Wednesday, August 11, 2010


It took a lot for the Australian Government to say sorry to the stolen generations. It is always hard to express an emotional reaction of regret for the predicament of others.

But I really do feel sorry for the coalition. They launched their broadband policy yesterday. It got roundly criticised in the twitterverse and by seasoned commentators.

The reason I feel sorry for them is that they are captives of their past and hence constrained dramatically o the policy dimensions. The constraints they face are the fact that as vendors of Telstra they feel responsible to Telstra shareholders (the infamous Mums and Dads), as the 'privatizers' of Telstra they have an abhorrance for further Government ownership, and as the imagined architects of competition they flounder for a market based solution to a problem they couldn't solve in Government.

The policy is a mish-mash that doesn't address any real issues. The valid criticisms that could be made of the NBN are not made because to make them entails accepting principles that are unpalatable to the coalition because of its past.

Before I go through the policy let's just note that communications policy featured highly in the campaigns the last two times government changed i Australia. In 1996 John Howard won in part on the support of the environmental movement, support he won by promising to create a $1B environment fund. That fund was tied to the proposal to sell the first third of Telstra. So communications policy delivered the environment vote that was important in the outcome.

In 2007 the NBN (Mark I) was the defining policy (other than climate change) that delineated the ALP with having a view of the future.

Both of these policies were launched well ahead of the relevant election; they became part of the narrative delineating the parties. This coalition policy has been snuck out eleven days from polling day. Worse the leader wasn't able to stand beside the shadow releasing it, and couldn't personally defend it (see note).

The coalition finds itself in the same position as the ALP was in 1998, 2001 and 2004. Writing a policy to defend a previous position rather than moving on.

Now to the actual policy; it is hard to figure out other than there will be a new beast called the National Broadband Commission that will advise the Government on what actual projects to sponsor to fulfill its grab-bag of plans. Not to be called an "expert group" this time since both parties have had one of those before - the coalition as an expert group to determine a tender for policy, the ALP to determine a winner for NBN Mark I. The coalition has no plans for any fibre network - they even seem to want to back away from mandating fibre in greenfields estates.

They do plan to build a "national broadband database" - not a bad idea that someone should actually map exactly what service is available by every address in the country. Unfortunately this is not as simple as it sounds because the availability of broadband depends on the cumulative demand i an area (elstra can run out of copper). The problem with this plan is that the coalition previously proposed in the Broadband Blueprint in 2006 to map backhaul. The policy stated;

Access to efficiently-priced backhaul is important in a competitive market because
it allows new carriers to provide a service in places where they do not own their
own networks. The more competitive the backhaul networks the lower the prices
that will be paid by consumers.
In the past, commercial sensitivities have prevented sharing of the extent of
networks across Australia, particularly backhaul. For the benefit of all providers
and government these issues need to be resolved as far as possible.
For the benefit of all providers, the Australian Government will continue to work
with industry to develop an interactive map of backhaul supply.

I'm prepared to be corrected, but in the period following the release of that blueprint it seems absolutely nothing was done.

The NBC will now be charged with "picking winners" for the handing of $5B in grants to the private sector. These grants will cover five areas - fixed broadband optimisation ($750M), regional fixed wireless ($1B), metro fixed wireless ($1B - this one is an investment), satellite services ($700M) and backhaul ($2.75B). At least the one body will be deciding, not like the tender for Broadband Connect being conducted at the same time as the coalition expert group that was going to assess the "tender for policy" for FTTN.

Let's unpack these. Fixed broadband optimisation. This is talking about places where there is copper but it is not a clean path to the exchange - typically due to "pair gain". How do you replace a "pair gain" - either by deploying a whole new copper loop or moving to an FTTN architecture. But the FTTN architecture will be little pockets of orphan architecture. What will be the access regime to these? Can anyone other than Telstra build them? I think not. So the deal is to offer Telstra $750M to upgrade their network.

The regional wireless is really the bit that looks like retendering OPEL. At least if the real broadband database is completed first then there can't be the embarrassing disagreement about coverage that plagued that contract.

The metro wireless is a new promise and idea. The timing (doesn't start till 2013-2014) makes it clear this relies upon the 2.5 GHz and/or 700 MHz spectrum. That's all there is and despite the coalition proposing to be "proactive" on spectrum one should note that neither of these can be brought any further forward than they are now, where they are now has been entirely the achievement of the Labor Government and the spectrum section of the 2006 "Broadband Blueprint" is an embarrassment that the coalition would hope to ignore.

It is hard to figure how the metro wireless promise fits with the fixed optimisation program. Why not simply fix all the copper - that is by FTTN to only those parts of exchanges where the copper runs are too long.

On satellite there is basically no difference between the coalition and the ALP - merely a note to history that AUSSAT was the right idea too early. I've already commented on backhaul. But let me add it would be cheaper to nationalise the existing Telstra fibre network and sell it at a subsidised nationally averaged price than it would be to invest in duplicating fibre on routes that already have more capacity than required.

Meanwhile the NBN itself escapes the scrutiny it should have. Firstly there is no convincing story on the backhaul versus access network component of the national network. Secondly the priority for deployment of the NBN is unclear - commercially you would build it first where the broadband density is highest, for policy you'd build it first where there is no DSL. Thirdly the timescale to improve the really unserved areas is too slow. Fixed wireless now would be a good infill service but lack of clarity about hen areas will be reached by the FTTP creates an overhang for the market in meeting it.

Conroy and Tanner hatched the NBN in part as a way to restructure the industry into structurally separated components. Telstra could have won NBN I by agreeing to it - but didn't. The coalition can't disconnect itself and realise that a policy that does not separate Telstra is an insufficient policy.

Finally, the coalition has its obsessive fear about investing in telecommunications. It was the sale of Telstra that ultimately paid off all the debt paid off by the Howard Government. But the "carrying value" to the Commonwealth of Telstra was zero - it had received no government funds from the budget since 1959.

The NBN will in the long run be the same. Twenty years after it is built it will "owe" the Government nothing. The cash-flow from its revenue will justify a multi-hundred billion dollar sale price. Building the NBN is the best "Future Fund" the country could have.

The coalition are captives of their past and cannot see this.

NOTE: At least Abbott was kinder to Smith than Howard had been to Abbott in the 2007 campaign. It was Howard's insistence that Abbott travel to Melbourne for a policy launch that made the then Health Minister late for the health debate at the NPC. Abbott's lateness and subsequent treatment of Nicola Roxon was an enduring memory of the campaign.

1 comment:

ian said...

An interesting exposition.

Telstra already has an extensive FTTN network, and would probably have expanded this or built FTTP (at least for new developments) IF it could have gained the regulatory protection it sought.

At the time of OPEL tender FTTP was the logical solution, but FTTP now costs little more, and would be cheaper in the long term.

I see no realistic alternative to single fibre backhaul & distribution networks. Who runs these and on what terms is the issue (also deployment timing).

I disagree with the suggestion to nationalise the existing Telstra fibre network. I am sure the bulk of this is still SDH (including all the capacity leased to other carriers and customers). The integrity of the network is the day-to-day operation of this (which includes routine reconfiguration). No carrier could give this up.

Telstra made a decision in the early 1990s to migrate all its transmission to SDH and completed this by 1995/96 moving to a single national control centre.

I am sure Telstra is examining other options, but if you total the bandwidth requirements for all its voice and mobile services I expect SDH would still be the optimum solution, and well within the capacity of existing SDH network, particularly if the "internet" traffic could be migrated to a more suitable technology.

I do agree that use of existing Telstra dark fibre would be more sensible than rolling out another fibre network - but is this not what the NBN Telstra agreement will achieve.

Finally don't forget, the most expensive part of a telecommunications network is the hole in the ground.