Confirmation bias - the NBN and facts

After my last post for 2013, in which I was taking as a given the need to build a fixed high speed broadband network, I've started 2014 engaged in a "twitter-sation" with a gentleman whose twitter description is "business broker".  I had completely forgotten that there is still a bunch of people out there who seriously believe that any investment in fixed broadband is a waste because it will be bypassed by wireless.

"The NBN is obsolete because of wireless" claim

The conversation started innocently enough with a question to me asking if I'd ever heard of apps and including this chart.

 

As I'd written about the idea of using technology to generate letters to MPs I was wondering if this was some cryptic hint that I should be looking for an app not a website.

 

The reply was that "Nobody is using cables. The world is going wireless at a rapid rate."

 

I replied citing the ABS stats on downloads per service (more on this later) This evoked the response "ABS stats? How about some global data that is up to date? You do know what Android is? " This was accompanied by the graph below.

 

 

Now I was finding all this interesting - in part because I was carrying on the twiiter-sation using my iPad and the home WiFi.  I asked my respondent what he was actually using and don't think I got a reply. 

 

Now the ABS Stats I forwarded were only to December 2012 because that was the set I found using my iPad and a quick Google search.  I realised that I'd actually put all the June 2013 data up in this blog post on 8 October. 

 

My interrogator seemed to place some great store in the use of international sources rather than domestic ones. I'm not sure I actually ever got the relevance of either of the two charts - especially since as they are both cumulative data sets the growth rates are relatively modest. Apps is a difficult one because there is no "limit" to it - but the Android devices showed a distinct slowing. 

 

But the question remains over what networks are the connections made.  The Cisco VNI global data and forecasts are as follows;

 

Global Fixed/Wired was 59% of total IP traffic in 2012, and will be 45% of total IP traffic in 2017.

Global Fixed/Wi-Fi was 49% of total Internet traffic in 2012, and will be 56% of total Internet traffic in 2017.

Global Mobile was 2% of total IP traffic in 2012, and will be 9% of total IP traffic in 2017.

 

When it is recognised that the period 2012 to 2017 sees the full explosion of mobile devices it is clear the per service download trends will continue for a while.

 

Attempts by me to use the comments of Telstra and Optus in support of the idea that fixed networks will still do the heavy lifting, and that the former CEO of Vodafone AU Bill Morrow was clearly backing the fixed line networks were met with derision.  The point that mobile networks rely on fixed was met with "here we go again… repeating same drivel. yes mobile tower uses fibre as backhaul. Why raise something so irrelevant?" I really didn't have the energy at that point to explain the mismatch between Cooper's Law and Moore's Law, that higher speeds like 4G don't magically make more spectrum appear so long term strategies are about smaller cells and traffic offload.

 

At the same time came the real stunner "As for Telstra - their 4G profits say it all!"  As I'm pretty sure Telstra doesn't even declare profitability separately between fixed and mobile, I am thoroughly confused about a report on the profits of 4G.  This, of course, did follow from the comment " look at #nbn financial & take up rate, then compare it to Telstra 4G."

 

So it is time to do some research.  What exactly is Telstra saying about 4G?

 

A quick review of the October 2013 Investor Day presentations reveals no separation out of 4G growth or profitability.  Pages 12 and 13 reveal that mobiles revenue in total is growing at 6%, but that margin remains at 38% - up a bit but not significantly different from 5 year trend of 36%.  Full year results announcement to June 2013 did include the comment "We now have sold 2.8 million 4G devices, including 1.9 million handsets and 200,000 tablets, 400,000 dongles and 300,000 mobile WiFi devices."  It noted that 27% of handheld devices were now 4G.  It did not record what percentage of time 4G devices used the 4G network or were actually roaming on 3G (at the time 4G only covered 66% of population.) It also noted that total CapEx of $3.8 billion "has enabled us to meet ongoing customer demand, support the accelerated rollout of mobile 4G LTE and meet ongoing delivery of NBN commitments."

 

So I don't really understand the assertion of high take-up rates and profitability.  NBN take-up is - despite incorrect reports to the contrary - actually very strong. (NBN Co's presentation to the JCNBN on 19 April 2013 demonstrates this.

 

My interrogator also questioned whether NBN Co should be happy with 2% completion after 5 years. Actual commencement of construction on the FTTP network only really commenced once the Definitive Agreements with Telstra went unconditional in March 2012.  The figures also pay no attention to the extent of build of the transit network (of which Telstra builds part), nor of fixed wireless and satellite. It is also amazing that the "2%" number endures despite there being an additional 100,000 premises passed from July to December.  And even the "Revised Outlook" from the Strategic Review only pushed the completion date to 2024 (Note also that if the FTTP build were to not cover the HFC areas the revised outlook would presumably see it complete by 2021).

 

Anyway the whole discussion of mobile as an alternative died when I got no response to my question on what device/network combination my interrogator was using. By the way for the record are screen shots for my iPad using WiFi and my 100 Mbps Telstra cable extreme and then using the Telstra 3G from home (to a Telstra testing point)

 

 

Simple observations: (a) given a choice for doing absolutely anything I will prefer the faster download speed - the difference is immense even on something as simple as refreshing the twitter app and (b) the upload is rubbish on both and its importance is often underestimated for ordinary browsing.

 

Corporate Plans and other reports

 

So the twitter-sation suddenly leapt into a third new territory with the comment "Why was @AlboMP hiding a report that values #NBN at NP Value of NEGATIVE $35b?" 

 

This sudden diversion conflated two issues.  The first was the assertion that the Government refused to release the Corporate Plan 2013-16 prior to the election.  This claim was made as recently as 18 November by Mr Turnbull in the Parliament, and on the same day Mr Albanese demonstrated why it was a false claim. (The draft was ultimately published on the AFR website after it had been leaked). As was revealed by NBN Co's CFP Mr Payne at a Senate Committee the Government had asked NBN Co to revise the draft that was submitted to reflect the effect of the suspenson of Telstra remediation work while new asbestos handling procedures were implemented.

 

The second was a report in the Australian on 16 November that was headed "Labor told of $31 billion NBN risk."  The existence of this report was not new - after all it was reported on by the AFR on 13 April 2013. 

 

The reports of the Lazard review contain all the essential information but the Australian version specifically has been crafted to mislead.

 

The review was commissioned by the Government to provide advice on the Telstra/NBN Co agreement (as reported by the AFR and in the actual story in the Australian), not on the overall project (as claimed in the Australian editorial of 18 November).  The key recommendation of the report was that the Government should seek lengthier non-compete clauses from Telstra. 

 

The Lazard report raised concerns about the effect of wireless substitution which was covered in the original Telstra agreement by a prohibition on Telstra promoting wireless as a substitute (as reported by the Australian). This was deleted at request of the ACCC (as reported by the Australian) but at the time all parties agreed it was actually unnecessary because to promote mobile as a "substitute" would be misleading and deceptive conduct.

 

The single biggest clanger in the original Australian report was to claim "Net present value calculations are done specifically to take the risks involved into account." They are not.  They are done to make it possible to compare two sets of future cash flows - in this case the "Telstra deal" and the "no Telstra deal" scenario.

 

The nub of the issue is included in one line in the Australian report "The advisers said the project had significantly underestimated the cost of its capital, and provided alternative figures, but in the end reasoned that this was a theoretical endeavour."

 

That's really it - to do the deal/no deal comparison Lazard simply used a much higher discount rate for doing the NPV calculation - in part because they wanted to use a lower discount rate to reflect the idea that the Telstra deal de-risked the project.  The $31 negative NPV was simply the outcome of doing that - and it certainly wasn't anything remotely approaching a '$31 billion risk."

 

Mr Turnbull himself fuelled the confusion over the Lazard report.  In the Parliament on 20 November Mr Turnbull noted that in December 2010 Minister Conroy had said the expected rate of return was 7 per cent.  He continued "The only problem was that this was one month—only one month—after the government received advice from Lazard, the investment bank, that the NBN project had a negative value of $31 billion. No wonder Australians lost faith in Labor. No wonder they are sick of their spin."

 

The implication is that somehow one could not say there was a rate of return of 7% if the Lazard report had found a negative NPV. This is not the case.

 

Discounted cash flow analysis is not something most people deal with - but business executives, economists, some accountants, and bankers would deal with it regularly.  The internal rate of return (IRR) of a project is the discount rate at which the NPV is exactly zero.  In a set of cashflows for an investment with upfront investment followed by eventual returns using any discount rate higher than the IRR will automatically generate a negative NPV. 

 

As the Australian article had noted this is exactly what Lazard had done.  No mystery. No new information. No new risk not quantified.

 

My interlocutor at various points in the twitter-sation had disparaged Australia's tech media as biased in favour of the NBN and had critiqued any pro-NBN comment as "busy publishing #nbn copy from Conroy's office." The latter was particularly hilarious because one high profile online journalist had observed to me that his apparent pro-Turnbull line had come about because Turnbull's office was far more useful in providing information for stories than Conroy's.

 

In particular he was praiseworthy of the Australian for reporting on the Lazard report when no one else had.  Technically he was wrong because the AFR had already done so in April. But the substance was that only the Australian had been provided with a leak in November.  And the article reads like they had the actual report, not just someone's comments on it.  But unlike the AFR with the draft Corporate Plan the Australian did not publish the report in full. 

 

It is mighty odd that the Australian has supported a call to overturn a long standing convention about cabinet submissions when it could apparently publish the information itself.  It is also quite odd because someone has clearly been hawking the story around since April about this report.

 

The protagonist as I now think of him was today asking "What? You still don't know about the report was sitting on since 2010? " This is my long form reply to that.

 

He quickly pointed to three new items in the Australian as "You guys are beginning to look like a doomsday cult! More articles on obsolete #nbn".  Note the source is again the Australian.

 

Conclusion

 

I resorted to this long form response because the twitter-sation was going nowhere. This really wasn't just because it is hard to discuss the kinds of issues here 140 characters at a time. Similar frustrating conversations can be observed in the comments sections on on-line publications - Delimiter has many examples.  And whirlpool.net.au is just a mine of such conversations.

 

It reflects far more the principle of "confirmation bias."  The rather good article on Wikipedia defines this as;

 

Confirmation bias (also called confirmatory bias or myside bias) is the tendency of people to favor information that confirms their beliefs or hypotheses. People display this bias when they gather or remember information selectively, or when they interpret it in a biased way. The effect is stronger for emotionally charged issues and for deeply entrenched beliefs. People also tend to interpret ambiguous evidence as supporting their existing position.

 

 The original description was applied to a tendency of people to use tests of a hypothesis that confirm their hypothesis rather than ones that don't.  This is generalised to a biased search for information and a biased evaluation of information.

 

In the context of discussion of broadband policy the position of The Australian has been very clear. One interpretation of this though is that the paper adopts the position that it expects will sell more newspapers. Newspapers by definition are more attractive to people who are not "digital natives" and hence a broadband policy story that is likely to trigger a purchase is one that confirms the anti-technology bias. 

 

The reverse is largely true of mostly on-line sources.  That is it is a logical commercial response by each media to undertake its intermediation task in such a way to confirm the beliefs and hypotheses of the people they want to attract.

 

Indeed, there is a reasonable theory that the Murdoch media's political coverage in general over the last forty years has been more a matter of following public opinion than forging it. The correlation between the Murdoch policy stance and public opinion does not provide evidence of which way the causal flow operates. 

 

Confirmation bias is a real phenomenon; none of us is immune to it. However, having policy discussions in fragmented form such as Twitter or the grabs of the nightly news doesn't really make it possible to address policy issues in such a way that confirmation bias can be addressed.

 

In policy areas outside broadband the same facts apply.  People on the left will incant "social justice" and the like minded will find al the evidence why policy to help the less well off is justified.  But people of the right simply hear "culture of entitlement" or worse (see Marlene Goldsmith's Social Justice: Fraud or Fair Go).

 

The biggest problem with confirmation bias is that we don't know we are doing it.  The best way to avoid it is to take the very conscious effort to understand what the evidence being presented o the other side really says and write a response directly to it rather than to just quote an alternative statistic. 

 

I'm not sure I totally pulled that off in the above - but at least I think my response on the wireless question shows that I do not have a myopic view about the future of wireless devices.  Indeed there are deeper industry questions about whether only the three mobile operators themselves will be able to properly integrate the use of home based networks with mobile networks and thus create a strategic risk for the future of MVNOs like iiNet and TPG.

 

But the broadband policy debate is far more complex than protagonists on either side will admit.  In many ways it really is a little like climate change. Just as one cannot conclusively prove that the planet is warming due to the effects of human activity, because of the uncertainty of future applications one cannot absolutely assert what the full future benefits of ubiquitous fibre broadband will be. But just like with climate change one can make a risk-weighted decision on what the right choice should be.  In the case of climate it is to move to reduce carbon emissions.

 

The NBN Co strategic review actually found the cost savings of building to an all-fibre network in the future were relatively small compared to the overall cost of the project.  And this is with cash-flows assuming away most of the earlier high end use of an all fibre network.

 

The last time a major fixed network investment was made in Australia it was Telstra's decision to build HFC after Optus had.  It is well known that at the time Telstra expected the investment in HFC to be value-destroying - it had a negative NPV of about $4 billion.  But not acting had a bigger impact - negative $7 billion.  (see page 89 of Managing in Australia).  However, these financial forecasts DID NOT include revenue (or costs) for also using the HFC for Internet connectivity.  In April 2012 Telstra CEO David Thodey called Foxtel Telstra's best investment - which has to include the HFC investment.

 

And that ultimately is one of the core questions - what are the unknown upsides of building FTTP now. The one thing we do know is that if we don't build FTTP the upside will be zero. So what is the "prudent" decision?  Is it to forgo the upside - or make an investment and realise the upside.  Telstra's twenty year old HFC decision gives a clear guide. 

 

 

 

Postscripts

 

1. The Australian editorial referred to above opened with the following.

 

In April 2009, The Australian urged the Rudd government to produce the business case for what taxpayers could expect from their investment in fast broadband.

           

Despite repeated urging, Labor refused to subject the nation's largest infrastructure project to a Productivity Commission cost-benefit analysis. As did the Gillard government. The obvious reason they didn't want the numbers crunched for public scrutiny was the extravagance of their "Rolls-Royce" fibre-to-the-premises model.

 

This editorial reflects an ongoing confusion in Australia's media between a "business case" and a "cost-benefit analysis."  The business case was indeed published - it was the Corporate Plan 2011-14 published in December 2010.  That was subject to independent review by Greenhill Calliburn who found it to be of the standard you would expect from a major listed company. 

 

2. The ethics of leaks.

 

When a journalist is basing a report on a leaked document they have more leeway than with reporting on a public document to be selective in their reporting, or indeed to make factual errors that may stand uncorrected.

 

Neither the Journalists Code of Ethics or the Australian's Professional Conduct Policy makes any direct reference to the issue of leaked documents.  But they are featuring more highly in everyday reporting as digital technologies make it ever easier to copy and distribute whole documents. And they work far more effectively than "we have been told" stories.

 

Surely it is time that the policy be that the source document be published - not necessarily on the day of the story but at least with sufficient currency that the accuracy of reporting can be scrutinised.

 

3. The case of Israel

 

A former colleague just informed me of a December decision by the conservative Government in Israel to back "Digital Israel" which seeks to make all interaction between Government and citizens paperless.  That part is very much the same as "Digital First" which was announced by the Labr Government in June 2013.

 

Interestingly the article notes that "to ensure that everything works the way it is supposed to" the Government is also "subsidizing a fiber-optic network that will let Israelis surf the Internet at speeds of 1 gbps (1 gigabit, or 1000 megabits, per second) and more...By 2020, some 70% of the country should be covered with a total of 25,000 kilometers of fiber optics in place when the project is fully completed."

 

So there you have another Government - via its electricity utility - investing in FTTH, offering 100Mbps with plans for 1Gbps.  Sounds familiar.

 

4. Apologies for the fact I accidently published this before it was finished.

 

 

 

 

 

 

 

Broadband - Looking Back and Looking Forward

As December draws to a close we get to reflect on the year that was.  With an election it was always going to be an eventful political year, but it has been even more eventful when it came to the NBN.

Ultimately it got off to a bad start when in February at Estimates NBN Co retreated from a forecast made to an October 2012 JCNBN hearing that they would pass 300,000 premises by June 2013, advising that they were now only forecasting the original target of 286,000.

Matters became worse when on 21 March they advised they would not meet that target, due to contractors not mobilising resources.

But ultimately everything was upended by Coalition Policy and the election outcome.

Coalition Policy

In September 2012 in an article published on business media outlet Business Spectator, Mr Turnbull wrote that he could not provide precise financial figures regarding the difference between the Coalition’s rival NBN policy and the Government’s existing project:

I have been careful not to nominate a particular sum of money as the difference between what we would do and Labor’s current plan. For a start there is enormous scepticism that the NBN Co project can be completed within the cost and timeframe of their business plan. Several very experienced civil contractors and engineers have said to us recently that they think the actual build cost is likely to be $80 to $100 billion for example.

The then Opposition Leader Mr Abbott in February in a speech to CEDA had said that "If we don’t go ahead with the National Broadband Network in its current form, that’s about $50 billion less that the Commonwealth will need to borrow."

Confusion about the basis for that claim came in April 2013 Mr Turnbull released his own policy and decided to be incredibly precise about his own claims of the cost of the existing NBN plan and about the cost of his alternative. This was the day of the infamous $94 billion claim (which was peak funding).

In defending the policy, Treasurer Joe Hockey even climbed in with a comment on an Alan Kohler piece saying "The fact that our NBN policy saves taxpayers over $60bn is obviously so irrelevant to Alan that it does not rate a reference." 

That $60 billion saving claim was based on the peak funding difference between the Coalition costing of the Labor plan and the Coalition costing of their own.

But the real core of the Coalition policy was the need for three essential reviews - of the cost of the NBN and alternatives, of the availability and quality of broadband and a cost benefit analysis.  These were to be concluded within 60 days, 90 days and six months respectively.

The first observation is that none of these targets have been met.  The Strategic Review "clock" was reset a month till the Board and Management were changed, but at the 60 days all that happened was the Minister got a draft.  It took a further ten days to be released.

The broadband availability and quality report was due on 23 December, but all we got was a short 5 page summary.  It appears that all the Department knows is the location of DSLAMs and the number of available ports. Everything else is derived from that.  We have to wait to an unspecified date for the full detail.

The cost benefit analysis team was only appointed the day the Strategic Review was released and their six months start now. We don't know whether the six months is till the Minister gets his draft or till there is a final for release.

That itself is not a great start.  But the content of the two reviews released thus far doesn't really help either.

Strategic Review

The Strategic Review released on 12 December resulted in Mr Turnbull having to inform the Parliament that he could not meet the goal of providing everyone with a speed of 25 Mbps or better by 2016.

The review itself contained a "Revised Outlook" for the existing project, a "radically redesigned" FTTP rollout and a number of alternatives - with the favoured alternative labelled Multi-Technology Mix - or MTM - or Malcolm Turnbull's mess.

It is not my intention to fully compare these. The review itself is being interrogated by the Senate Select Committee on the National Broadband Network (SSCNBN). 

But I do want to share a few diagrams.  The first compares deployment timelines. 

 

This is where Mr Turnbull had to admit that the MTM model doesn't get you to 100% with 25 Mbps by 2016.The leap, however, from 22% under the revised outlook to 43% under MTM looks impressive.

 

However when you examine the previous exhibit you realise this is nowhere near as impressive as it sounds.

 

 

Of the 40% of ALL premises able to access 25 Mbps by 2016, more than half are doing so because HFC is suddenly added to the calculation. This is without building any more HFC at this stage. 

 

Or to convert the percentages from Exhibit 4-2 to a base of the fixed line footprint rather than all premises we see the 43% is made up of 13% FTTP, 5% FTTN and 25% HFC.  Now note that the Revised Outlook has the comparable number of FTTP premises at 22%.  Somehow we are told to believe that passing 18% of premises with new infrastructure instead of 22% is somehow faster.

 

We then also get to the second issue - the promise of 90% having 50 Mbps by 2019.  Exhibit 4-3 shows they just squeak over this line, but in evidence to the SSCNBN the Executive Chairman was not prepared to guarantee that speed.

 

But it is also another major deviation from Coalition Policy. The policy document was unequivocal.  Completion would be 2019, and there would be FTTN in all the areas where there isn't FTTP.

 

 

But the MTM model is completed a year later and doesn't build where there is HFC - in fact HFC grows to cover a further 7%. 

 

It is then that the financials become interesting.  Coalition Policy was quite unequivocal when it came to the difference between Labor's policy and theirs.

 

 

This is really farcical in hindsight, not least of which is the fact that the Strategic Review uses the same revenue assumptions for all the models - so there is no real "price difference" (There is, however, a quite idiotic approach to argue what prices would need to be to get a 7% return, despite having already cruelled the cashflow by reducing prices).

The two stand-out figures are CapEx of $20.4 billion, and peak funding (unlevered in Coalition case - i.e. as all equity) of $29.5 billion.

How does this stack up with the MTM model?

Cumulative CapEx blows out $10 billion to $30 billion, and peak funding (all equity) hits $39 billion while it is $41 billion if debt is raised (a ten to eleven billion dollar blow-out on Coalition estimates). 

Mr Turnbull was asked on 7:30 about how he was missing his 2016 target, and his plan would cost $11 billion more than he'd said.  He replied;

And the fact is that the NBN Co is a much bigger mess than even we had thought it is. We have got to stop the spin.

But the fact is, it is not in worse shape than he'd claimed NBN Co was in when he launched his policy.  He'd claimed a peak funding of $94 billion and completion by 2025.  The most the Strategic Review could back in was peak funding of $73 billion and completion by 2024. In fact, NBN Co was in better shape than he had claimed.

The single most interesting paragraph in the whole of the Strategic Review comes at the end of Chapter 2 which had detailed the Revised Outlook.  It said;

In other words, the most important thing to do right now is to get over the reviews and the management changes and roll out FTTP as quickly as possible as any other changes are made.

Availability

As far back as his speech to the National Press Club in August 2011 Mr Turnbull has made a claim that "The NBN extends high-speed broadband to at least 2 million premises with inadequate service."  That claim when analysed was based on some figures included in the NBN Implementation Study, which in turn was quoting from a 2003 Senate Committee hearing, and even at that hearing the figures were being referred to as already including cases of remediation.

In fact the full footnote to the speech read;

The McKinsey/KPMG NBN Implementation Study (2010) identified 1.2 million pair gain or RIM lines where ADSL was not accessible (p.190), and another 0.4 million premises in the ‘last 7 per cent’ (p.282) where DSLAMs hadn’t been installed in Band 4 exchanges. In addition there is another imprecisely quantified cohort of underserved premises which are in Exchange Service Areas where ADSL2+ is available but the length of the copper run from the DSLAM is too long to allow reasonable speeds.  ADSL2+ has a theoretical maximum download speed of 24 mbps and upload speed of 1 mbps. But average download speeds in Australia are around 10mbps and 63 per cent of users are at least 2km from the exchange (NBN Corporate Plan 2011-13, p. 40). If distance from the exchange exceeds 4km maximum theoretical download speed falls below 6 mbps. FTTN/FTTC resolves this problem by reducing the average and maximum lengths for copper runs.

The "2 million lines" claim featured highly in Coalition statements, including;

• “When they announced this scheme, when they announced this three or four years ago, there were 2 million Australians that couldn't, on their wire line, download a YouTube video. There still are.” Malcolm Turnbull Lateline 27 Nov 2012)
• “Much of Australia has good communications infrastructure but not all; at least 2 million premises cannot access broadband or are constrained by limited speeds.” (Malcolm Turnbull website 7 Dec 2011)
• "If you look at the Implementation Study prepared by KPMG and McKinsey, the study notes that there are about 2 million premises where you can’t get a decent DSL service.” (Paul Fletcher Twisted Wire 20 Dec 2012)
• “By comparison there's an estimated two million households and businesses that have substandard broadband and don't appear to be getting any level of priority.” (Senator Birmingham to AFR 12 Feb 2013)
• “It is scarcely believable so little has been achieved since 2007 given there are approximately 2 million Australian households which have sub-­‐standard fixed broadband or no access at all.” (Dr Bill Glasson, LNP candidate for Griffith, letter to Department Secretary to resign as Broadband Champion 22 Feb 2013)
• "Alan, the tragedy of all this is that there are at least two million households in Australia who don't have - basically don't have broadband at all.” (Malcolm Turnbull, interview with Alan Jones, 27 Feb 2013)

The two million lines suddenly became 1.5 million after the election.  In his Ministerial Statement accompanying the release of the Strategic Review Mr Turnbull said;

Shortly we will publish the first ever analysis of broadband availability in Australia. It will confirm areas encompassing about 1½ million premises have little or no broadband. Many are in regional areas.

Somehow magically an election outcome provided 500,000 premises with broadband that didn't have it before!

In announcing the release of the summary of the broadband availability and quality report, the Minister said;

Key findings of the report are that there are approximately 700,000 premises unable to get access to a fixed broadband service and an additional 920,000 premises in areas with estimated median peak download speeds of less than 4.8 megabits per second (Mbps).

So now we have the availability and quality report defining the number with "little or no broadband" as 1.62 million.

But what should we make of this observation?

The first is that the 700,000 with nothing are predominantly, but not exclusively, the areas receiving fixed wireless and satellite.  There appears to be no difference in the approach to these, scheduled for completion in 2015.

More surprising is the claim that a "median peak download speed" of 4.8 Mbps is now the definition of "inadequate".

This dramatically contrasts with a statement Mr Turnbull made as Opposition Leader.  Speaking on radio 4RO on 15 April 2009 Mr Turnbull said:

I've got a Next-G wireless card in my laptop and when I was in Mackay yesterday I was getting 3.5 Mbps … that allows me to do everything I need to do.

In 2009 3.5 Mbps allowed him to "do everything I need" - but by 2013 having less than 4.8 Mbps qualifies as inadequate?

I have no real difficulty with Mr Turnbull over four years realising that requirements of download speeds are increasing.  It's just that his own policy doesn't. 

There are many who would argue that every premise without FTTP has inadequate broadband, the real number is 12 million not 1.5 or 2 million.

The other challenge revealed in the report is that "approximately 1.4 million premises (13 per cent) are in areas where fewer than 40 per cent of premises can access a fixed broadband service." These are the areas from which the majority of complaints come - they are the complaints about there being "no port available".  This is an issue that should be fixable. Presumably for exchange based DSLAMs as FTTP gets rolled out there will be DSLAMs that could be relocated from decommissioned exchanges.  For RIMs there is a useful conversation to be had with Telstra about a further extension of the top-hat program.

Where to from here

The Senate Select Committee will continue its evaluation of the Strategic Review.  Irrespective of that the review itself for the MTM scenario is predicated on continuing to rebuild momentum in the FTTP deployment.  The assumptions for the MTM model (page 96) include that FTTN deployment will commence in the second half of CY15.  That is vastly different from Dr Switkowski's expectation in evidence of getting FTTN rollout happening by the end of CY14.

Everyone who wants FTTP needs to focus less on what the alternatives might be, and more on encouraging the Minister to instruct NBN Co to build the deployment rate as fast as they can while they undertake any redesign.  The MTM model forecasts 26% FTTP which is higher than the 21% in the Coalition Policy. 

The best way to do this is by writing to local MPs. Ideally clever people inside the various NBN campaigns could construct a simple website that uses he AECs digitised maps to do an electorate lookup for an address, then prepare a completed and addressed draft letter or e-mail on the theme of encouraging the Minister to instruct NBN Co to continue to rollout FTTP as quickly as possible while it continues to undertake its review activities.  Lots and lots of letters, especially ones that are slightly tweeked by the individual help.

The second thing is to focus more on why the higher speeds and a four port NTD are needed for the applications that we expect will be common once the NBN becomes universally available. 

This is an area where people and organisations should use the opportunity to make submissions to the Senate Select Committee (by 31 January). The Committee has limited direct resources of its own, so don't expect that they will be able to find something just because it has been previously published.  Submissions from people already using fibre, or people with plans to use fibre either for themselves or in applications will help make the case.

The future of broadband in Australia is still a live policy question.  To get a good outcome requires good people to be very active.

Why Christmas is for Everyone

As we celebrate Christmas it is useful to reflect on the significance of the day, what it really means and why it really is a celebration for everyone.

So we all know the reason is the annual celebration of the birth of Jesus. This raises two questions, did Jesus exist and was this his birthday?

Last week I was in a conversation with someone who raised the line that if there really had been such a rebellious sect leader as Jesus then he would have appeared in the written records of the Romans, not just the Biblical tales. This rests on a common fallacy that historic facts are accurately recorded at the time, and are known as such from the moment they occur.

A good example was given on Coast Australia last week and the story of the massacre of Lizard Island.  When first reported in November 1881 Mrs Watson, her child and two staff were killed by natives.  The account was repeated in December...in a report that confirmed Mrs Watson's body had been hacked into pieces and thrown into the sea.  The real story was that Mrs Watson had floated to another island and died of thirst.  

On the basis of how "facts" do or do not get recorded, it is simply reasonable to allow the idea of Jesus as a historical figure as "fact". That the stories themselves might conflate the teachings of more than one rebel doesn't change the fact that we can talk of Jesus.

No matter what the truth of the lineage and birth of this person, no one believes he was born on 25 December. Certainly the biblical nativity stories do not correlate to mid winter.  It is generally acknowledged that Christians attached the celebration of Jesus birth to per-existing mid-winter festivities.  This is a demonstration of a feature we come to later, the universality of the message.

So now let's just focus on the world of Jesus. Israel was a country with a history as a religious state that effectively traced its successes and failures to the periods when the people were loyal or disloyal respectively to their God.  They believed they were a chosen people.

But the religion itself was practiced through "the law" and what you ate, circumcision and other superficial behaviours were interpreted as what the will of God required.

At the same time the country was occupied by Romans and the people "chosen by God" were looking for a leader to liberate them.

Into this environment came Jesus, who preached that the way to honour God was not to follow rules but to behave in certain ways ...most importantly through love of one for another.  When Jesus invokes his followers to believe in him it is usually interpreted as believing in his divinity, but it can equally be applied to believing his message.

And Jesus confounded the chosen people by saying that any person could be one of the chosen people by simply following Jesus, following the testimony of love.

Despite all the horrendous things done in the name of Christ, despite some of the distorted theology, it was the simplicity and universality of this message that explained its early adoption. And while the co-option of the faith to the State for some 1500 years (roughly 300 to 1800, longer in some cases) can explain a lot, the ability of the faith to be of use to the State came from the faith's intrinsic value.

So when it comes to Christmas everyone can celebrate an artificial anniversary of the birth of a man who taught the world that what matters is not ritual nor race but loving one another. 

Don't get me wrong, I'm not saying that you can't believe in love without believing in Jesus.

I am saying that everyone who believes in love can celebrate Christmas.

Merry Christmas to you all.

 

 

 

That Bruce Hawker book

One of the problems with the plethora of Labor insider books is that you don't want to line the pocket of the author, but you know you need to read them.

The Rudd Rebellion is such a book.  I haven't finished it, and I might never do so.  But the start of the book up to the first few weeks of the Rudd return teach the reader two things.

The first is that Rudd Mark II was still entirely a creation of focus groups and market research.  Not only in the planning of the execution, but in the positioning of the new brand.

The second is that team Rudd's reform of party rules was motivated by this research, by the need to develop a response to research that the public wouldn't vote Labor because the party would still replace him.  

So people who get excited about party reform need to put that bit in the bin called irrelevant.

Abbott and the NBN

The fact that Tony Abbott referred to the previous Government as "wacko" in an interview with the Washington Post has received some coverage.  But most of it has missed the point that the reference was to broadband.

An excerpt:

What have you actually accomplished?
The flow of boats is significantly reduced. We have drafted legislation to repeal the carbon and mining tax. We’ve just announced a commission to review the size and efficiency of the government on an agency-by-agency basis. We’ve taken control of the national broadband network, and we will deliver faster broadband much more quickly and less expensively than would have been the case under Labor.
Labor wanted a national broadband network?
It’s a government-owned telecommunications infrastructure monopoly, which was proceeding at a scandalous rate without producing any commensurate outcomes. We are changing the objective from fiber to every premise in the country to fiber to distribution points, and then we will use the existing infrastructure to take the broadband to individual premises.
Is that cheaper and more efficient?
Vastly.
But Labor wanted to extend fiber to every household?
Welcome to the wonderful, wacko world of the former government.
So you believe the former government was doing a lot of things that were bad for the country?
I thought it was the most incompetent and untrustworthy government in modern Australian history.
Be more specific.
They made a whole lot of commitments, which they scandalously failed to honor. They did a lot of things that were scandalously wasteful and the actual conduct of government was a circus. They were untrustworthy in terms of the carbon tax. They were incompetent in terms of the national broadband network. They were a scandal when it came to their own internal disunity. They made a whole lot of grubby deals in order to try and perpetuate themselves in power.  It was an embarrassing spectacle, and I think Australians are relieved they are gone.

So there we have it - the NBN was "wacko".  A new term for it.

Some people have noted that the PM seems to still be behaving like an Opposition Leader campaigning rather than a Prime Minister governing.  That theme also came through in the PM's interview with Andrew Bolt.
Here the PM said;

One of the differences between the good government that I served and the poor government that I replaced, is that the good government didn't feel that its main job was manipulating the media.

It still contrasted Howard with Rudd/Gillard, not Abbott with Rudd/Gillard.

But in the conclusion of the interview he denied there was an issue in this exchange.

AB: There's a thing called impostor syndrome, this feeling of, 'My God, am I really up to this?' I think you suffered that early on as Opposition Leader. I don't get that sense of you now as Prime Minister.
PM: The short answer is no … I know exactly what you are talking about, but no, this is a position that I have every right to hold. And these are duties and responsibilities that I think I am more than entitled to discharge.

I keep going back to the way the PM deals with the NBN though, where it still seems the dominant theme is about the cost.  So I think I see the PMs hand leading the pen for Bolt to write today;

[Shorten] praised the National Broadband Network, which the Coalition will soon expose as a financial disaster worse than most critics warned.

Meanwhile on the other side of the world Google continues to provide reasons for a fibre to the home network.

Over here the simple fact is that the job of delivering a broadband network now rests with Tony Abbott and Malcolm Turnbull.  And while the Minister seems to understand that, the PM still doesn't.

NBN Review and Henry Ergas

NBN Co has announced the selection of three advisory firms to contribute their services to the strategic review process:

• Deloitte will provide governance and the program management office services to ensure the Strategic Review fits within the parameters and tight deadline for submission set by the Government;
• KordaMentha will contribute to the analysis of the current NBN operational and financial performance;
• Boston Consulting Group will participate in the review of the timing, financials and product offers under alternative models of delivering very fast broadband They are Deloitte, Korda Mentha and BCG.

A forensic accounting firm is an interesting choice that reflects the conviction that the books have been cooked.  It will be very interesting to see what comes of that.

The selection of Deloitte is a bit unsurprising in that both KPMG and E&Y had done work verifying earlier plans for the shareholders and board.  But a concern with Deloitte is the possible presence of Henry Ergas among their number, though this my be slight given the scope of work they have been contracted to do.

Ergas was a champion of competition reform in the 1980s before going on to establish his successful economic consultancy NECG. This firm gained a reputation as an adviser to the big end of town, defending them from regulation designed to introduce competition, especially Telstra. I've previously mentioned on this blog a bit of criticism Ergas scored from a judge about his conduct as an independent expert.

After he sold his business to Charles River Associates (CRA) Ergas did some work for the Liberal party.  One was a flawed study for the Menzies Research Centre on productivity in state governments.  This was followed by a tax policy for Malcolm Turnbull that was never released.

Ergas was a persistent and early critic of the NBN.  In some ways it was like the criticism of Kevin Morgan because it unpicked work he had done.  In the case of Morgan it was the creation of Telstra from the Telecom/OTC merger (in which Ergas was on the other side). In the case of Ergas it was the defence of the vertically integrated Telstra.

Ergas rushed to print soon after the April 2009 announcement claiming services would cost $215 per month.  He also whipped up a cost benefit analysis that claimed the network was worse than an alternative plan by some $17 billion (by recollection).  That CBA assumed there was no need for services at higher speeds achieved with FttN, was over a shorter period than the NBN case (10 I think, rather than thirty) and used a commercial discount rate.

Today in the Oz Ergas has again shown his ability as an advocate rather than as an expert. His theme is a "pathology" of high cost projects.

He claims that a common feature of such projects is that:

The goals being pursued by new programs are not clearly defined, and the difficulties and risks involved not rigorously and transparently assessed.

Of the NBN he writes;

In the case of the NBN, the decision to proceed was largely based on unpublished advice from the Australian Competition & Consumer Commission, which lacked the capability to evaluate the options and bore no responsibility for the outcomes. By the time a more thorough analysis was commissioned, the government's decision was well-entrenched, and the analysis was limited in ways that precluded that commitment being questioned.

He then returns to the general theme;

That troubled programs prove such hardy survivors is partly because the "tyranny of sunk costs" comes into play. Projects that would never have been undertaken if their total costs had been known at the outset are not cancelled because each evaluation concludes spending a (relatively) little bit more might still make the exercise worthwhile. As hope triumphs over experience, natural selection is put on hold.

Ergas then goes on to make some specific assertions about how the NBN fits this description, including reference to a report that shows "accumulated losses" that supposedly wasn't released.  This is somewhat confusing since both the 2011-14 and 2012-15 Corporate Plans made it clear that like any large project there are losses before turning an EBITDA return.  This is confirmed in the 2013-16 Plan that has since been released.

But the crux of the story is the implication that Ministers have lied about the project.  He refers to a July launch of the NBN in Coffs Harbour for a switch on event, and the accusation that nothing was actually switched on. It is true the building was not in the fibre footprint, but that was not an assertion made by the Minister.  Equally the demonstration at the back of the room of an application was not at the request of the Minister.

He then asserts that "the stunt" could have landed the Minister in gaol if he had been a company director.

This must be interesting for the former executives of Optus who launched the Optus local call service over their HFC network - because they actually used a Telstra local call for the event.

Ergas is wrong on the facts of what the Minister actually asserted, and he is wrong on the claim of the extent of the penalty that would apply.

Finally, let's just reflect on another great project - the Jindalee Operational Radar Network.  JORN is another ripper case of a big project that had early implementation problems - when managed by Telstra - but now is usually touted as an outstandingly brilliant part of our defence capability.

Critics of the NBN like Henry Ergas have focussed on its choice of objective and the challenge of delivering that objective, and have developed a narrative that there is some "truth" to be revealed.  The risk is that those revealing the "truth" have invested so much in their own narrative that the counter claim is more flawed than the original.

 

Nicola Roxon's John Button Memorial Lecture 2013

The full text of Nicola Roxon's John Button Memorial Lecture 2013 makes interesting reading.

Bernard Keane in Crikey has labelled it "revisionism", but primarily for the comments made about the PJCIS review of data retention.  He has found a few quotable sources to regret the focus on Kevin yet again, and to create concern that it will provide the basis for yet another Rudd set of whispers.

But the speech was structured around ten points as a guide to future leaders. Ms Roxon said it herself best;

I want to provide some practical tips for the next Labor Government, and for Labor MPs, on how best to conduct themselves. And how to ensure that a fresh Labor purpose is constantly in focus, and ways that mission can be delivered. I hope it might be of use to Bill Shorten as the new leader, and to others, as they go about their work of regaining ground for Labor.

Superficially it may seem boring to talk about housekeeping and conduct, when a party of progressives wants to be about ideas and improving lives. But I use examples to highlight their necessity if we want to deliver fabulous policies effectively.

We can want power, but we have to want it for a purpose. So we have to know how to use that power well, and to full effect.

The structure of her speech necessitated talking about bad examples from the party's immediate past, and it didn't focus on KRudd exclusively for that.  Of course, the structure could have been chosen just to provide an excuse for that, but the points she made seem appropriate when stripped of their examples.

The focus should be on her "ten points".  I've listed these - with an additional sentence or two in some cases - below. 

1) Labor must always focus on the fact that good policy improves people’s lives and that is why the party exists.  (and a related issue here is: don’t do too many things at once.)

2) Governments as a whole, and the prime minister in particular, need to keep their focus high level - spending time and energy on the things that really matter.
If you can’t describe what you are doing in general terms, and its purpose, then either the policy isn’t right, or you’ve descended into detail most people don’t need and probably don’t want to know.

3) Good leaders are good delegators.

4) Labor needs to welcome debate, not fear it.
A progressive party needs to be able to argue over issues and not see it through the prism of internal politics.

5) Be polite and be persuasive. Or I could call this "Keep yourself nice".

6) Always ask what you can do for the party (and the nation) not what it can do for you (with apologies to JFK).

7) Good governments run best with good diaries - so boring, but universally true.
This is not just about housekeeping, as it seems, but you actually can get better policy, get more done and protect against foreseeable problems if you plan a diary and run to plan. You can only get to an end game if you have planned where you want to go.

8) Choose good people - as leaders, as MPs and as staff.
In every walk of life, successful organisations need a pool of talented people, and politics is no different.

9) Accept you are not always right, and cannot always fix everything. It’s easier with this as your starting point.
If the public is promised a messiah, they’re inevitably going to be disappointed.

10) And lastly, never forget polling is only a snapshot, not a predictor.

She makes the case well for the leader in the Hawke tradition.  One who delegated.  One who was able to engage in a public discussion on policy.  The secret to that discussion was always to have a range o options, and include in it something more extreme than you were happiest to go.  Coming back from that extreme is then seen as a consequence of consultation. 

On the point of polls it is surprising that Labor has never developed a better understanding of the way Mark Textor uses polls for the Liberals.  Textor uses polls to determine HOW to frame the Liberals messages, not WHAT the message is.  They use polls as part of the process of persuasion, not as a way to decide what to reflect.

Roxon finished with a rallying cry.

And now the invitation is to the next generation to think how they will refresh the Labor purpose - to pump some new blood into its beating heart. And to be ready to conduct themselves with dignity, so they get time to bed down the vital reforms of the next generation, reforms that we know only Labor will deliver.
We should never, ever as a Party be ashamed of our past.
We should celebrate it, learn from it, and use it to improve our nation’s future.
Good luck - and thank you.

That is a great peroration.

The speech as a whole makes a great manifesto for aspiring politicians.  It should be read as such, and not as a critique of one or two PMs.

Keep the faith

The historic first ALP leadership ballot is over.  It generated a new level of interest in the party, received widespread community attention, and provided media coverage that belied the election loss.

The results are in.  The rank and file voted nearly 60/40 for Anthony Albanese, but Bill Shorten won on the strength of the caucus vote.  

Some party members are already reacting with desperation, feeling that the initial foray into democratising the party has been frustrated by the caucus ballot. Some are reaching out on social media suggesting they will now 'give up on the party.'

I can understand the reaction but would counsel all of them to stay and continue to drive further reform.

The move to democratising the party by allowing a member vote for leader of the FPLP was championed by Sam Dastyari.  That should tell the members something. It was the one move that he felt comfortable with not affecting the power of state secretaries and the factional system that underpins them.

But this is not a genie that can easily be put back in a bottle.

Members of the party need to do the following.

- ask your mp or duty senator how they voted and why, they didn't represent views of the base so let them know your displeasure

- discuss with your fellow members the areas of further reform you want to see

- continue to promote the values of the ALP which seeks to represent the people who make a living by what they do, not what they own.  The party that stands for jobs and growth, opportunity, sustainability and a fair go

- encourage more people to join

Leaving will not create change! The only option is to stay and fight for it.

ABS Internet Activity - June 2013

The latest version of the ABS series 8153.0 - Internet Activity, Australia was released today.

This is an incredibly useful series, but one that inexplicably the ABS seems to continually wilfully misrepresent in its accompanying media releases.

In the period from June 2011 to Jun 2012 as the number of wireless broadband connections passed the number of fixed the ABS reported the stats using proportions in such a way as to suggest the actual number of fixed connections was declining rather than merely growing at a slower rate.

Over the last three halves the ABS has gathered data on mobile handsets but as far as I can tell only includes the data in its summary and not in the actual data tables.

That doesn't stop them screeching about it though.

Today's full media release is fascinating. 

Australian mobile handset downloads surge

 Nearly 20,000 terabytes of data was downloaded by Australians with internet access connections via a mobile handset in the three months to June 2013, which is an increase of 6,000 terabytes according to figures released today by the Australian Bureau of Statistics (ABS).

"Download volumes for mobile handsets have really seen explosive growth," said Lesley Martin from the ABS, "and while it's true that the number of mobile handset internet subscribers has also increased, that's been much smaller growth."

The total volume of data downloaded via mobile handsets between April and June 2013 was 19,636 terabytes, which is a 43 percent increase from the previous period of October to December 2012.

Between December 2012 and June 2013, the number of mobile handset internet subscribers grew by 13 percent.

"Mobile handset downloads contribute a small percentage of our total internet downloads - in the three months to June, Australia's total download volume hit 657,000 terabytes, which is up 18 percent compared to the three months ended December," Ms Martin said.

"Australia had 12,358,000 internet subscribers - not including mobile handsets - at the end of June 2013, showing a three percent annual increase.

"In pure percentage terms fibre has been the fastest growing type of connection, with a 26 percent increase since December 2012; but it should be remembered that this growth is from a low base.

"There's now 115,000 fibre connections compared to 6.2 million mobile wireless broadband connections such as a dongle or tablet SIM card, 4.8 million by DSL, 93,000 by satellite, and 227,000 still on dial-up."

Further information is available in Internet Activity, Australia, June 2013 (cat. no. 8153.0) available for free download from www.abs.gov.au.
The headline and first paras screech about mobile handset download growth.  Only much later do you get to the real story that the handsets are a very small share of the overall data.

Let's just look at the three main trends.

First there is the total number of connections.

The number of fixed and wireless data connections both continue to grow slowly.  They are dwarfed by handset connections which tend to be personal whereas connections tend to be for households.

Then there is the total downloads.

And while there has been a surge in the total data downloaded by handsets as a proportion it really is a miniscule amount.

The best measure is the download per month per service.

 

This is the biggest killer for both the claims of both wireless (dongles etc) and handsets versus fixed broadband.  The downloads per service per month continue to increase on fixed and barely move for the others. 

 

Another way to look at this is the proportion of all data that is downloaded over fixed line versus wireless and handsets.

 

Overall fixed line is slowly taking an even greater share of the overall traffic.

 

It is no wonder that Malcolm Alder, an author of the NBN Implementation Study, is reported by the AFR today as saying the NBN may result in fewer "mobile only" households than first thought.

 

Assuming that the proportion of mobile only would actually be greater was one of Malcolm Turnbull's four bases for asserting a higher cost for the NBN.  It was the only one which NBN Co itself had not earlier refuted.

 

So, simply put, the ABS release is misleading in the extreme.  The data continues to support the need for a fixed broadband network engineered for continued growth in data demand.