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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.

  11. cairns50

    this is pure vandalism by turnbull and abbott

    can you imagine a labor govt being elected in the 50s or 60s and stopping the snowy mountains project?


  12. Steve777

    The Coalition don’t like monopolies – that’s why they privatised Sydney Airport, which is now competing with all the other international airports in Sydney.

  13. Steve777

    can you imagine a labor govt being elected in the 50s or 60s and stopping the snowy mountains project?

    The Snowy Mountains Scheme was conceived and started by Labor in the late 1940s. A Liberal Government would never have the vision for such a project. Fortunately Robert Menzies and his Liberal successors continued and completed the scheme. John Howard or Tony Abbott would have stopped it and sold off any bits that were profitable for peanuts. In fact, Tony Abbott may yet do that in the next few years.

  14. Electric Lardyland

    Yes, what’s the bet, that in a couple of years time, when the Federal budget deficit is totally out of control, due largely to Abbott’s neo-Reaganomics, there will calls to flog off the bits of the NBN that have been built? And what’s the bet, that News Ltd will likely be a major beneficiary off the sell off?

  15. Jonathan Maddox

    Where we’re going, we don’t need … 😎 … roads.

  16. Hamis Hill

    The poor whi-e trash of Asia, become the laughing stock of the neighbours.

  17. Two Bird Stone

    Check out this Swedish broadband company I just saw in Stockholm: https://www.comhem.se/
    According to the advertisement (top of the home page) Tony Abbott’s NBN at 25Mbps is somewhere between a fat woman on a scooter and a fat woman on an antique bicycle.

    The Liberal NBN is nothing less than an international embarrassment which we’ll be regretting (and paying for) for a generation.

  18. Mike Flanagan

    They haven’t even started yet Hamis (Hi)wait until they until they ‘open for business’ our Queensland tar sands

  19. tonyfunnywalker

    Like most other policies this is another one that was not discussed in the Master Chef Election. Stilgherrian you seem to have missed the Murdoch factor and the monopoly that Foxtel has for Pay TV. So Murdoch can add to his Newspaper monopoly. ( Monopoly in the US is defined as controlling 20% of the market) and in most developed markets there are penetration limits on Monopoly and Duopoly power. It is OK for Katter who wants to have Woolworth divest share then it should be the same for Murdoch. For a Capitalist Murdoch is a “closet Socialist” when it comes to the Communication Business. Monopoly pricing brings big dividends. So rural Australia gets in the throat again or in the pocket – paying a premium for service – do you think that Business will relocate when a fundamental infrastructure is premium-ed. It is difficult now to get doctors/ teachers/ to relocate to rural Australia – so what are you saying Tough Luck move to the City and add to congestion costs of doing business? No wonder Abbott got rid on the Regional Australia portfolio. Another Mushroom decision. BTW Kohler works for Murdoch -… so take what he says with a pinch of salt. I note there is a move to banish the FIRB – it all adds up to a Murdochracy decision.

  20. Scott

    I actual think it’s a pretty unselfish thing for the board to do.

    Almost impossible to get rid of board members of these government companies, so by offering their resignations, they are allowing Turnbull to appoint his own guys to implement the new strategy. Bravo.

    If only the guys from the clean energy finance corporation would do the same and allow Greg Hunt to run climate policy the way he was elected to do so. Unfortunately it won’t happen. The difference between ideology and business.

  21. bjb

    Forty years ago Whitlam presided over a great vision which shaped many parts of Australian life for many years to come. It is quite likely that Abbott will do the same, but not in a good way (unless you’re part of the 1% of that is).

  22. DiddyWrote

    Lets think.
    Australia largish continent, small population mostly squeezed into five major metropolitan centres which are separated by considerable distances from one another.
    A tyranny of distance. High rents in ever more congested CBDs. Ever longer commuting distances and higher traffic congestion. Expensive crowded internal flights between these major cities.
    A general workforce that is more and more dealing in digital data.
    A rural agricultural population that desperately needs an influx of younger blood.
    With a complete high speed fibre optic broadband network a lot of these infrastructure problems would disappear.
    So who would lose?
    Large banks that gain enormous rental returns from airports and business rentals.
    A chance to future proof Australia for the next fifty years vs some bankers getting bigger bonuses.
    The Coalition will deliver the correct outcome to their backers regardless of the cost to Australia’s future.


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