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Sep 23, 2013

NBN Co board refuses to drink the poisoned chalice

It's no surprise the entire NBN Co board has resigned. The Coalition doesn't want NBN Co to succeed, and the technological and political challenge ahead is mighty.

The entire NBN Co board have offered their resignations. And who can blame them?

An NBN Co board job would be a poisoned chalice right now, because NBN Co is being set up to fail, either as a byproduct (intended or not) of introducing wholesale competition, or to provide a clean and obvious historical example that “proves” Labor can’t manage infrastructure projects, or both.

As Alan Kohler succinctly puts it at Business Spectator, that the Coalition plans to use fibre-to-the-node (FTTN) technology — which means relying on copper wire for the last few hundred metres — rather than fibre to the premises (FTTP) isn’t the issue. Competition is the issue.

But for that to work, NBN Co has to be a monopoly, and the very concept of a monopoly goes against the Coalition’s religion. Its policy makes it very clear that the monopoly will go: “The Coalition will remove or waive impediments to infrastructure competition introduced to provide a monopoly to Labor’s NBN, and investigate opportunities to invigorate and enhance competition among retail service providers (where hopes that monopoly infrastructure would enable a dynamic retail market have so far been unfulfilled).”

With competing wholesale providers able to cherry-pick the most lucrative parts of the market — such as Telstra’s existing cable network in the inner cities, or any number of players running fibre through greenfield housing developments or to high-rise apartments — NBN Co will be left to do the bits no one else wants because they’re not profitable enough. NBN Co is then forced to raise its wholesale prices, making them unattractive to the retail telcos, which have to package the NBN Co’s raw wholesale connectivity with support and application-layer services, such as email and web hosting, and flog them to the public.

The result? Commercially successful wholesale broadband providers in the cities, and NBN Co struggling to deliver its now-overpriced services. “See?”, says the Coalition, “We told you that the private sector is more efficient.”

Would it be too cynical to then imagine some concocted “budget emergency” forcing NBN Co into an asset fire-sale, with private operators picking up whatever they’ve managed to roll out at knock-down prices?

“Turnbull’s challenge is now to deliver faster broadband speeds more quickly than almost any other developed country.”

To give new Communications Minister Malcolm Turnbull credit where it’s due, the Coalition plan does have the potential to deliver at least some significant broadband speed increase sooner to those in most need, but there’s some significant challenges too — even apart from having to create an entirely new board for NBN Co.

The FTTN network still requires the installation of tens of thousands of nodes — that is, the roadside cabinets where the optical fibre is connected to the existing copper network — and that means talking once more to all those cooperative people in local government. There are still many unknowns about the state of the copper network. How much of it needs to be replaced anyway? And there are many contracts to be re-negotiated.

Then there’s the fact that he’s starting from behind. Australia is now well behind the pace when compared to other countries, and Labor can’t take all of the blame. In the mid-1990s, Australia had the third-best internet infrastructure in the world, after the US and Finland, whether measured in terms of percentage of households connected, or total internet bandwidth per capita. By the time Kevin Rudd replaced John Howard as prime minister in 2007, we’d dropped out of the top 10 completely, and we were arguing about whether we were still in the top 15.

The latest global State of Broadband Report was released by the United Nations’ Broadband Commission over the weekend. Australia’s ranking is now down to 29th place in terms of fixed broadband penetration, and 22nd place in terms of the percentage of the population that using the internet.

While we’re sixth place when it comes to mobile broadband penetration, we need to remember that it’s the fixed connections that do the heavy lifting — now, and for as long as physics operates.

Turnbull’s challenge is now to deliver faster broadband speeds more quickly than almost any other developed country. It’s a big ask.

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22 thoughts on “NBN Co board refuses to drink the poisoned chalice

  1. CML

    How are those who voted for the Coalition going to defend their action? What you now tell us Stilgherrian, is that the government will virtually destroy the NBN, certainly for those in rural and remote areas. The mind boggles!
    Why were we not told about the ‘competition’ priority (as opposed to the FTTN alternative) BEFORE the election?
    We really do have to get rid of this idealogical government as soon as possible. They are hell-bent on wrecking the joint!

  2. Timehhh

    Yes, because infrastructure-based competition worked so well last time it was tried, when Optus and Telstra rolled out their cable networks…
    What this really means is less retail competition, because the barrier to entry to providing a retail service is building your own network, rather than simply buying wholesale bandwidth from an open-access network where smaller ISPs are on level terms with large ones.
    Looking forward to more of the same old failed model where the wholesale provider is also the retail provider and can rig the system to its own advantage.

  3. @chrispydog

    Tony’s a ‘builder’ don’t forget…he’s making the superhighways of the 19th century: roads.

    Vision, huh?

  4. klewso

    Surely a monopoly that goes against the Coalition’s religion – depends on who owns it?

  5. Harry Becher

    You forgot the most staggering figure, that we’re approximately 94th in terms of average upload speed: Below Ethiopia and Sudan.

  6. Jimmy

    Klewso – Given the parties current stance of tackling carbon emmissions they aren’t that devout.

  7. ianjohnno

    There are reports that the government want to bring on board a former telco CEO.
    Add the bloke who was his board chairman and NBN will be roadkill in no time flat.

  8. Honest Johnny

    Great big node cabinets on every street corner, what an eyesore. When people start crashing into these great big node cabinets on every street corner and lives are lost because of them, will we hear the same howls of protest that arose from the pink bats?

  9. michael r james

    Don’t you worry about that.

    They are going to bring back Ziggy to run the NBN. (“run” as in run into the ground and I don’t mean optical fibre). No conflict of interest in that. After all he is an expert at privatising (T1, T2, T3 of Telstra) so obviously just the man for the job. (“Privatising” as in transferring public monopoly to private monopoly to be run by grotesquely over-paid management.)

    Of course they will have to make clear to him that N doesn’t stand for Nuclear!

    And besides, the LNP have a mandate.

  10. Paddlefoot

    Turnbull Towers on every street corner. What next – Garden nodes ? Maintenance nightmare coming up.