What Actually Is The NBN Objective?

In the ongoing debate on whether or not the National Broadband Network (NBN) will ever be completed in its current form, there are many different views. Mainly because in a project that would be expected to take ten years, there are many different possible outcomes.

Of course, the federal opposition through its communications spokesperson Malcolm Turnbull would love to do anything they can to halt the project as it stands, and replace it with what they believe is their cheaper, yet vastly technically inferior, and less future-proof solution.

Last week, Turnbull made an interesting statement regarding what would happen should the Coalition win the next federal election.

“What we will be able to do and I will give this solemn undertaking to the Australian people: We will be able to complete the job of the NBN Co. We are not going to rip it up or tear it up or abandon it. But we will complete the objective, but we will do so in a much more cost-effective way.”

This represents a significant softening of language, when the original line from the Coalition was to “demolish” the NBN’s business case. Many have argued that this is a tacit acceptance that the NBN is inevitable, in its 93% fibre-to-the-premises (FTTP) form, if the idea is now not to “demolish” it, but to “complete the objective”.

Well, no. Not quite.

It is a step towards the government policy, in that the opposition now agree it should be “completed”, but with their fibre-to-the-node (FTTN) version of the network – there are of course many arguments as to which is “better”, and how “better” is defined.

The key is the line that the Coalition “will complete the objective”.

Interesting choice of words – what exactly is the objective of the NBN?

Time for a history lesson.

When the opposition was last in government – (pre-November 2007) – it settled on the OPEL Networks solution to upgrade Australia’s broadband infrastructure. It was to be a mix of WiMAX, and an extension to the existing Optus DSL network.

While OPEL was a step forward, its ability to provide a significant improvement in broadband access to all Australians – (including to those who had no broadband access at all) – was heavily criticised.

It was better than nothing, but left the wholesale network in the hands of private operators, and did nothing to restructure the flawed telecommunications market in Australia.

Upon coming to office in the 2007 federal election, the incoming Labor government cancelled the OPEL project, since it was analysed that it would only reach 72% of currently underserved premises.

That is, of all the premises that didn’t have adequate access to broadband, OPEL would still leave 28% of them underserved.

The new government replaced the OPEL plan with its own FTTN solution, expected to cost around $4.7b, and the tender process was opened to seek interested parties. The new plan would be to cover 98% of all Australian premises with a mix of FTTN, wireless, and satellite connections.

Companies such as Optus, Telstra, and Canadian firm Axia NetMedia wanted a piece of the national action. Some companies tendered for state-based chunks of the network.

Things seemed to be progressing well until Telstra – (who own the copper network in Australia, which would have been required as part of any FTTN build) – was sensationally excluded from the tender process after submitting a non-compliant tender response, and then the subsequent complete cancellation of the newer FTTN proposal.

So why did that happen?

The then Prime Minister Kevin Rudd and his communications minister Stephen Conroy announced that a review into the FTTN plan found that it would be a “wasteful” solution:

“The proposals have also demonstrated that rolling out a single fibre-to-the-node network is unlikely to provide an efficient upgrade path to fibre-to-the-premises because of the high costs of equipment associated with rolling out a fibre-to-the-node network that would not be required for a fibre-to-the-premises network.”

It was also feared that utilising the Telstra copper network would see the government liable for an approximate $20b compensation payout to Telstra, who would lose their control of the network; and then use the compensation payout to build a competing network.

They even openly said that that’s what they would do.

The Optus FTTN solution – (and presumably any other FTTN solution) – would have seen approximately 75,224 nodes, supported by 100,000km of fibre links.

NBN Co CEO Mike Quigley has suggested the number might need to be as high as 80,000.

Based on the Optus proposal, we’d also have approximately 150,000 massive and unsightly FTTN cabinets – (75,000 in the government network, and presumably 75,000 in Telstra’s network, like the ones in New Zealand in the picture below) – spread all over our nature strips.

Axia NetMedia was pushing for a more complete, more future-proof FTTP solution.

If the $20b compensation price to Telstra was as expected, and the new network would cost $4.7b, the final price would be $24.7b; and it would be challenged in the wholesale market by the FTTN network Telstra was promising to build with the compensation.

The government looked into Axia NetMedia’s FTTP proposal, and found initially that it would cost around $43b, but that only $26b of government equity would be required to complete the job.

The remaining $17b was to be funded from the debt market once the network was underway and earned itself a credit rating to borrow against.

So it was $24.7b for a FTTN network – (up against a competing Telstra-owned network) – or $26b for a full FTTP network that didn’t have a Telstra network to compete with.

The NBN as we know it now was born. The small extra outlay seemed more than worth it.

The Coalition of course hated the price, and the “interference” with the market.

Through Turnbull after the 2010 federal election, it proposed a return to the FTTN model, now independently priced at approximately $17b. Telstra would still get approximately $9b in payments to give up their network, as would happen with the FTTP model struck between themselves and NBN Co.

That’s $26b all up. That number sounds awfully familiar, doesn’t it?

Technically of course, an FTTN solution is greatly inferior, and would lock Australia into a future and expensive further upgrade to FTTP when the capacity of the FTTN network is eventually outgrown.

This reflects the view in the reports that canned the FTTN network originally – “a single fibre-to-the-node network is unlikely to provide an efficient upgrade path to fibre-to-the-premises because of the high costs of equipment associated with rolling out a fibre-to-the-node network.”

Turnbull tells us his FTTN model is cheaper, but do we want FTTP for $26b of government equity or FTTN for $26b of government equity?

Seems a no brainer – but that’s where the argument is at the moment.

Getting back to the original idea here – Turnbull wants to “complete the objective” of the NBN, but not build the NBN as it stands.

The objective has to be to build the best possible broadband network for Australia.

That has always been so, considering the various versions of the network that have been proposed, and then cancelled as “better” solutions presented themselves.

An FTTN solution has also raised potential legal issues, and has been labelled “a huge mistake” by overseas experts.

The best long term solution is FTTP, and the FTTN solution – (particularly when you factor in a massive future upgrade to FTTP) – is at the very least no cheaper, and more likely far more expensive over time.

The passive nature of the FTTP model requires no power to run the distribution network, whereas the 75,000 to 80,000 FTTN cabinets would need to be powered, and this power costs money to supply, and costs greenhouse emissions to generate.

If the objective is to build the best possible broadband network, it’s time to get on with it.

If Turnbull really is interested in completing the objective of the NBN, we should carry on as is. Stopping and changing the network would cause delays. More people want the NBN than don’t want it. Uptake in early rollout areas is exceeding expectations.

So I’m all for Turnbull completing the objective of building the best possible broadband network for Australia.

His objective, however, seems to be different – so he wouldn’t be completing it at all.

That would be a tragedy.