NBN not over the line yet
|
Yesterday’s agreement, as explained by NBN Co and Telstra, certainly delivers a certain amount of clarity, but certainly not certainty. The clarity is all about what happens to Telstra’s operations once the National Broadband Network’s fibre starts connecting up homes and businesses progressively over the next eight to ten years. The NBN was always intended to be a wholesale network, replacing Telstra’s “last mile” copper-wire telephone network. The government’s intention was always that retail fixed-wire telephone and internet service providers would move their customers’ services from copper to the NBN. Including Telstra itself. This agreement means Telstra will indeed play ball. There will be no expensive duplication of fibre networks – unlike the hybrid fibre-coax (HFC) rollout of the 1990s. As premises are connected to the fibre, customers will be invited to transfer to the wholesale NBN, choosing their own retail provider. For each customer that disconnects from copper, Telstra gets a one-off payment from NBN Co to compensate for the loss of wholesale income. The payment happens no matter which retail provider the customer currently uses, and even if the customer then chooses Telstra as their NBN provider. Customers will be given some as-yet-unspecified time to make their choice before the copper network is finally turned off, a process that’ll happen area-by-area rather than house-by-house. For anyone still wanting nothing more than a plain old telephone service (POTS) using their existing analog handsets, the NBN’s customer premises equipment (CPE) will include a compatible socket. To do all this, NBN Co will have access Telstra’s existing “passive network assets” – cable pits, pipes, ducts and exchange buildings – through a long-term lease. That saves NBN Co having to build their own, speeding up their rollout and creating a new permanent income stream for Telstra. All together, that’s an estimated $9 billion for Telstra from NBN Co over the course of the NBN rollout, based on post-tax net present value. Telstra also gets to dump its Universal Service Obligations – basic telephone services to anywhere in Australia, pay phones and 000 emergency calls. A new USO Co Ltd will be set up, taking over from 1 July 2012. And from 1 January 2011, the new wholesale provider of last resort to greenfields housing developments will be NBN Co, not Telstra. Telstra also gets an additional $2 billion from the government in exchange for various public policy reforms, and $100 million to retrain staff who might otherwise have been retrenched as a result of these changes The uncertainty comes from the simple fact that this is a “non-binding Heads of Agreement”. Either Telstra or NBN Co can bail out any time they like. A bailout by Telstra would involve significant loss of face, sure. But the company still has to get approval from its shareholders and the ACCC – and it doesn’t expect to have anything concrete to present to them until early 2011. To judge from this morning’s conference call for analysts and media, Telstra hasn’t even discussed this with its major investors yet. A bailout by the government would be… well, that’s politics. Talk to m’learned colleague Bernard Keane about that. However the Opposition has already said they’d undo the deal. Even if everything goes ahead without significant changes, there’s still the question of what Telstra will do in this new environment. “Telstra has finally sealed its own doom,” reckons Delimiter’s Renai LeMay. I’m not so sure. $11 billion more than covers a new 4G mobile broadband network, the so-called Long Term Evolution (LTE) – especially given that Telstra’s flagship Next G network cost “only” $1 billion. Prime Minister Rudd has already given Telstra a written guarantee that if this NBN deal goes through, they will retain the right to bid for 4G spectrum. But Telstra has also signalled potential moves into content development, an area where its track record hasn’t been as strong. To judge from this morning’s conference call for analysts and the media, Telstra simply hasn’t decided how it’ll spend that money. The devil will be in the detail. |
|
|
|
54 Comments
It was the previous Labor Government (Sen Lee) who was responsible for the ugly cable strung up from the light poles. I hope any rollout will out these cables and the power cable underground, so we can remove the poles from our streets, leaving the off few for street lights.
This kind of agreement is very common in business and should not be read as some kind of shaky outcome. Providing the government is re-elected then it is a virtual certainty that the deal will proceed.
It is obvious that both Telstra and the government/NBN are big winners from this deal. If negotiations had collapsed then Telstra would have tanked even further and, obviously, today’s share price gains would never have occurred.
“There will be no expensive duplication of fibre networks”
This is a non-sequitur. Neither Telstra, or anyone else, ever considered trying to create a fibre network that would compete with the NBN. Any business that did want to take this path would have to have a desire to lose many billions of dollars.
This journalists needs to acquaint himself a little more with the business facts behind this issue.
A question: I heard Conroy on the radio this morning saying “the first [NBN] customers in Tasmania will be connected up in a few weeks’ time,” or words to that effect. What is Conroy going on about?
James, you should inform yourself before you post a comment. My ISP, Exetel, has been signing up Tasmanian NBN customers for some weeks now in the expectation that they will be online fairly shortly.
It is a limited test roll-out but it is real and it is happening.
@David Sanderson:
Duplication of fibre networks can be in iether of two ways.
Duplication of existing fibre by the NBN would have been unnecessary and costly. Remember, there are fibre networks up and down the country owned by various corporations, not just Telstra. One parcel of land with which I am familiar has at least 7 bundles of fibres running parallel to the New England Highway in the Hunter Valley, owned by three firms. One objective of the NBN must be to use as many of these as possible.
If Telstra or another chose to construct, post-NBN, a duplicate fibre, that would be the situation you have described. It ain’t gonna happen.
So, yes, there was a real risk of duplication of networks. It is to be hoped that agreement will be reached between all parties to share, rather than force the NBN to duplicate existing perfectly good assets.
Journalist: was right, after all.
DS: was a bit fast with the trigger finger.
If Stilgherrian wished to say that without an agreement there would be a necessity to duplicate some of Telstra’s ‘backhaul’ fibre then he would have said something along those lines.
He did not say that - he said that without this agreement there was a risk that Telstra would build a competing fibre network. That he believes Telstra would have considered such a disastrous waste of shareholders funds betrays a serious lack of background knowledge about the issue.
Stilgherrian’s intent is clear (the comparison with the HFC rollout is telling) and you should try reading a bit more carefully.
Meh, Fibre optics are all read a generation behind some of the new transfer technology that exists internationally. As the world goes “wireless” its interesting that we would choose a fixed line system, that costs billions to fix and upgrade….
I guess just another way Australia lags behind the world.
Interesting both Steve Jobs, and Bill Gates have been asked questions about the Australian NBN and both rubbished it as outdated and ineffective. 200mb a second..lol. I get that now wirelessly for 60 bucks a month.
Of course they did. It’s the typical knee-jerk “don’t wanna” response I’ve come to expect from the Fibrals, led by “Doctor No”.
Here is said letter from Telstra.
Dear Shareholder
Over the past year Telstra, the Government and the NBN Co have engaged in extensive negotiations in an attempt to reach a mutually acceptable agreement for Telstra’s participation in the National
Broadband Network (NBN) roll-out.
Over that period, the support and feedback from all of our shareholders has been greatly
appreciated by the Board and management.
Today, we are pleased to advise that we have signed a non-binding Financial Heads of Agreement
(HoA) with NBN Co to participate in the rollout of the fixed NBN. The transaction, if completed,
would deliver Telstra a post-tax net present value of approximately $11 billion. This includes
payment for the decommissioning of Telstra’s copper network and cable broadband service, use of
Telstra’s infrastructure, and the value to Telstra of avoiding costs, including certain Universal Service
Obligation costs. Payments would be made progressively to Telstra.
The HoA provides the framework for definitive agreements to be negotiated over the coming months
and is an important step in realising the Government’s high-speed broadband vision. It reflects a
commitment by all parties to reaching a mutually beneficial outcome for Telstra investors,
customers, employees and the industry.
While the Government is not a party to the HoA, Telstra has received written confirmation from the
Prime Minister that Telstra would be able to bid for Long Term Evolution (LTE) wireless spectrum
should the transaction be completed and that sufficient regulatory certainty will be provided on a
range of matters for both NBN Co and Telstra to enable the transaction to proceed.
While this is an important step, a very significant amount of work must still be done on many
complex issues, including migration processes, taxation, the future of legacy regulations applying to
Telstra and consequences of any major changes to the NBN rollout schedule. In addition, the HoA
has a range of conditions, including the passage of necessary enabling legislation and ACCC
approval.
Due to these outstanding issues, while we believe the proposed transaction is in the best interests of
shareholders at this time, there is no guarantee it will progress to completion.
We will continue to work through the issues with the Government and NBN Co and update you when
significant developments occur.
Should a final agreement be reached, and all necessary regulatory approvals received, Telstra
expects the transaction would be put to a shareholder vote in the first half of calendar 2011.
Shareholders and investors would receive comprehensive details of the definitive agreements and an
independent expert’s report on the transaction well before any vote.
As always we welcome your comments, so please contact us at investor.relations@team.telstra.com.
Yours sincerely
Catherine
@David Sanderson
Stilgherrian said:
“This agreement means Telstra will indeed play ball. There will be no expensive duplication of fibre networks – unlike the hybrid fibre-coax (HFC) rollout of the 1990s.”
The 1990’s reference was specifically related to Optus, which is not really the point of this article. In the 1990’s various rollouts took place, all with duplication and lack of coordination - including backbones.
If you are suggesting that Telstra really, seriously, considered fibre to the customer duplicating equivalent systems previously installed by NBN Co, then this is not what Stilgherrian said.
Duplication is duplication. It comes in two major styles, as I pointed out.
That one reader is blind to this is neither here nor there - my comments stand uncorrected. Note, David Sanderson, that the NBN is much more than the final mile, which you seem to be fixated on. It is the whole shebang.
There are none so blind as those who refuse to see. Optus is irrelevant and the relevant fact is that the HFC rollouts were competing rollouts of networks to the home. Clearly Stilgherrian believes that there was a chance that Telstra would build a competing fibre network to the home.
You are obviously intent on denying the obvious so I will leave it now for Stilgherrian to confirm that he has made an error. Hopefully, he will have the good grace to do so.
I pay my ISP for broadband but have the additional cost of phone rental to get that broadband. With the NBN cable I can cancel my phone account because with the small amount of calls I make its cheaper to have pre paid mobile phone only. For the last five years or so my rental for the phone has been the major part of my phone bill as 75% rental 25% calls. A decade ago I was with bigpond and my experience with their plans and pricing ensured I wouldn,t do so again. I notice that Telstra has finally delivered its customers better plans although apparently through term contracts and bundling which is what my sister took up. So even though I have been with a rural ISP for the last five years I have been better off than any plan Telstra had on offer, rural or city.
How Telstra was sold without separating retail and wholesale by a government promoting competition is beyond me. A case of go for the higher sale price and forget the national interest. I remember the ” neither fish nor fowl ” comment about selling the second tranche but never the monopoly situation being discussed. Telstra will gain from this agreement but for once so will its customers and the Australian public as a whole. As for me I get to save on a phone rental that onbly serves to attain broadband. Wireless was never a preferred option for me although I checked it out. Being serviced by a phone broadband provider I would have to pay full cost , no subsidy, in Gippsland. Using a wireless dongle thing wan,t any cheaper and from what I have read less secure.
The implication of Conroy’s words this morning (for the benefit of the supercilious and the slow of wit among us) being that it was too late to cancel the NBN. The implications of the Telstra negotiations (for those having the passion if not the ability to act like a government mouthpiece) being not that Telstra seriously considered going it alone, but that the government did consider exactly that.
Thank you David for confirming, apart from what you always seem to confirm, that the imminent rollouts are insignificant trials, and that Conroy’s words were irrelevant as to the question of whether the NBN will ever see the light of day.
“To do all this, NBN Co will have access Telstra’s existing “passive network assets” – cable pits, pipes, ducts and exchange buildings – through a long-term lease. That saves NBN Co having to build their own, speeding up their rollout and creating a new permanent income stream for Telstra.”
I believe this is also an error, at least in regard to pits, ducts and pipes. No coverage I have seen mentions a long-term income stream for these assets. Instead they are being sold into the NBN which will presumably also take over the maintenance of these assets. Thus there is a series of sales but no long term leasing income stream
GEOMAC: You could always go with an ISP/Phone company the provides ULL (Unbundled Local Loop) lines. You still pay $30/month for them, though, so…
James, it would be more appropriate if you admitted that you did not know what you were talking about rather than fire off an irrelevant diatribe.
“if you admitted that you did not know “
I did admit it, when I asked the question. If I’d known the question was going to cause you so much agitation, I wouldn’t have addressed the question to you. Oh, that’s right, I didn’t.
BELLISTNER
Thanks Bell but I checked that out as well . The difference was too small to make any change and I still have phone rental which was the gist of my comment. I understand that cable delivers many other advantages but I mainly want a reliable service without paying for a phone rental to get it. If I didn,t use broadband I would have ditched my landline phone years ago. This is the reason Telstra knows it had to go with the NBN or find an alternative, copper wires are a declining source of revenue. Wonder what would have happened if Sol was still in charge ?
Now here is the REALLY important question: Will the new USO thingy take over the 1194 number and give it to us for a local call cost?
Rush,
Fibre is current generation technology and is the fastest transmission medium available. Wireless technology will never achieve the throughput speeds available through fibre optic infrastructure.
Wireless has massive problems with competing wireless spectrum space, not to mention that it doesn’t scale too well. Ever had mobile phone coverage but you couldn’t make/receive a call?
The speeds that are being talked about (i.e. 100Mb/s, but initially more like 20 to 24 Mb/s) are not the maximum speed of the fibre technology. It’s the speed that is thought can be given to subscribers without overloading the back end switching technology and backbone (including international) links. Multi-mode Fibre can easily achieve speeds up to 10 Gigabits per second (10,240 Mb/s), and that’s using current switching technology. There is no way that wireless will even come close to these speeds with a dense population.
This NBN is fantastic for Australia. Over the one fibre connection into your house you’ll soon be able to get all your TV, phone, internet, pay TV and whatever else comes along in the mean time. There will be bandwidth available in smaller regional centres (where land and workers are cheaper than in the cities) for large multi-nationals to set up call centres, IT Data Centres, whatever that would make use of the available bandwidth.
This NBN will set up Australia’s technological infrastructure for at least the next 100 years. It’s being hailed internationally (in IT communications and infrastructure circles) as an example of how to do right.
As an IT professional, I think this is the right way forward for Australia.
Further to my comment above…
Rush wrote “200mb a second..lol. I get that now wirelessly for 60 bucks a month.”
Telstra have one of the fastest wireless broadband networks in Australia. Their download speeds are from 550 Kb/s (or around 0.5 Mb/s) to 8 Mb/s (taken from http://www.bigpond.com/internet/plans/wireless/ ). Well short of the ADSL2 speeds of up to 24 Mb/s (depending on distance from the exchange) and vastly less than what is possible over the fibre of the NBN.
I’d say more than likely your wireless broadband download speed is 200 Kb/s, or around 0.2 Mb/s.
D Smith, thanks for an excellent summary of the benefits of an NBN. I would add that the potential educational applications are extraordinary and particularly of huge benefit to more isolated schools. For example, regional students could see a live production of a play on a large projector screen and then videoconference with the actors afterwards. Schools that make good use of the NBN will be schools that kids will love to get to every day.
Rush , must be a Fiberal member(DR. NO )? always looking on the negative side of life and not telling the whole truth . I cannot wait for this to happen, Telstra was never going to do this and the fibs didnt want their voters to have access to this world , just Murdochs and the rich mates world. Treat us like mushrooms no more, i can see the light in the tunnel.
@David Sanderson and @John Bennetts and all: Sorry for the delay in responding. Monday afternoons are always busy for me with other commitments.
David, I do indeed reckon that until yesterday the risk of a parallel rollout of fibre to the home by Telstra was there, particularly in highly profitable areas like the inner cities. Or it might have been some other fixed-line technology. Telstra had not yet announced any such plan, I agree, but I wouldn’t imagine that meant Telstra could not have announced such a plan in the future.
Telstra has a history of playing their cards close to their chest, and only rolling out new technologies when “forced” to by competitors announcing their own place. The ADSL2+ rollout is a case in point.
That said, if there’s some real evidence that Telstra had definitely ruled this out then I’ll happily stand corrected.
The “passive infrastructure” is most definitely not being sold to the NBN, but leased. This was made quite clear by Telstra’s CFO John Stanhope in the conference call for analysts this morning. Perhaps this is not being clearly reported elsewhere.
“For the most part payment will be received as our copper network is decommissioned over the next say five to ten years, and then as NBN accesses our passive infrastructure over a more extended period. So as long as they use that infrastructure, they will continue to pay for it’s use,” Stanhope said. You’ll be able to listen to him say that on my Patch Monday podcast when it’s posted late this afternoon.
Telstra’s infrastructure might conceivably be leased to other players too, should there be room.
@Rush Limbugh: Wireless is not the answer — though it will always be able to complement fixed-line services. While you gain mobility with wireless, you also gain the risk of interference, black spots and jamming.
You also run into the physical limits of the Shannon-Hartley Theorem, i.e. the physics of how much data can be transferred over radio signals of a particular frequency and power. The bandwidth has to be shared with all users of the cell. As individual bandwidth needs increase, you need ever more cells placed ever close together. And then those cells need to be connected — with fibre.
I’m not technically adept regarding 21st century telephone options but two points occur:
1. wireless connection runs the risk of being infiltrated by outside parties therefore has a security issue
2. letting your landline go means reliance on a mobile phone. In a power outage, depending how long the electricity is not available, if you have a landline (with a CORDED phone, not cordless) you can still freely communicate. Once your mobile’s battery has depleted there is no way to recharge it, ditto a cordless phone. In an emergency, being isolated could prove life threatening.
In Queensland, where tropical storms are common, power outages are a regular reality. Sometimes they are quickly fixed, sometimes not.
@ zut alors: To fill you in on the gaps…
1. Wireless broadband connections are encrypted, and in this context the telephone is just a special case. But, yes, there is the risk that the encryption system might be cracked at some point in the future, or is already by some random Bad Guy but we don’t know it.
This is separate issue from from the Wi-Fi connections used around their homes or offices, which should be encrypted if set up properly but frequently are not.
2. Correct, the NBN will replace the analog landline, so it will need to have similar works-if-the-power-fails capability. The analog phone system has battery backup, and minions to check that the batteries are in good working order. The NBN will need similar backup power for the CPE in everyone’s homes. A normal analog handset can plus into this CPE.
I have not yet had the chance to investigate whether this is being taken care of. Question on notice.
If you think this plan isnt a few year behind do some research on Singapore and other Asian nations with much higher connectivity rates.
I’m not saying there won’t be some net gain to having the NBN, but for that cost, and for the upgrades needed almost straight away, there are other options.
Can anyone tell me if the NBN will put us in this list?
1. The top internet connections in the world are from South Korea. This country with only the 13th largest economy in the world, rises far above everyone else when it comes to internet connection speeds. Nearly 70 percent of internet connections in South Korea are over 5 Mbps with the average being 15 Mbps.
2. Not surprisingly, Japan ranks second in internet connections and broadband speeds. Japan ranks second on average broadband speeds but over 50% of the connections in Japan are above 7 Mbps
3. Honk Kong ranks third in average connection speed, with 6.9 Mbps being the median, but only 38 percent of the connections are above 5 Mbps.
4. Romania, with a population of 21 and a half million at last count, comes in fourth for internet connection speed, 5.7 Mbps being the average. However, they rank lower when it comes to average superfast connections, with only 45% being above 5 Mbps.
5. Sweden is nearly tied with Romania for extremely high speed connections, with 39% being over 5. They also compete well for average connection speeds with Romania, thier average being 5.6, just one point down from Romania’s 5.7 Mbps.
6. Switzerland is in the number six spot, not making our list for high broadband connections, but grabbing our number six for the average connection speed being 5 Mbps.
7. Our last spot is taken by The Netherlands, which you may be more familiar with as Holland. This country, just west of Germany, competes well with everyone else on the list with the average connection speed being 4.9 Mbps. They completely blow Switzerland away on average high speed broadband connections, with 28% being over 5 Mbps.
Surprisingly, the United States is fifth for having the most computers per capita, but only ranks 17 on the list for average internet connection speeds. The average speed of connections in the US is only 3.9 Mbps.
Only a quarter of the country has super fast broadband connections of over 5 Mbps. China is far behind nearly everyone with thier average connection speed only around 800 kpbs and less than 1 percent of China’s internet users having a high speed broadband connection of over 5 Mbps.
Zut,
Your landline continues to work in a power outage because it’s powered by DC voltage supplied from your local exchange. In a power outage the local Phone Exchange (as in the telephone system in your telco exchange building) runs on battery. You’ll get anywhere from hours to perhaps a day off that battery charge (depending on usage), unless the system is backed by a diesel or other generator.
I’d fully expect all the NBN equipment to have either battery and/or generator backup (depending on the location). You’ll most likely require some power to run the box supplied by the NBN carrier in your house, but someone in a region with frequent power outages could quite easily use a home grade Uninterruptible Power Supply on their home NBN box for emergency calls in a power outage.
Some people used to rig up a small lamp powered off the 48V DC phone line power for use in a power outage. But those people were breaching the telecommunications act and risked having their phone service disconnected. Even though it was quite handy in a blackout. :p
As much as I love the old POTS telephone network, it’s time for it to be dragged kicking and screaming into the 21st Century.
@ Stilgherrian and D Smith
Thanks for the explanations. I’m gradually getting a handle on the 21st century.
@zut alors: Take your time. A lot of 21C technologies are structured in very, very different ways from the 20C technologies they’re replaying — and that in turn means the business based upon them are also very different.
Our concept of what a telecommunications company does has also been shaped by history, with PMG / Telecom / Telstra being both a wholesale network operator, concerned with exchanges and cables and trenches and batteries, and a retail service provider concerned with attracting customers, selling them a product, providing user support and billing them. But they’re really two different kinds of business with two different skill sets.
Yesterday’s agreement means Telstra can get rid of its wholesale obligations in a controlled fashion and known monetary compensation.
Whether the compensation is “the right amount”, well, the market will tell us — although so far the reaction has been positive.
Whether Telstra can fashion itself into a successful retail-only provider, one of many selling services that run on the NBN, remains to be seen — and, indeed, is the key question.
This is very good news and shows a growing maturity by all the parties. Those people who were arguing for different companies building different networks were remiss. The result would have been like the debacle of overground cabling and duplication of services that occurred in the early 1990’s You do not throw the whole baby out with the corporate bathwater. Either/Or thinking is the hallmark of halfwits. Telstra employs a lot of people. Certain section of the private sector can be redeemed. Some companies like Sodom and Gomorrah should be allowed to die if they have absolutely no merit. It is necessary for clear boundaries to be delineated between the private and public sectors. Both have roles and responsibilities. The devil really is in the detail. With wise oversight and management the various command and control issues of the sector can be negotiated. The people of Australia deserve reliable, efficient, fairly priced broadband. There are over 800,000 homes that cannot get fixed broadband. A growing population will only exacerbate the problem. This telecommunications truce is timely.
@D.Smith.
Thanks for putting R. Limbaugh in his correct place, though I am not sure he (especially some one calling themselves by that name) is worth such a considered reply. He is obviously a troll and/or dishonest if he really has that wireless broadband and doesn’t experience frustrations with it.
Another point about optical fibre is that while the associated or chosen technology currently achieves a give speed and capacity, in reality it is future-proofed and will be able to do much higher speeds when/if required.
The duplication of cable was the bright idea of former treasurer Paul Keating and not due to any contract squabling as cited in Wikipedia and elsewhere. He wanted all metro area’s covered by two competing companies so that, if a resident decided to change providers at whim, they could do so - his theory was about choice only. And avoiding another Telecom debacle.
But just like mobile phone towers today; it was local government that stymied full coverage rollout. The contracting period ended with obilgations not being fulfilled since shire’s/councils upped the fees for access.
I’ve been very itchy about people claiming the NBN isn’t wanted and a waste of money.
Its a bit moronic to benchmark the network on civilian uptakes. The whole reason we need to refresh this network is for business. It is incredibly expensive for business to get appropriate network speeds, that is if they even can. They have to be located in the CBD or near it to achieve any sensible speeds to cater for a 20 person+ business and that in itself becomes quite expensive. I think that we need to take into consideration that the NBN might be taking a lot of small business out of the cities.
As for wireless technologies, they do have their flaws. As it is a shared medium with voice and sms services, internet traffic is shaped and at put a lower priority, meaning if lots of people make phone calls, you have no internet. This also breaks any services that are latency sensitive like VOIP and video streaming.
The fact we aren’t needlessly ‘doubling over’ our network is a very good thing.
Zwan, I reckon a Melbourne-Brisbane VFT would be great too. Even better, a comprehensive national freight network of rail and intermodal hubs. It may be killjoy but the questions of cost have to be asked.
The median income earner makes $41,000 a year and pays about $7,000 in direct tax. That’s one part in 40 million of the total tax revenue which was $278 billion in 2008-9. The same fraction (1 in 40 million) of the NBN cost ($43 billion) is just over $1000 from the median income earner.
If a telco salesman came to your door to sign you up for a privately owned NBN, would you pay a $1000 connection fee?
For those not on the median income and tax — total tax revenue is approaching $300 billion a year, so you can just calculate 14 per cent of whatever tax you’re paying ($43bn / $300bn) and that’s your direct tax bill for the NBN.
If we include indirect taxes that we pay on all our spending (GST and company tax on purchases, etc) the total personal income in 2008-9 was $561 billion, and the total tax revenue was almost exactly half of this ($278 billion). One way or another, we pay 50 cents tax from each dollar we earn.
If my assumptions are right, you can calculate 14 per cent of your entire income, and that will be the true cost of NBN to you. Would you pay that much connection fee for a private NBN?
Also I’ve got a technical question: increases in real computing speeds over the last 20 years have not reflected the so-called “Moore’s law” increases in computing power, because bloated software and usage tends to take up any slack very rapidly. Fibre to the home will enable a lot more of your neighbors to play multimedia games and download movies in HD. Realistically, how much faster will the average student or researcher be able to browse and communicate over NBN?
@James McD:
1. VFT. As a student engineer in the 1960’s, BHP and others were competing for the rights to construct a VFT between Sydney and Canberra, with variants to Newcastle and Melbourne. One essential component of the financial models as they were presented to our classes by the proponents was that they required: Taxpayer support; Rights to compulsorily acquire land at pre-VFT prices for construction; and Land zoning rights, coupled with a share of the profits due to rezoning and sale of any land within 1km of the track and several km’s of the stations. Not surprisingly, the proposals never got far.
This illustrates to me the value in community ownership of essential communications, including the fibre wholesale system, either to suburban nodes or, better, to the door.
2. How much faster will your downloads be? The actual capacity of the fibre is much greater than the limit which will be permitted to individual users. In effect, you pay for the bandwidth you get and you only get what you pay for. Thus, your next door neighbour should be able to play as much as he likes without limiting your access. They will pay for excess data transfer if their contract has monthly limits.
Consider also using shareware such as Linux and Open Office, which is free and nowhere as bloated. It’s pretty good these days and has a high degree of compatibility with Microsoft’s bloatware.
Sorry I got the last bit wrong: 14 per cent of 50 per cent is 7 per cent, not 14 (Duh!).
So I should have said: If my assumptions are right, you can calculate 7 per cent of your entire income, and that will be the true cost of NBN to you.
@John, thank you.
@James in regards to your technical question, moores law is in regards to transistor density and we have indeed following that trend if not gone above it slightly, it doesn’t directly pertain to speed (we can blame x86 for that).
What is also important to note with fibre technology is that it is much less likely to degrade over distance. Currently I’m on adsl2+ but I have very low speeds because I am so far away from the exchange (built up resistance over the distance of copper) that I am unable to stream HD content and play multimedia games.
Also having large amounts of bandwidth means we can use greener technologies like cloud computing, rather than have your own personal computer at home, would would have a dumb terminal sitting at home which would feed directly from a server farm, which can easily manage power and capacity much more efficiently than any home PC could.
Thank you Zwan and John, both answers take care of the congestion question.
My main question of cost still remains: 14 per cent of your tax dollars, or as much as 7 per cent of your total income when indirect taxation is taken into account. NBN is great, but is it worth that much?
Your statement does take into account the increase in trade because of the NBN and the businesses that will benefit from it as well. It is a hard question to answer whether it is worth that much because the internet is very dynamic and I couldn’t being to speculate what it is exactly is and going to be used for.
As a network engineer I would say yes, as a tax payer I would say no.
James, your amateurish arithmetic has no relation to the actual cost of the NBN. For starters the NBN is not paid for out of tax. The money for it is borrowed and paid back from the earnings of the system, just as many other commercial ventures, large and small, are.
This venture is being set-up in a similar way to how a regulated private enterprise would do it so your premise of a $1000 connection fee is silly. Did you pay that amount to get your phone connected? Of course not, the connection cost is amortised over time.
James, it’s not the 14% of your tax dollars for one year which is at foot.
Even supposing that the government paid for all $43B of the system out of taxes, the system is being constructed over a decade or so and will be valuable far beyond that.
Think of it as a legacy to those who follow, somewhat like the rail systems and highways. In the main, these have been built during the past 140 years or so, in increments, each funded at the time in its own way. This is even true of the toll roads which will revert to public ownership after 20 or 30 years.
I think it is fairer to think that about 1% of tax or the equivalent in loans money will be spent annually for this purpose.
David Sanderson: Even private enterprise doesn’t just find money lying around. It, too, either uses equity or loans or retained profits, which is really equity retained within the corporation. I agree that the idea of a $1000 up-front fee is inappropriate, but it does indicate the scale of the net present worth of the undertaking. Large, but not huge.
John’s answer is a good argument, thank you. I’d still like to hear what others think.
David’s answer would be convincing but for one flaw: “The money for it is borrowed and paid back from the earnings of the system.”
If the second part of that sentence were true, then user charges would be able to capture that payback. So wouldn’t private industry have been approaching Canberra for permission to build it with private capital, before the government even proposed the idea? (The original tender process doesn’t count, it was for a much smaller project still publicly funded.)
There is no reason why externality benefits towards national productivity would not be able to be captured in usage charges, even if the taxpayer subsidized some disadvantaged users. So, where’s the commercial business case for it, and where are the investors lining up to own it?
Wireless isn’t secure - any encryption currently available can be hacked within an hour or so - and once enough packets have been gathered to unlock the code anyone within range can gain access to your network.
Laser light in fibre on the other hand, being much, much faster and immune to interference cannot be easily hacked into - and since the number of photons being sent and being received can be measured you’ll know if anyone has broken into your communications.
Also to get faster wireless you need a higher signal to noise ratio - which means much higher power and higher frequencies for higher data rates - which means that as power & frequency increase we are approaching the case of having an unshielded microwave oven worth of radiation coming from their wireless routers/devices.
Thats why the NBN is so good for our country - we need as much data going through fibre optic cables as we can.
There are good reasons why private enterprise is not financing such a massive investment but they are not the ones James thinks. They are too complicated to go into here (and I am not qualified to properly present it) but it is easy to research for yourself.
The government has credible modelling that the NBN can be privatised some years down the track and earn a solid but unspectacular return for investors.
@EngineeringReality That is not true at all UTMS(3g) is not hackable within a few hours, only the previous mobile technology (GSM) can be hacked that quickly.
Please don’t make such brash states like that.
@ David Sanderson:
Yes, I have seen reports of a rate of return of 6 or 7 percent over time. This is not normally attractive to private corporations, especially if there are construction, regulatory, competition and startup risks involved. However, private corporations operate quite often in regulated environments, especially when providing essential services.
The government has accepted three of these risks and the fourth, competition, has been addressed recently via agreement with Telstra. It remains to be seen whether the actual rate of return on investment some way down the track will be attractive to a private corporation and I am not particularly bothered if it is never offered to private capital. The main thing seems to be that the fibre thing will now be built, to our mutual benefit.
@ZWAN
With wireless radio communications the entire message can be received by 3rd parties, recorded and farmed out to a server farm or botnet to be decoded. All communications can be recorded for later use. Doesn’t matter if decoding takes a bit longer and is not in real time - cause sooner or later it’ll be hacked.
If you bank on any wireless comms being secure then think again.
OK, a related problem:
We’ve had other discussions about urban growth being limited to the capital cities — urban infill, high rise, and tightly controlled sprawl at the edges. At some point around the time of Federation, towns all but stopped arising organically, and we became stuck with the few we had. This has been a major factor in the outback labor shortage, housing affordability problems, and Sydney’s march towards gridlock. Queensland’s initiative to build three new towns is highly unusual.
A big part of it is excessive government control of land zoning, and this is related to ever higher expectations of civil infrastructure to be provided by government — with councils progressively passing responsibilities to state, and state to federal. So allowing people to build their home where they wish is no longer just a matter of land use and environmental approval; funds for roads and other utilities have to be budgetted for it at a high level. Thus, very few new cities arising opportunistically at junctions and so on.
The biggest one is roads. As we move to a user-pays road system that finally captures its real cost to the taxpayer, railways might one day become commercially viable. Then we may be able to look at privatizing roads.
Is the NBN going to push that goal even further away? If population centres of a certain size are guaranteed access to the NBN, at taxpayer expense, won’t this give federal government a reason to block new developments, on the grounds that the national budget can’t afford to extend fibre to it? Could the NBN have the effect of further locking down Australia’s 19th-century population distribution, just when we’re starting to break free of it?
@James McDonald:
At the centre of this contribution lies a sweeping assumption, that the bush population is growing, or at least would be growing if not for the restrictions placed by land planning.
The bush has suffered for many years from centralised government, which ensures that the first, the biggest and the brightest of everything must be in the centre of the capital city.
Think of libraries, opera houses, sports facilities, educational opportunities, transport and distribution hubs, State government departments, and so forth. This attracts head offices of private organisations, manufacturing and distribution and, again, the list goes on.
All these people living and working in a central location attract the youth from the country and this is a one way street. Returnees to the country are so rare as to be local celebrities.
Now, I have not heard that smallish localities are not going to receive the NBN. That was probably a bit of an assumption. However, those who do remain in the bush, who love the country as I do, understand that that the treasure ends up in Sydney and there is nothing we can do about that. We also accept that we co-exist with limited water supplies, occasionally poor roads, wobbly communications and bushfires.
However, for James to pin NBN and town planners on this picture in this manner is odd. Typical country folk seek fair opportunity, not personal right to demand from the public purse extension of services to the remotest paddock, on demand. That type of cargo cult attitude is far more typical of the cities, especially the capital cities, where everything is somebody else’s problem and personal responsibility is disdained.
The problem with development in the bush is not the NBN. It is as it always has been, driven by the “me first” attitude of the centre, which remains ignorant of the opportunity and value of the periphery.
It is attitudinal, not physical.
John, I agree with you and I’m not worried about people in the country bludging freebies. In fact, I’d like to see more of my tax dollars spent breaking out of the urban deadlock. That’s why I was disgusted with NSW Labor in 2007 whose entire transport policy consisted of Victoria Rd and the Inner West Metro, more interested in favoured property values than actually transporting people.
My concern is government saying “No you can’t do that because then we’d have to give you this, and you don’t have enough votes for a porkbarrel.”
If federal government provided more of a foundation fibre grid, leaving local communities — city and country — to pay for their own subnetworks up to a reasonable maximum distance, then rural communities would be much more on a level playing field with the suburbs. And new developments would simply factor in proximity to the grid when selecting greenfield sites.