the same light.  Networks work just as hard standing idle or sending little data as they do sending volumes. So once the provisioning is adequate and in place, I don’t see the need for wholesale or retail data charging at all.  This is just a historical anomaly, which inhibits the development of information systems.

If the government was to drop the whole pricing mechanism completely, Australia could probably simplify the network and reduce operating costs by an enormous amount.  The justification for taking this measure lies in the range of new services that Australia would generate — well ahead of the rest of the world — and  I’d bet that savings equal to the lost revenue would probably be recovered in other ways.  Population distribution, remote education, more efficient home services, etc. reduced road usage, etc

A free NBN would leave the country with payment for content only.

 

My response to Stewart

Good thinking Stewart and I do agree. Years ago, I argued that the commercial value of having access to services would be of such importance that access costs could be covered by the money organisations can make because they are connected, add to this the non-commercial benefits to society and the economy and it should be a no-brainer.

 

 

 

 

 

 

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