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114 responses to “An alternative telco plan”

  1. Chris

    What I didn’t realise until recently is that the NBNco negotiations with companies like Optus over their cable networks is not to use them because they can already deliver high speed internet access, but to pay them to shut them down, effectively forcing people onto the NBN.

    I agree with your comments about Telstra’s monopoly power potentially causing problems and the need for the whoelsale/retail structural separation to avoid this. But what argument is there for paying other high speed internet providers who do not have a monopoly to not compete except to try to make the NBNco profitable by removing end user choice? Are they going to do this everytime a company decides to move in to setup a network in the high profit sections (eg perhaps the Brisbane sewernet proposal?)

  2. Incurious and Unread

    Robert,

    It’s a fairly transparent attempt to kill the financial viability of the NBN by effectively forcing the copper network to keep operating.

    The ACCC is required to authorise anti-competitive agreements if they provide a net public benefit. Conversely, the Coalition amendment will cause an agreement on copper to be prohibited by the ACCC only if such agreement causes a net public detriment.

    So, although you are probably right about the motivation behind the Coalition amendment, there does seem to be an economic justification for it.

  3. John D

    It all sounds like a plot by a capital city politician to screw the regions yet again. So what are Barnaby and his mates going to do?

  4. Craig Mc

    What financial viability?

  5. Andrew Reynolds

    Robert,
    Perhaps it would be fair to also ask why would we have any confidence that NBNCo would voluntarily do anything other than exploit its monopoly power to the detriment of the rest of us, leaving the ACCC perpetually fighting the last battle?
    The current plan simply creates yet another monopoly provider.

  6. Wozza

    What Incurious and Unread said.

    And furthermore, if the financial viability of the NBN is dependent upon forcing Telstra not to compete on its ancient copper wire, does this not immediately and completely destroy all arguments about the transformational nature and mind-boggling wonderfulness, so wonderful it cannot even be vaguely quantified, of the NBN?

    With all due respect to your own pretty balanced and objective views on this subject, Robert, I doubt that yet another thread on it do more than provide for an airing of entrenched views. I will refrain fromn repeating mine any further. I reserve the right though to track down amd maim the first person to use the word “Possum” as an argument.

  7. PatrickB

    “impose a universal service obligation of 12 megabits”
    Is this possible given current technology? ADSL speeds vary greatly at the users router depending on the cables and the distance from the exchange.

  8. AuFozzy

    One thing to keep in mind when reading Peter’s piece, whilst I generally have a great respect for his analysis, on the NBN he’s very much against it and my impression is that he’s been heavily promoting the “No” case.

  9. David Irving (no relation)

    PatrickB @ 8, I think (unless I’ve completely misunderstood Robert) that the 12 Mb/s is a psoposal by the Opposition.

    Remember, they are completely clueless about the technology, so it’s hardly surpring that they think that would be possible.

    Wozza, people are going to keep saying ‘Possum, Possum, Possum’ to you until you indicate (somehow) that you’ve actually understood what he was on about. I’m not going to hold my breath.

  10. Flynnboy

    Andrew @ 5

    “Perhaps it would be fair to also ask why would we have any confidence that NBNCo would voluntarily do anything other than exploit its monopoly power to the detriment of the rest of us, leaving the ACCC perpetually fighting the last battle?
    The current plan simply creates yet another monopoly provider.”

    Yes – one that is under those very embarrassing circumstances, the responsability (and political liability) of elected government.

    As opposed to the current private monopoly who are not required to answer to the electorate every 3 years.

  11. Jacques Chester

    It’s a fairly transparent attempt to kill the financial viability of the NBN by effectively forcing the copper network to keep operating.

    If it requires the wholesale removal of a competitor — the flatout destruction of capital paid for by taxpayers — is it actually “viable” in any real sense? Because that’s what we’re discussing here.

  12. Jacques Chester

    As for the public monopoly argument, there’s two problems.

    a) It’s still a monopoly. It’s not as though Telecom wasn’t used as a milch cow.

    b) It may be a public monopoly today, but it won’t be forever. One day it’ll be Telstra Mark II. Basically the last 30 years of telco policy replayed.

  13. Wozza

    Yeah well, Robert, in the first place, in regard to “if universal NBN usage delivers a net benefit over the status quo”, that is something we will never know since the Government refuses even to attempt to demonstrate that it is the case, and the cheer squad maintains that it is actually impossible to do so. So it’s not exactly a forceful argument. And in the second place, if large chunks of the population are forced onto an NBN they don’t want and will have to pay more for as initial indications in Tasmania suggest, the disbenefits of that make it an intuitively unlikely “if” in the absence of a demonstration of the contrary.

    However, I swore not to participate in an exercise in regurgitation of past stoushes, and with the siren song of DI(NR) trying to drag me into exactly that by repeating his own mantra for the twenty seventh time this week, I think I should stop at that and bow out.

  14. Jacques Chester

    When it gets sold, it gets heavily regulated to ensure that it can’t go into the retail business.

    Parliament can’t bind its future self, Robert.

  15. Fran Barlow

    Jacques Chester said:

    Parliament can’t bind its future self, Robert

    That’s true. Laws can be passed and rescinded, but you can create a context in which rescission is unlikely.

  16. David Irving (no relation)

    It’s unlikely that any future government would be stupid enough to repeat the telecommunications mistakes of, particularly but not limited to, the Howard government, Fran.

  17. Mercurius

    I just can’t believe that the Coalition (and Turnbull) have chosen this particular hill to die on. Monomaniacal chanting of the “waste and mismanagement” mantra when they haven’t bothered to consider what a waste it would be, and what appalling mismanagement, if they are prepared to simply stand by and do nothing while the nation’s communications infrastructure slowly corrodes in the ground.

    If they’d like that to be their political epitaph — “we died in a muddy ditch to stop anybody else digging one”, well, it’s their choice, I guess, but the nation will suffer for their myopia.

  18. Chris

    David Irving @ 19 – I think once the NBN is established as a government owned monopoly there will be a fairly big temptation to allow it to do retail because of the amount of money to be made.

    Perhaps it would start as just selling access direct to large corporates, pocketing the money which would normally be taken by the resellers. There was already a push pre-election for the NBN to be allowed to sell to very large users but that got knocked down.

    The NBN will eventually be seen as a cash cow by future governments. Its not like people will have any other choice. With private resellers in the middle and without transparent wholesale pricing, governments will be able to blame the ISPs for price rises. ISPs who complain can get punished by even worse wholesale pricing, much like Telstra are accused of doing.

  19. David Irving (no relation)

    The mistakes I was thinking of, Chris @ 21, were introducing phony competition (Optus), then selling a vertically-integrated near-monopoly (Telstra sale).

  20. Andrew Reynolds

    Robert,
    Are you seriously claiming that, when the then Telecom Australia (or PMG) was in government ownership, it did not charge excessive amounts? I can’t see any other way in which your argument makes sense.
    Secondly, the new NBNCo will still have an effective near-monopoly over all backbone services. Is it realistic to expect that they will not engage in any feather-bedding, price gouging or other such activity on behalf of their shareholders and employees? Agency theory alone (particularly as they will be largely protected from competition) would predict otherwise.
    You have that much faith the ability of the various regulators that have been unable to restrain Telstra to suddenly be able to restrain NBNCo, much of who senior management will almost inevitably be drawn from Telstra?

  21. Andrew Reynolds

    David,
    Incidentally, I would agree. The way Telstra was sold was a disaster. I just think that the NBN shows genuine commitment not to repeat the mistake of Howard by making a whole new set of mistakes.

  22. Brian62

    NBN rollout is crucial to provide a quality internet solution for all Australians, at prices that are affordable and unlike the present situation where we have the likes of Telstra etc.promising people speeds they don’t deliver such as 8 Mbps download 0.384 Mbps download that are only obtainable if your lucky, at midnight till 7.30 am the rest of the time approx half of that or less for $70 + PM and when you complain your not getting value for money we get “we said UP TO 8M x 0.384” as in the UP TO 80% OF Rug sales bulls***t the truth of the matter is it is not natural congestion as they suggest but in fact oversubscription by having to many customers on an exchange that is not adequately provisioned to handle the customer numbers, it is high time this rort was exposed for what it is, if your paying for 8Mbps and on average getting 4Mbps then the price should reduce by half instead of telcos hiding behind the “minimum service guarantee” of 1Mbps Bring on truth in advertising.Turnbull and the Coalition want to preserve the JOKE for their Telco and Media mates instead of providing value for money as in the NBN.

  23. Brian62

    That was meant to read 0.384 Mbps UPLOAD Sorry.

  24. Brian

    It seems to me we are going over ground that should have been gone over at least a year ago, when Conroy was trying to get Rudd’s attention but couldn’t get it and had to get onto a plane to Dubai with him just to talk to him.

    Telstra was playing a tough game in the interests of their shareholders, as was their duty. Conroy called their bluff essentially by replacing their wholesale monopoly with the NBN. This is water under the bridge in terms of policy decision making.

    The difference between a public monopoly and a private one is that with a private monopoly a universal service obligation is secondary to creating shareholder wealth. So Telstra when privatised became more responsive to its main markets and less so to the unprofitable part of its portfolio, which was just lead in the saddle bag. My brother has a property 2 hours out of Rockhampton. It took him 2 and a half years to get his phone service fixed. In the process they found that the copper line was in places just strung across the ground in a cattle paddock.

    There is no regulator that can force a private monopoly to give acceptable levels of service to all customers all the time. There is a notion in the Anglo democracies that public services just don’t work. This is not true. Again some rellies of mine who are reasonably remote had a medical emergency which involved madivaccing to Brisbane and a 5-hour eye operation starting at 1am in the morning. The service they received in the following days and months can only be described as world class, all on the public purse.

    A public monopoly with ubiquity and equity up in lights as prime values seems to me the the only sensible way to go for the wholesale service.

    Turnbull and co are trying to derail NBN. I doubt that the extras in the lower house will fall for it.

    Meanwhile the opposition continue to spread lies. The latest is that it will cost $6000 per home to connect. This is based on a $43 billion spend, a 70% uptake and the entire cost being born by households. Businesses and major public institutions get a free ride, apparently.

    Information about take-up rates was given yesterday in Senate question time. From memory it was 74% in Townsville 84% in Willunga and 87% in Armidale. That’s before the copper network gets replaced in the Telstra deal. These connections will be operational by mid-2011.

    The train has left the station.

  25. brett coster

    Wozza,

    in my part of the world, about the only users of the optusnet cable network (hanging from the power poles) are the possums who have realised that it provides a safe way to get from one haunt into any wired up house. Reason being, that telstra got there first with their in ground cable.

  26. MikeM

    An ADSL2+ “heat map” is available here, showing that in inner metro Sydney, just on half of iiNet’s customers can achieve 12 Mbs or better. (Click on the map to enlarge it.) The proportion in outer metro, where exchanges are further apart, and in rural and regional areas would be very much smaller.

    Thus a blanket 12 Mbs USO cannot be achieved with existing copper technology for perhaps more than (I am guessing) a quarter of subscribers – or might it be even less?

    Regarding decommissioning Opturs cable, what many commentators overlook is that NBN implementation is starting mainly in non-metro areas. By the time it reaches Optus cable-equipped areas, the value of the cable plant will likely be depreciated to nil. It is not as if valuable assets will need to be written off. I seem to recall that iiNet for one has restarted installation of ADSL2+ DSLAMs in exchanges on the grounds that they will have an economic life before being superseded by fibre.

    The bulk of the Telstra and Optus cable plant was installed IIRC in the mid 1990s and the networks are not quite what they seem. We live less than 5 Km from the Sydney GPO, not exactly out in the sticks, yet we have neither Telstra nor Optus cable. During the original great cable-laying frenzy, Optus ran a cable guide wire to within 20 metres of our home. They never bothered to follow up with actual cable. Also if I recall, there were technical impediments preventing premises that were in blocks of apartments from being connected to cable even in districts which were cabled. So cable coverage is a patchwork that in many cases will need to be filled in by some other technology on a street-by-street basis.

    When you get down to specifics things are a lot more complicated than many of the sweeping generalities in this debate suggest.

  27. Chris

    Brian said:

    Information about take-up rates was given yesterday in Senate question time. From memory it was 74% in Townsville 84% in Willunga and 87% in Armidale. That’s before the copper network gets replaced in the Telstra deal. These connections will be operational by mid-2011.

    I think its the government deliberately confusing what take up rate means, but those number are not the rate that are signing up to pay for an NBN service. This is simply the percentage who have said they will allow the NBNco to run the fibre on their property and connect up a box at no cost to them (and so no money to the NBNco).

    Take up rates of a service in Tasmania have been about 11% of the people who have consented to have the connection (so about 5-6% overall I would guess). A bit baffling why the consent rate in Tasmania for a connection is so low given its free but at least thats not happening in the mainland.

    What will be very interesting is the business case information that is meant to be released soon which should have indicative wholesale pricing. So we can get a better idea of how much the retail costs of an NBN connection will be long term.

    Re: service quality from a monopoly. The old Telecom had a pretty bad reputation with regards to customer service and what privatising forced the government to do was to actually document minimum service quality. In terms of getting a new line connected I have had much better experiences post privatisation than pre.

    A public monopoly with ubiquity and equity up in lights as prime values seems to me the the only sensible way to go for the wholesale service.

    That may be the theory, but when budgets get tight, governments are just as prone to push off infrastructure development or insist on an extra big dividend to help. I’d actually rather have this monopoly heavily regulated and privatised. Regulations mean very little when its the government regulating itself and there’s an inherent conflict of interest. Also we’re more vulnerable to governments introducing things like internet filtering – since the government own the NBNco can they at some point in the future just make a compulsory filter a condition of an ISP connecting, avoiding any requirement for legislation?

  28. Andrew Reynolds

    Brian,
    The train may have left the station, but they all eventually do – even if delayed. The question is whether it will be a very expensive wreck before it gets to the destination.
    If this is as good as we are being led to believe it is then why on Earth would they need to stop Optus and Telstra, their only partially effective competition?
    If we all really need this then we will switch of our own volition. The simple fact that they need to stop anyone competing to me means they are really worried that we might choose to stay with what we have – i.e. that it will fail.
    I still smell another Telstra float out of this.

  29. Katz
  30. Mercurius

    Right Katz. Therefore the right time to upgrade communications technology is always next decade.

    Where we went wrong was ditching the telegraph. Think how much money the government wasted on the national copper wire network when we could’ve just waited a century for fibre!

  31. Katz

    Strange conclusion, Mercurius.

    Somehow, I don’t think that you believe what you say.

    The telegraph was never ported into homes and businesses. It went no further than selected post offices.

    For telephones, copper was the best technology for a century. That fixed capital cost was amortised over a long time span. When it was installed there were no such things as mobile phones. Yet we know that mobile technology undermined the profitability of the copper network.

    Will fibre last a century? Maybe.

    But as fibre is being installed unlike with copper wire, we already know of the existence of other, competing, potentially much cheaper, modalities.

    If satellite delivery develops to the point where it is as attractive as fibre, will Australians be permitted to opt out of fibre without penalty and adopt satellite modalities without penalty?

    If that happens, who picks up the tab for the unamortised portion of enormously expensive infrastructure?

    A taxpayer wants to know.

  32. Zarquon

    If satellite delivery develops to the point where it is as attractive as fibre

    Not possible. The physical bandwidth and latency restrictions on satellite networks are never going to allow competition with fibre.

  33. Andrew Reynolds

    Katz,
    In other news, it looks like Telstra has started the NBN recruiting drive.

  34. The Low Spark of High Heeled Boys

    Andrew,

    the NBN will not be trying to change our minds they will be trying to change the ISP’s minds and as far as I can tell they have already changed.

    They are waiting patiently to give their customer base whole new choices.

  35. Katz

    I didn’t say “as fast” I said “as attractive”.

    Perhaps satellite-delivered data will prove to be satisfactory for delivery of movies, which is about as bandwidth-greedy as most punters want their internet to be, especially at defined price-points.

  36. Zarquon

    The physical restrictions mean the cost per bit of satellite data will always be much much higher than for fibre. The only reason that satellite networks are attractive now are that they are easy to install and are subsidised by the government for rural and remote users.

  37. Andrew Reynolds

    The Low Spark of High Heeled Boys,
    They will not have to change the ISPs’ minds. The ISPs will have no choice but to pay virtually whatever the NBN tells them to pay, subject only to how good the regulator is at restraining NBNCo.
    Given their record with Telstra, I am not particularly overjoyed at that prospect.
    The ISPs will not have whole new choices – they will only have one. Do they want to be in business or not?
    Great set of “whole new choices” there.

  38. sg

    In support of the “it’s transformational” claim, a report in the UK says internet industries are almost as important as banking and notes that growth of the 100bn pound industry depends on uptake.

    It’s compiled for google, so requires some salt, but still…

  39. The Low Spark of High Heeled Boys

    Andrew,

    At present they have only one but cannot offer the choices that would be available on fibre which is why they are champing at the bit.
    There is open access on this network as well.

    Universities are champing almost as hard in anticipation

  40. Katz

    Does that estimate include the amortising of the costs of fixed capital?

    Imagine Australia had both a comprehensive satellites system and a comprehensive fibre system in situ.

    Would the establishment costs of the satellite system be much less than the fibre system?

    If so, at what point in time would the fixed costs plus ongoing running costs of the fibre system break even with the fixed costs plus ongoing running costs of the satellite system?

    No doubt there are some users who relish and need huge bandwidth. Is is cost effective that everyone have this huge and probably unused potential for the benefit of the few who do need it?

  41. Chris

    Katz @ 43 – satellite systems are very very expensive. I’d be totally amazed if it turned out cheaper to do satellite rather than fibre in built up areas. Even wireless/wifi would be cheaper. And as satellite users discover, things like bad weather can cause interruptions.

    Re: your “fast” vs “attractive” – I would guess thats why they’re planning on paying their copper/cable competitors to shut their networks down. Because they fear that at least in the earlier years where real for > 10-20Mbit speeds is fairly low, that people will opt for the cheaper options rather than fast ones.

  42. Katz

    Thanks Chris.

    So the question of the cost of decommissioning the Telstra cable is critical.

    Given that Telstra shares are now much cheaper than the govt. flogged them to the mums and dads for, maybe the govt could by them back and still declare a profit.

  43. Chris

    Katz @ 45 – its not just Telstra, but Optus as well as some smaller players. Eg TransACT who have FTTH or FTTN running to much of the Canberra area as well as a few existing fibre rollouts in greenfield sites. Are they going to buy them out as well? How are they going to handle companies coming in and rolling out competing fibre in the high-profit areas which the NBN want to use to cross subsidise unprofitable areas?

  44. Andrew Reynolds

    Chris,
    There is only one way that they could handle that – buy them out or use the legislature to make sure they are not a problem, the same way that the old PMG Department got rid of any competition they had.
    Run around shouting “natural monopoly” and then use the decidedly unnatural method of banning competition to create the said “natural” monopoly.
    .
    The Low Spark of High Heeled Boys,
    All of that does not mitigate the simple fact that the only way this is going to work is by buying or banning any competition – the same way that Telstra was formed in the first place. Telstra Mark II – a great Aussie outcome.
    Oh – and while we are waiting for this result we will have to put up with a steadily degrading current system as no-one will invest in the current one if it is just going to be shut down.
    Even better 🙂

  45. Andrew Reynolds

    Robert,
    No – but TransACT has competition from Telstra, Optus and 3 or 4 wireless providers for broadband services and from satellite.
    Is that a natural monopoly? It depends on how narrowly you define the scope of their business.

  46. Mercurius

    Katz, you’re a commenter for whom I have a great deal of time and respect, but on this issue I think you’re out to lunch.

    @34

    But as fibre is being installed unlike with copper wire, we already know of the existence of other, competing, potentially much cheaper, modalities.
    If satellite delivery develops to the point where it is as attractive as fibre, will Australians be permitted to opt out of fibre without penalty and adopt satellite modalities without penalty?
    If that happens, who picks up the tab for the unamortised portion of enormously expensive infrastructure?

    Your position is of a type with the standard zombie conservative arguments for perpetual deferral of action. The best time to purchase expensive new technology is always next year.

    Let me put it this way: the “No” camp are always quick to ridicule any notion of emergent or as-yet-unmeasurable benefits from NBN infrastructure. Yet here you are effectively advocating we should “wait and see” because there’s gonna be some emergent or as-yet-unmeasurable technological great leap forward (satellite! wireless! Their cost will come down by two orders of magnitude any day now!) that’ll render fibre an expensive white elephant. Well, if you’re allowed to invoke such magical NBN-killers, let me remind you that the emergent unforeseen ADSL technology squeezed an extra 15 years of value out of a moribund copper network, so I’m gonna invoke a magical emergent unforeseen technology that in 30-50 years time will give us another 20 years value out of FTTH. So there.

    Meanwhile, why do people who push satellite and wireless, which are orders of magnitude more expensive in transmission costs than fibre, get to claim the label “rationalist”? They’re a classic example of what John Ralston Saul is on about when he describes how frequently quote unquote rational policies lead to irrational outcomes.

    A fibre network is the “space elevator” of communications infrastructure. Once you build the damn thing, the payloads are next-to-free. Fibre is the fastest, cheapest, bestest available solution, so we get to wear the “rational” hat. So there, again.

    Perhaps satellite-delivered data will prove to be satisfactory for delivery of movies, which is about as bandwidth-greedy as most punters want their internet to be, especially at defined price-points.

    With that attitude, you could serve on the NSW government, who never build a three-lane highway when a two-lane one “will prove to be satisfactory”. Because, hey, the cost of thirty years of traffic jams doesn’t appear on government balance sheets and, when the public costs truly become intolerable, they can just start a PPP to get the third lane built and charge a private toll. So that won’t appear on the government balance sheet either. See what responsible rational economic managers we are!?

    As this debate wears on, I’m finding it increasingly difficult to see the “No” camp as honest brokers in the debate. Perhaps the jaw-jutting declaration by the Opposition at the outset that they were going to “demolish” the NBN should have tipped me off that they came to the debate as something less than gentle seekers of truth.

    Their company ill serves you, Katz.

  47. Katz

    Mercurius, I’m asking leading questions to get razor sharp responses. I’m happy to admit my ignorance on these technical matters. I’m on a steep learning curve.

    For example, I didn’t know of the existence of TransACT before today. Then I learned that they have a subsidiary right here in Victoria called Neighbourhood Cable, which is servicing Mildura, Ballarat and Geelong.

    A quick trip to Whirlpool indicates that their speed and reliability claims about reliability and speed on their FTTC (Fibre to the Curb) service occasion guffaws of derision from folks who claim to be subscribers.

    If FTTH is better than that, then Neighbourhood Cable (and TransACT) may be dead meat. But then again maybe these services are cheap enough and stable enough to cause many folks from these bergs (and any others which I don’t know about) to decide to shun the NBN.

    Does anybody know? Would government have to kill these services in order to make NBN profitable?

  48. Nick

    “Would government have to kill these services in order to make NBN profitable?”

    No. Or, at least, according to the McKinsey report, TransACT should be fine and left more or less untouched by legislature as they’re already open access, not vertically integrated, and also service the regions, instead of cherry picking only the highest density, most profitable parts of the major cities.

    “So the question of the cost of decommissioning the Telstra cable is critical.”

    The $8 billion+ of copper that Telstra own and get to flog off will sweeten things a bit (for the company, and for its shareholders).

  49. Don Wigan

    My knowledge is no better than yours, Katz, but I’m prepared to go along with the expert opinion which seems to be that high speed broadband using optic fibre is the way to go. Peter Martin is about the only dissenter that I’d have a high respect for, and I think he’s wrong on the comparable value of copper.

    If the argument om fibre optics is accepted, it’s then only a question of whether the NBN program is the most effective method of delivery. I assume that the objections of mozzie and Andrew Reynolds are primarily on that point, albeit I’m not certain.

    My view is similar to Tony Windsor’s and perhaps for the same reason. The infrastructure is best delivered as a state concern, with competition merely on the retailing. The reasons for that are simple and easily understood if you live in country or regional Australia. They are directly related to distance and the population imbalance between city and country.

    We know from the past that both the railways and the electricity utilities services to country areas were not viable until taken over by the state. The same would happen today with alternatives to NBN.

    Equally we know (or ought to)the importance of putting enough capital into it to get it right. The various gauges of railways should be lesson enough.

    In SA in the 70s the State Labor government planned to put in a rail connection to Modbury at a cost then of about $91 million. The Liberals took over before it was started and settled instead for an Autobahn bus system for about $9 million. Some SA posters can probably tell you more on that but I’d guess it was a lemon. You can’t skimp on these things.

    We’re not even aware of all the economic possibilities of NBN, but the implications for health and education alone would justify it. And if we believe that Murdoch’s opposition to it (which is as energetic as his opposition to climate change science) it may have the additional benefit of reducing News Ltd control of information and influence.

  50. Andrew Reynolds

    Don,
    I accept that FTTH is the best way to deliver broadband if everyone actually needs 100mbps or 1gbps at the home right now. I also accept that if it is needed to everyone’s doorstep (or nearly everyone’s) then the only real way to see that happen is that the government gets involved in some way.
    I just do not believe that either of those is the case.
    .
    There are some good reasons why hospitals, particularly in remote areas could use this now and perhaps schools. To try to argue that, by extension, it needs to be in every house, even those with no interest in having a computer, and those with good existing cable connections and those with good existing DSL connections and those with good existing access to wireless is, to me at least, to draw a very, very, long bow indeed.
    I was listening to the radio tonight on the way home. Martha Lane Fox was talking about how great it was that the UK had the highest rates of eCommerce in the world. She also said it would be great if everyone had access to (to paraphrase from memory) “…a good, stable 2Mbps broadband connection.”
    Not gigabit – 2 megabit.
    If they can do what they have with that sort of infrastructure then why are we spending a lot of money to build something 500 times as fast?
    Seriously – there has got to be much, much better uses for $43bn than putting a lot of dark fibre in the ground right now. Let’s spend the money getting better penetration off our existing infrastructure and then upgrade and replace on an as-needed basis, not blowing a huge amount of money building something that we will not actually get close to using the full capacity of for a long time.
    If you are doing this out of a loathing for News Limited then a much, much cheaper way to go about it would be to persuade people that getting (or establishing) a new newspaper would be a great option.

  51. Brian

    On the Murray-Darling Basin thread hannah’s dad gave us a link he said would take too long to download with his connection. I clicked on it and started counting. It downloaded in about 5 seconds. With the NBN we would both get it in less than a second.

    Katz, the current edition of New Scientist has information about all sorts of materials and other cutting edge means of handling information. One ‘wonder’ material is graphene, one atom thick, tougher than diamond, stretches like rubber, has superconductivity etc etc.

    Something may come along better than optic fibre, but we can afford optic fibre (so the $25 million study says), we know what it can do and what it can provide is more than we can imagine we’d want. It should be good for 30 years and that’s all it has to be.

    I can see wireless also becoming universally available as a supplement in major population centres, so we can access the internet as our electric car drives itself.

    Chris @ 30, there are indeed concerns about a public utility being used as a milch cow. I believe Australia Post has this problem right now where there is a diminishing dividend being extracted when it should be using spare cash to reinvent itself. We need someone with expertise in public administration to advise on the best way of preventing this happening.

    Chris @ 46 asked:

    How are they going to handle companies coming in and rolling out competing fibre in the high-profit areas which the NBN want to use to cross subsidise unprofitable areas?

    Either you shout “natural monopoly” and make it one as Andrew fears, or you cop the potential losses and subsidise the bush from the taxpayers purse. The fear is that you do neither, which means the bush misses out.

    Don Wigan makes a lot of sense.

  52. Brian

    Andrew, I’m getting a bit tired of the $43 billion number when we know it’s going to be something less. I’m expecting the business case information promised shortly will give us a new figure. We’ve been told that $43 billion is the worst case scenario, of which public money was supposed to be only $27 billion and that paying for it’s copper network Telstra will make it cheaper.

    So let’s wait and see what the amount really is.

    Also it’s been said above we are paying Telstra for the copper network to stop them using it. That will be the effect, which means that take-up rates are meaningless, but NBN will also be able to access the conduit. My copper wire comes from under the footpath, under my garden along the boundary line and enters the corner of the house. I expect that’s how the fibre will come when it comes.

  53. sg

    Andrew, that study I linked to indicates that take up of broadband by households is a key determinant of the extent of economic benefits flowing from internet industries. It doesn’t restrict the case for high speed internet to hospitals and schools. You really need to drop the “no-one really needs it” argument, especially when up till now no-one in Australia has had a choice about whether to choose it or not.

  54. The Low Spark of High Heeled Boys

    The problem for those who advocate competition is that they do not say how it could be done.They of course always never say the present system is not a competitive market.

    It didn’t originally occur for understandable reasons which one Henry Ergas trumpeted for Telstra in rerspect of payTV.

    This system will have open access so where is the problem?

    On take up Australians have shown in the past they are first movers.
    demand for mobile phones far exceeded anyone’s forecast.
    Previous experience of changing from dial up would indicate strong demand and the korean experience would seem consumers thin kit is very attractive.

    Andrew misses the major point the main beneficiaries would be business in particular the medical and education sectors

  55. Incurious and Unread

    Andrew @54,

    You are not alone. I agree with your position. This “all or nothing” argument is very tiresome.

    Brian @ 55,

    Are you saying that you should not have to wait for 5 seconds for a download?

  56. Brian

    Are you saying that you should not have to wait for 5 seconds for a download?

    @ 59, no, but in terms of Katz’s worry about being overrun by newer technology, FTTH at 12MBps should give us a service no-one could reasonably complain about and if people want to download DVD’s in few minutes, let them pay a bit more.

    The prospect is for a technology that should exceed our reasonable needs at the universal service level, and yet be scalable to cater for higher demand functions for entertainment, health, education, home business etc purposes.

    At the very basic level of simply needing a fixed line phone service, we are told that the only thing that will change, including what we pay, is that the phone gets plugged into a new outlet and the old one becomes defunct.

  57. David Irving (no relation)

    Don @ 53, the Adelaide Obahn is actually fantastic. (I didn’t realise it had been that much cheaper than rail would’ve been, btw – I always assumed they’d cost about the same.) It’s a fast, efficient system, and it doesn’t involve mode changes (from bus to train, for instance). Often you can get to where you’re going without even changing buses. Its only disadvantage is that there aren’t more of them, radiating in all directions from the CBD.

  58. Don Wigan

    I agree with Brian that the resource should be there and available to everyone. As he said, Australians have an excellent record of taking up new technology when they can see advantages from it. Mobile phones is the best example but there are others, especially things like farmers using satellite technology and GPS in relation to weather, crop rotation, livestock, etc.

    There are unforeseen possibilities with high speed broadband, particularly in relation to workplaces. People may well be able to work from home and still communicate as freely with colleagues as in the post. The office block may become a thing of the past.

    While occasionally gazing in dismay at Melbourne’s decaying suburban railway station system, I’ve even wondered at that possibility. Why do all railway/transport staff have to be in a giant building? Why not scatter them throughout the station network knowing that with something like NBN they could communicate just as freely as they do now? At least having staff at the stations might mean there’s a bit more security and you can unlock the toilets. Of course, it may require re-socialising the rail system but it’d be worth it.

    I don’t feel any real concern about the spending required to ensure so much access. The country will get the benefit. Cross-subsidizing worked with postage. And if it seems extravagant, well look at how much we’re forking out to keep the private health insurance sector alive, or how much education funding is being creamed off by Kings, Geelong Grammar et al.

  59. Don Wigan

    Thanks for that, David. I had no idea it was that good. I’d only seen it on fleeting visits.

  60. Andrew Reynolds

    sg,
    I have never (IIRC) said no-one really needs it. Clearly, some do. Do we all, though? Completely different question.
    .
    Brian,
    Does it make a difference if it is $43bn, $40bn or $35bn? They are all very, very large amounts of money to be spent now. If what they buy is not going to be well used it is all waste that could have been better used elsewhere.
    .
    The Low Spark of High Heeled Boys,
    I do not miss that point – it is the point I am making. Hospitals could use this – but we do not have a hospital in every house in Australia. For the vast majority of residential homes in this country there is no economic case to put in broadband that is faster than they can possibly use.
    .
    Don,
    The question you have not answered is why NBN is needed to achieve that. Existing cable and ADSL is more than fast enough to deal with the sorts of stuff you are talking about.

  61. joe2

    So Andrew is arguing a first class system for some, it doesn’t matter if the overall cost of a universal system is misrepresented and you should all be happy with the crappy system you have got.

  62. Fran Barlow

    Andrew asked:

    Does it make a difference if it is $43bn, $40bn or $35bn? They are all very, very large amounts of money to be spent now.

    Well assuming 22 million Australians (there are more beneficiaries than that even now and by 2060 who knows home any) and 50 years to recover the capital cost that works out at somehwere between $0.07 and $0.10 per person per day, so yes, it does matter. That 3 cents per person per day could come in handy.

    If what they buy is not going to be well used it is all waste that could have been better used elsewhere.

    Well it clearly isn’t going to be all or mostly “waste”. Some of it may well be temporarily redundant capacity which we will in due course need on a timeline that will only be available if it is built now and temporarily redundant. This also saves us money.

    If you are going to run an opportunity cost objection, you have to look at both sides of the question. It is not merely “what else could we do with the money” but what costs, and uincertainties and risks do we suffer if we don’t spend the money in the way proposed.

    This seems to be a persistent pattern in the positions of those running the coalition policy agenda — cherrypick the bits of the story that suit carping claims but ignore the package of costs, risks and benefits as a whole. Just as a price on CO2 is presented by the coalition as if that is all there was to it, and so too on RSPT, so too on NBN it is presented as if there is all cost and no benefit and no risk or cost at all in doing nothing.

    And finally, as I’ve noted more than once, raising opportunity cost is disingenuous handwaving unless you actually propose to spend the money on something better and more, also target other programs that would be open to opportunity cost objections — as in defence for example. Simply standing around wailing those now famous three-word slogans counts for nothing.

  63. The Low Spark of High Heeled Boys

    Andrew,

    You could make the same case for households and write ADSL not fibre.Indeed people said just that at the time

    There are a large number of households where the business is combined with the household.

    oh the amounts you are talking about are way too large.

    The cost wil be much less. There is already fibre which has been laid, there are other ways to lay it etc

    The opportunity cost if of replacing the copper system which is quite expensive for Telstra to keep up to speed.

    I really would like someone to spell out how you have a competitive wholesale market.

  64. Andrew Reynolds

    Well, Fran – if you are looking to find someone running the “coalition policy agenda” I suggest you keep looking. I am running to my own policy agenda, as are most of us here. Keep the strawman off the forum, please.
    As for spending the money on something better – how about tax cuts for the poor – “use” the money to raise (for example) the tax free threshold. Don’t take the money in the first place. Great use for it there.
    .
    As for the rest, your argument seems to hinge on two points. Firstly, a fundamental misunderstanding of finance (excusable) when you claim that doing it all in a big rush just to get it in too quickly (and possibly paying over the odds by doing so) is somehow saving money. Installing capacity as it is needed and actually going to be used means that you are not only saving money but you are also not misallocating resources.
    Secondly, you seem to think that installing things quickly costs no more than doing it more slowly (i.e. as needed). Getting it all done in a rush means that lots of people need to be trained to install the equipment and then re-allocated after it is done – and having lots of dark capacity. Building it as needed means you need to train up fewer people to get the job done as needed and you do not have large amounts of dark capacity.
    How can the first possibly save money? You are also hiring a lot of people to do short term work.
    As for the difference – $0.03 a day. $10.95 a year. Do I really need to lampoon that one? Naw – too easy.
    .
    joe2,
    Good to see you reverting to type – misunderstanding and misrepresenting. Not even a good try.

  65. joe2

    We would never have had a sewage system or the electricity grid if you bean counter types had been around Andrew.

    And do not make me laugh with your concern for the poor and tax cuts. You sound just like the rabbit who proposes to do the same while pulling down our welfare system.

    You would be more than happy for them to be left with a 3rd rate, crumbling, telecommunication system because you personally do not think they have a need for it. Do up your slip mate your elitist liberal slip is showing.

  66. Fran Barlow

    Andrew said:

    if you are looking to find someone running the “coalition policy agenda” I suggest you keep looking. I am running to my own policy agenda, as are most of us here.

    Oh I don’t imply that you are acting on behalf of the coalition, but what you say certainly is what they are saying, so the observation is fair.

    As for spending the money on something better – how about tax cuts for the poor – “use” the money to raise (for example) the tax free threshold.

    Tax cuts of 10.7 cents per day? Gosh … Next step utopia … I don’t suppose that people clubbing together and buying in bulk some asset that would help them ever makes sense?

    Firstly, a fundamental misunderstanding of finance (excusable) when you claim that doing it all in a big rush just to get it in too quickly (and possibly paying over the odds by doing so) is somehow saving money.

    On the contrary, I do understand that fast tracking stuff costs more, all else being equal. As is usual, all else is not equal. Firstly and most obviously, we will have to fast track even faster if we attempt to wait until the useful life of the existing copper is completely exhausted. We will of course be obliged to keep people on servicing the copper in the interim. And of course we don’t get to gflog off the copper to others in the interim either. One suspects selling it in the next ten years will be better than selling it in the ten years after that.

    We have a world class team assembled to do this right now. If we invite them to take a hike and please themselves, we will be obliged to assemble them again go through a whole new project specification process and compete with others scrambling to do the same thing. The UK is itself working on doing this right now.

    It is dangerous to convert rules of thumb into decisive conclusions without taking the bigger picture into account.

  67. Katz

    On the contrary, I do understand that fast tracking stuff costs more, all else being equal. As is usual, all else is not equal.

    While I agree with AR and FB, that fast tracking will be more costly, I think there is a more imprtant reason than those enunciated by FB why “all else is not equal”.

    Joe mentioned electricity and sewerage as analogues for the fibre network. And to a degree that is true. However, unlike electricity and sewerage, where it does not impair the system if few people choose to hook up to it, if people choose not to hook up to the fibre, its serviceability is impaired.

    Electricity flows only one way — into the home.

    Sewage flows only one way — out of the home.

    But the essence of connectivity is that information flows both inwards and outwards. The utility of the system for its users is dependent upon a critical mass of people being hooked up to it and actually using it.

    Partial roll-outs vitiate this function.

  68. Andrew Reynolds

    Fran,
    In that case you are running the ALP policy agenda. Those observations are not entirely helpful – and are misleading and to a great extent, wrong. Do focus on the points, rather than trying to imply that I am some sort of stooge.
    In any case, I do have my disagreements with the Libs on communications, as I have made plain at other points. You, OTOH, seem to be taking the ALP agenda pretty much wholesale.
    .
    Several points from your comment. Who is getting the tax cuts of 10.7 cents per day? Raising the tax free threshold has very different effects to a full tax cut. Do try to keep up.
    I have never said that we have “…to wait until the useful life of the existing copper is completely exhausted…” Not my argument at all. Try again – you are just wrong here.
    Flogging the copper off once it is of no further economic use would make more sense, not less. More copper is used in power transmission than in telecoms, so as people start putting power stations in more diverse and remote areas demand will only go up. Supply might as well, but that is then a judgement call. Digging it up and selling it, though, when it is still useful where it is is just insanity in any economic, or even possibly environmental terms.
    The team is here and they should be putting in fibre. Great – the only question is how fast and who pays for it. I think the users should pay and that it be put in as needed. You seem to think we all should pay, even if we do not need it or want it and it should be put in long before it is needed, if it ever is.
    That is the bigger picture.

  69. joe2

    “In any case, I do have my disagreements with the Libs on communications, as I have made plain at other points.”

    Where is that divergence, Andrew? You sound like a shill to me. Same virtual lines about only those who can afford world class communications should have it. Good fibre in Toorak and copper for Sunshine. What’s the difference?

    Gold plated dunny for the rich and let the poor have a hole, if we were relying on you to set up a sewage system.

  70. bmitw

    Nice one, Andrew. Conflate tax cuts with raising the tax threshold and hope nobody notices that in our marginal tax rate system a raise in the threshold benefits all tax payers and not just the poor and a poorly directed cut may well do the same. If you were serious about wanting the NBN money to be redirected to the less well off you’d have mentioned a more targeted approach such as increasing the low income offset or raising pensions and unemployment benefits.

    And I for one am sick of reading half baked attempts at analysing the case for or mainly against the NBN. The NBN is a once in a century project and is essential for this country.

  71. Wozza

    Joe2 and Fran: do you really not realise that making arguments in terms of “Liberal shill”, or “running a Coalition policy agenda” is merely reinforcing the perception that, for many proponents of the NBN, this is not about vital infrastructure at all; it is about pursuing tribal politics by means of $43 billion of other peoples money?

    It is perfectly possible to have genuine doubts and queries about the NBN that are not based on political partisanship. No doubt it is equally possible to be convinced of its merits for reasons other than the purely political, although one must say that those advocating its merits on this blog provide less evidence for this assumption than one would like.

    Putting the politics aside, if that is possible, this is the fifth thread on the NBN in the last three weeks by my count, involving some pretty knowledgeable and intelligent people (exclude me from that number if you wish, the point still holds). It has got no closer to resolving the issues being questioned than any of the others. Doesn’t this suggest that simply aren’t enough facts around on which to resolve them? That is, that the basic issue, as a number – more outside this blog than on it – have consistently said, is that there is no comprehensive cost benefit analysis which would clarify the assumptions on which the project is based and obviate the need for mounting the argument in vague generalities like “taking the bigger picture into account” or “unforeseen possibilities”.

  72. Fran Barlow

    Andrew said:

    In that case you are running the ALP policy agenda.

    On the NBN, arguably so. On that issue, I’m not saying anything substantially at odds with what the ALP proposes. Of course, as you know, on other matters (e.g. nuclear power and clean energy, carbon pricing [I lobbied Liberals to block the CPRS], Afghanistan, the voting system, public funding of elections, the electoral system more generally, gay marriage, asylum seekers, resource rent taxation, housing policy, transport policy) I’m sharply at odds with the ALP policy agenda. So keen was I that they should be denied my vote that I voted informal denying The Greens my vote in the process.

    So really to describe me in general as running the ALP policy agenda would be seriously misleading. I just don’t tick anywhere near enough boxes and I protest loudly and persistently.

    I never said you were a “stooge” (nor did I imply it). I did note the persistent pattern of policy cherrypicking that runs through those who broadly share the coalition perspective on major public policy. That does not ential the inference that you are acting as an agent for anyone else. I assume your position simply reflects the state of play in your mileue.

    Who is getting the tax cuts of 10.7 cents per day?

    Presumably, those now burdened with the threshhold. All of them can get their $36.50 per annum. But why be stingy? lets exclude the top 50% from a rebate and give more to the bottom 50%. Let them all have $73 per annum. Wow!

    Flogging the copper off once it is of no further economic use would make more sense, not less.

    How much can you get for stuff that is of no further/much less economic use as a communication medium? Would it not make more sense to sell it when it’s still notionally useful to us (and thus to people like us)? If there is a big run on copper due to new energy systems being rolled out over the next decade would it not be good to cash in on that market? Would it not be good to abate some of the digging up of copper for these things, purely in ecological footprint terms?

    You seem to think we all should pay, even if we do not need it or want it and it should be put in long before it is needed, if it ever is.

    I do believe we should all pay because even if there are amongst us a handful of people who don’t directly need it, we will all derive benefit from it if not in the short term (next 10 years) then certainly in the medium term 10-25 years. Yes, some of us will be dead then but our children/grandchildren, for whom we typically sacrifice will be better off. People in this country buy houses and contemplate passing the equity onto children and in a communal sense, that is what the NBN is — a legacy for the next two-to however many generations.

    I see no basis at all for you questioning whether it will ever be useful. It is very clear that it will be useful in the foreseeable future. If we don’t build it now, it’s probable that we won’t have it when it will be really useful. Indeed, it’s quite possible that even if we build it now, that we will get it too late to realise all of the benefits. Really we should probably have started the process in 2006. Still at least the project has started and one benefit now is that it does provide employment in areas where employment is likely to remain weak for the foreseeable future and at a time when the cost of borrowing is likely to remain low and our capacity to service debt likely to remain high. Those are other uncertainties that haven’t made it into your figuring out of when this should be done.

  73. Fran Barlow

    Wozza said:

    That is, that the basic issue, […] is that there is no comprehensive cost benefit analysis which would clarify the assumptions on which the project is based …

    That’s true. There is not a comprehensive cost-benefit analysis of this because as has been repeatedly pointed out, it’s simply not possible to devise one that would be meaningful Any attempt would be very substantially a GIGO exercise conducted to warrant or strike down the project according to the whim of the body commissioning it.

    Thus, the persistent demand from the coalition that there should be a CBA is simply an exercise in self-serving posturing and attempted defeat by delay. We don’t have the filibuster in this country but that is what it is, constructively. It’s an analog of their argument that the carbon price committee should revisit whether we need a price on carbon at all.

    You will recall, I feel sure, the Auditor General’s report into the RPP back in the dying days of the Howard regime. Those things were far more amenable to CBAs and yet projects for which there were not even proposals were being “approved”. The Howard regime never considered CBAs on the Telstra sale or the G&ST. There were no CBAs on Sea Sprite helicopters before they signed off or Joint Strike Fighters or Super Hornets. It didn’t occur to them that committing to the NATO mission in Afghanistan or the COW in Iraq ought to have got the tick of a CBA. Nope … Was there a CBA for that $360 million APEC fandango in September 2007? Nope.

    So pardon me if I say note the notion of suck it and see has a long history in coalition government, even when CBAs would have been plausible and even when one assumes human life is at stake.

    Now they want one that can’t be done properly just because it will take a lot of time and they can go back to saying all talk and no action and cherrypicking the bits out that will fit into headlines in the OO. That’s not even funny. Just lame.

  74. Chris

    Don @ 63 – actually the o-bahn is probably a good example of doing infrastructure development which is appropriate for the situation rather than “the best possible”. At 10% of the cost of rail we have a transport solution which has been sufficient for what is needed (as well as having some advantages which David suggested. And in addition the o-bahn track reserves the land if demand gets high enough that say light rail really is required in the future.

  75. Wozza

    Actually, Fran, I was trying to move the discussion beyond political tribalism. A response consisting of screeds of mere anti-Howardism (a tip for you: he hasn’t been around for three years) is a salutory reminder that thinking that a discussion of the NBN might be conducted by, er, discussing the NBN, was wlldly over-optimistic. Forget it.

    The point about a CBA, incidentally, which has been made ad infinitum, is not that it will spit out a single yes/no answer which it clearly can’t; it is that it will force an explanation of assumptions and clarify risks.

  76. joe2

    “….it is about pursuing tribal politics by means of $43 billion of other peoples money?”

    And after making this blatantly provocative, misleading and partisan comment- it’s not that much, dickhead, for the millionth times- are we are somehow meant to believe that Wozza the loop.. “cost benefit analysis”…. “cost benefit analysis”…. “cost benefit analysis” is somehow clean and beyond the fray of politics?

    Yer, right, Wozza. You cannot spout every negative liberal talking point about the NBN and pretend innocence. It stands out like dogs balls.

  77. Fran Barlow

    Wozza continued:

    The point about a CBA, incidentally, which has been made ad infinitum {since we are unlikely to reach infinity, I’m calling pretentious hyperbole here FB}, is not that it will spit out a single yes/no answer which it clearly can’t; it is that it will force an explanation of assumptions and clarify risks.

    Oh yes, that would be the end Abbott intends 😉

  78. joe2
  79. David Irving (no relation)

    As I’ve said before, whenever one of the users of the application I support wants a new report, I ask them for a business case (essentially a cost-benefit analysis). The reason is because I don’t want to do it. I know they either won’t be able to justify it, or won’t bother because it’s too hard.

    That’s why the Opposition (and Wozza) want one for the NBN. It’s a ploy, not a desire for information.

  80. Mercurius

    “…it is about pursuing tribal politics by means of $43 billion of other peoples money?”

    Well, Dr. Evil just telephoned and told me the real cost will be $43 BAJILLION-zillion-squillion dollars.

    Wozza’s wide-eyed protestations that he’s really just looking for clarification would be a lot more convincing if he wasn’t simultaneously repeating distortions and untruths out of the other side of his mouth.

    The fact that the people calling loudest for a CBA are deliberately and repeatedly over-stating the projected public cost by about $15 billion dollars tells you all you really need to know about their commitment to clarity, probity or truth-seeking…

  81. joe2

    “Well, Dr. Evil just telephoned and told me the real cost will be $43 BAJILLION-zillion-squillion dollars.”

    Oh jes, Merc, Nick Minchin knows your phone number!

  82. Chris

    Brian @ 55 – so according to this report http://www.arnnet.com.au/article/364622/updated_government_control_prices_nbn_rivals/ the way the government is going to protect the nbn from competition is to legislate minimum wholesale prices. Competitors will essentially not be allowed to charge less than what the nbn does so there will be no financial incentive for end users to move to competing networks as it won’t be any cheaper.

    Of course the big downside to this is if someone does come up with a cheaper way of delivering high speed Internet and its not just cherry picking proftitable areas there’s no incentive for them to roll it out as it will be difficult to get end users to move over if they have to pay the same anyway.

  83. Marks

    [email protected]

    In at least two states that I know of, it is compulsory to hook up to and pay for sewerage if a sewer runs by. It is most likely the case in all others as well, because sewerage systems actually do depend on people connecting to make them work. I can think of at least one country system here that collapsed because it did not have enough people connected. Just think, not enough flow and the poo settles to the bottom and blocks it all up if the pipes are too large. (Very simplistic, there are other issues as well).

    I suspect that the connections were also made compulsory because there would have been a number of people who would have said: “Benefit? What benefit? That pit privy out the back takes three bits per hour, accompanied by Murdoch’s latest offering too? Waste of bloody money.”

  84. Katz

    Marks, I never suggested it wasn’t compulsory to link up to sewerage systems. However, your comments about the need for minimum sewage flows to allow the sewerage system to work is interesting in that it tends to support the general case that I was making.

    And the electrical grid … ?

  85. Brian

    Chris @ 86, thanks for that. It seems that conceptually the government is seeing broadband infrastructure as a universally available utility rather than an optional service.

    Katz @ 71 said:

    if people choose not to hook up to the fibre, its serviceability is impaired.

    People’s choice needs to be considered in the context where the copper network is going to be decommissioned. People may have a mobile phone and prefer not to use a fixed line service. But in view of what Chris said, they won’t have access to internet that is better or even cheaper than the fibre connection.

    Some people, mostly older citizens, don’t have a computer or want an internet connection. Those people are unlikely to opt for a mobile phone over a fixed line.

    As the matter stands those people will get the fibre connection and have the choice of plugging their phone into a fibre connection that works as against leaving it plugged in to one that in the future won’t. I can’t see where ‘choosing not to hook up to fibre’ becomes a realistic option.

    Andrew @ 72 said:

    I think the users should pay and that it be put in as needed. You seem to think we all should pay, even if we do not need it or want it and it should be put in long before it is needed, if it ever is.

    For such a policy to work the NBN would surely have to put fibre down the street and leave the final connection to the home an option that the user pays for. I understand that this is the case in Singapore where typically the service will be connected to the basement of a multi-story block of units. The better your view the more you pay for the final connection.

    I suspect that the decision to go all the way into people’s lounge rooms was related to dealing with an obdurate Telstra, who didn’t want to give up their position as monopoly network provider.

    My feeling is that these decisions relate to the context that existed during the last parliamentary term. For better or worse the decisions have been made and there is little profit in constantly rehashing them.

    As I understand your position, Andrew, there is a significant probability that there is a disaster in the making and we should therefore pull back from the brink. Given that the service appears to be technically sound, universal and affordable, I don’t share these fears.

    People in the bush who are getting priority for a service subsidised by the rest of us, a service which is beyond their wildest expectations in terms of efficacy and price, should be especially happy about these policies.

    There is an issue as to whether the public expenditure on the NBN will appear on the budget balance sheet, in which case there is a political risk that we may not get the budget back into balance in the time-frame promised. This is only a problem because our paranoia about debt, as far as I can see.

  86. Katz

    Some people, mostly older citizens, don’t have a computer or want an internet connection. Those people are unlikely to opt for a mobile phone over a fixed line.

    What assumptions drive your prediction about future consumer choices in this matter?

    I know many persons older than 70 who make extensive use of mobile phones.

  87. FDB

    In any case Katz – it’s trivial to house a mobile phone with charger in the shell of an old fixed-line phone. The oldsters can even go back to rotary dialling if they like. Nobody’s going to force them to take it to the shops if they don’t want.

  88. joe2

    Actually I suspect the take up of high speed broadband will be very strong amongst older citizens as powerful communications systems are likely to advantage them, in particular.

    The need for actual visitation trips with family members will be able to be reduced and many medical matters will be more easily monitored.

  89. Brian

    Katz, what I’m saying is that there are very few older people who would opt for a mobile instead of a fixed line service. That is give up their fixed line service entirely.

    Recently I had to give a speech to a group, on average on the elderly side, that is mostly people I worked with 40 years ago. I passed around a sheet of paper around so I could send the text of my speech later. Only three of 20, all over 70, didn’t have email, but there were more than that over 70 who did have email. I’d bet they all had a fixed line phone service. So with FTTH they will all be on board.

    If FTTH is going to be installed without people having to pay directly out of their pockets for the connection, there is virtually no-one who won’t be connected. That’s the bottom line. Calculations based on a 70% take-up rate relate to the calculations that were made before the Telstra deal and are basically humbug.

  90. Chris

    Brian @ 89 – I think you’re right, but the more of the detail about what NBNco wants to do, the more I think there is a high risk we’re creating a problem for ourselves in another 20-30 years when the NBNco will be in a very powerful position.

    For example there was an article in the SMH last week about how the NBNco want to allow ISPs to connect into their network in the capital cities. This does make it easier for them to do uniform wholesale pricing for the city and regional areas, but it also means they’re making a whole lot of existing fibre rollout redundant throwing away a lot of capacity in the existing network. At least Conroy has said no to this and (I think) there will explicit government subsidies for the regional areas. But its an example of a budding monopoly trying to flex its muscles.

    The minimum pricing legislation could also cause similar problems in the future. Eg an innvoative company wants to trial some new cheaper broadband technology and can’t do it in practice because they are by law unable to pass on cost savings to their end users.

    Katz, what I’m saying is that there are very few older people who would opt for a mobile instead of a fixed line service. That is give up their fixed line service entirely.

    I think your ordinary fixed line service is going to die pretty quickly – the only holdouts those who don’t have a mobile and don’t have an internet access at home. Especially once the 000 service problem is fixed with voip and mobiles. Even on the NBN the fixed line service is essentially voip anyway so why wouldn’t people move to a much cheaper voip service?

  91. John D

    Noikia has achieved some very high speeds on copper wire. Gizmag had the following to say:

    ust when the future of broadband appears to be tipped towards the mass roll-out of optics, Nokia Siemens Networks proves that there’s still life in the old copper wires yet. Using a virtual channel to supplement physical copper wire, data transmission speeds of 825 Mbps were recorded. Okay, so it was only over a distance of 400 meters (just over 1,312 feet) but the circuit managed to sustain 750 Mbps when the distance was increased to 500 meters (about 1,640 feet), with the technology promising broadband speed increases of between 50 and 75 per cent over existing bonded copper lines.

    Looking into ways of improving the existing copper infrastructure probably won’t stop the networks from having to invest in optic fiber altogether, but it might serve to put off that huge investment just a little longer – especially if speeds like those demonstrated by Nokia Siemens Networks are anything to go by. The super-fast speeds mentioned earlier were made possible using “circuits that involve the creation of a virtual – or ‘phantom’ – channel to supplement the two physical wires that are the standard configuration for copper transmission lines.”

    This doesn’t mean that the NBN work should stop but it sounds as though copper might be OK for some of the shorter lines. Ditto for some of the existing cable.

    I would be a lot more comfortable if there was a thoughtful discussion going on re NBN priorities instead of the simplistic point scoring we are hearing from both sides.

  92. Brian

    Chris, thoughtful comments.

    If fixed line is going to die does it mean that no-one’s number will be available in a directory?

  93. Nick

    “50 and 75 per cent over existing bonded copper lines

    John D, the catch is the technology requires *at least two* separate phone lines running into your building/modem (and probably more in this case, since Nokia failed to specify in their press release)…which may be fine for a lot of businesses, but never going to be practical or desirable for 95% of Australian households to suddenly up and have connected.

    Not to mention, it’d mean at least another 200,000 miles of ‘last mile’ copper having to be laid or strung across Australia.

  94. Nick

    Ok, some more reading shows it’s likely it was only over 4-twisted pairs, not any more than that…

    Incidentally, Nokia’s press release was just a bit premature. Alkatel also exhibited at the World Broadband Forum in Paris in the last few days – and can do 910Mbs over 4-twisted pairs at 400m (or 390Mbs over 2-twisted pairs), and took the prize for ‘Broadband Innovation of the Year’.

  95. Chris

    John D @ 95 – that link isn’t working for me at the moment, but it would be interesting to know how much improvement (if any) you get in the say 1km-5km range.

    Brian @ 96 – I think most people who get voip and get rid of their normal landline get a DID which gives them a real phone number. Although I have a landline (really just for the 000 service) as well as voip I have another externally reachable number for the voip line which I use as a work number.

    Those numbers don’t currently go into the whitepages, but there’s no reason there couldn’t be a central directory of these. But there’s a real incentive for Telstra at the moment not to include them. As voip popularity increases and normal landline connections decrease someone may well startup a directory service. But it will be interesting to see how many want their numbers listed if they don’t have to pay for it to be unlisted. My preference would actually be for unlisted and I can just give my number to those who need it.

  96. Zorronsky

    I have recently managed to solve a lack of service for broadband [wireless] by setting up an aerial that scrapes in a signal. However when I wanted to cancel my fixed line Telstra threatened to increase my wireless contract by 20$ a month. They do this by removing my concessions. I’ve tried other services to no avail. Also the much promoted 21.6 Mbps is in reality a huge exaggeration.

  97. Chris

    Zorronsky – yea Telstra do everything they can to get you to keep your landline. Though other providers who do both broadband and normal phone lines tend to have similar bundling deals.

    Re: wireless – Telstra are talking about a 42Mbit/s peak download rate software upgrade early next year. But you’ll only get that in pretty ideal conditions – just like you’re not getting 22Mbits now….

  98. Zorronsky

    Chris the bit that gets me is the garage size box I can see across the paddock from my kitchen window, on a side road, servicing probably 30 or 40 houses, farms and accommodation businesses has fibre laid and, according to a tech I caught up with there, required some hardware that would be able to give us all ADSL 2. or better when such service becomes available.

  99. Zorronsky

    I would just add that the roll-out map for the NBN indicates that this area will still be wireless and considering there are 100km by 60km of mountain ranges in the same National Park dominated area, things don’t look too promising.

  100. Chris

    Zorronsky – if you’ve got line of sight then with some antennas you could probably get excellent wi-fi. I doubt Telstra would be that flexible though – I wonder if the NBN will be.

    I rather doubt you’ll see Telstra investing much money in even mini-DSLAMs with the NBN rollout happening. But your situation brings up an interesting question – if you’re meant to have just wireless with the NBN rollout – what happens to your existing copper landline connection – who is going to look after that if Telstra no longer have to and the NBN are only interested in fibre or wireless?

  101. Nick

    http://www.dbcde.gov.au/broadband/national_broadband_network/policy_statements

    Delivery of USO Obligations outside NBN Fibre Coverage Areas

    As noted below, Telstra will also have a contractual obligation with the USO Co to operate and maintain its existing copper network and other relevant infrastructure in non fibre areas for a 10 year period starting from the commencement of USO Co in July 2012. The contract will be on terms consistent with the Commonwealth’s usual commercial practice.

    Telstra will continue to have a regulated obligation as the USO provider in areas outside of the NBN fibre coverage for 2 years after USO Co commences operations. After that time, the responsibility for delivery of the USO will transfer to USO Co.

    Under the terms of the 10 year contract with USO Co for non-fibre areas, Telstra will need to continue to provide a copper service for any consumer who wishes to continue such a service, and to ensure that the copper network is sufficiently maintained over time for that purpose.

  102. Chris

    Nick – thanks! So it just passes to the nbnco then. That would make for a very happy Telstra.

  103. Andrew Reynolds

    Brian,
    The “disaster” (very strong word, but I will use yours) I am worried about has several aspects.
    I know that optic fibre is technically the most cost effective way to deliver high-speed fixed broadband on current or foreseeable future technology – and that if we all wanted the high speeds it offers in a fixed location then there is no way you would be putting in a new copper network. It would not make sense to do so. It would, as a result, also be something close to the usual defition of a natural monopoly.
    That said, there are so many of the conditions in the above that are simply not true.
    We have an existing copper network, that is serving its purpose well – and that technologies exist and are being further developed to improve. Effectively throwing this away I do not see as making any sense whatsoever when the speeds it currently offers are good enough for most purposes and there is good scope for further improving them. We do not all need, nor is there any real scope to use, the gigabit speeds that will be offered – nor for the mass market are there any applications that actually use these speeds.
    Yes – there are some niche uses and it may well be that regional and remote hospitals could use them, but surely we could just have optics to those who actually need it, rather than wasting money putting in everywhere seemingly just for the heck of it. As it is upgraded and replaced it will probably be upgraded to fibre – over time and as needed.
    Secondly, we also do not all need, nor want, fixed line internet whatever the speed. Again, I know that if you want stable, reliable and fast broadband then wireless is not the way to go. With my travelling I know that better than many. For much of my internet use, though, wireless is fine – and very convenient. No – I am not going to run offsite back-ups through it, but using Dropbox, teamviewer or other such apps I very rarely have to transfer much data. The NBN structure seems to be built around the idea that we all (or many of us at least) will use high-capacity broadband to transfer huge files on a regular basis. Again – I simply do not see that is the case. A few of us do (and I transfer the occasional big file) but again, most of the time all I want to do is send and receive emails, update facebook and type missives on blogs – and maybe get the latest version of Angry Birds from the App Store. While the NBN may be nice for that, I do not see it as essential national infrastructure, justifying throwing some number of tens of billions of dollars at, when DSL, cable and wireless work perfectly well – if not always perfectly.
    That this program will more than likely also result in the steady degrading of the existing infrastructure over the next few years as capacity is not upgraded and equipment and networks are patched rather than correctly maintained also worries me.
    Lastly (at least as far as this comment goes) I am very nervous indeed about the creation of yet another national monopoly. We are still in the process of unpicking the last telecoms monpoly that was created by legislative fiat. We know how good that was. We now have an increasingly diverse and multi-channel telecoms system, with several competing technologies and several competing suppliers covering the large majority of our population. The results of this diversity have, overall, been stunning. Yes – there have been a few problems – and those need to be addressed – but let’s not forget where we have come from.
    That this is to be a government monopoly that is eventually to become a private sector monopoly which it looks like must remain so (again, by legislative fiat, not through a process of choice by anyone other than the government) is to me the most worrying aspect of all.
    To me, the fact we are to throw away a diverse and competitive infrastructure that, with a few issues, serves us well and could continue to do so for quite some time to put in a lot of capacity that we simply will not use for quite some time to come and in the process create yet another telecoms monopoly provider is a real waste.
    I can see why people get all excited by it – and if and when it happens I know I will enjoy using it – but is it worth the price? Not just the money (however many tens of billions it ultimately costs to put in), but opportunity cost of those funds, the waste of the current network, the imposition of yet another telecoms monopoly and the plan that it will become yet another (of course well-)regulated private monopoly.
    Chalk me up, to put it mildly, as unconvinced.
    .
    Unless anyone comes up with anything new in this I will leave the subject alone on this blog. IMHO the debate has got a little stale. That will probably come as a relief to several here.

  104. Mercurius

    Here’s what it’s about, and who’d a thunk it, a Murdoch paper printed it:

    http://www.theaustralian.com.au/news/opinion/broadband-network-offers-test-of-imagination/story-e6frg6zo-1225946342354

    The money quote:

    What is truly revolutionary about the speeds possible in an NBN is not the extra text, voice or video that will be sent but this piping of scientific data. The ability to send sophisticated algorithms and large data sets is set to become the game-changer of this century. This is data collected from the ocean, soil and air; from cattle, crops and bodies; from our cars and appliances; from our finances and cognitive processes.

    To reveal its secrets, this data needs to be crunched by new algorithms specifically designed to function in this brave new world of big data.

    So would all the people moaning about the cost of this network kindly agree not to partake of its benefits and, most of all, to STAY OFF IT once it’s built, so the rest of us can enjoy it without your endless bitching?

  105. Zorronsky

    Hear, hear! Merc.

  106. Brian

    Merc, some of the big international software houses are already seeing the Australian situation as an opportunity to develop apps that make use of the new technology, according to an article in the AFR recently.

    Andrew @ 107, I have some differences in philosophy. I’d hope, for example, that we can learn to get the best out of a natural government monopoly to the extent that attitudes change and as a populace we come to see that privatisation is not always best.

    But I’d been thinking of doing a comment relating a lesson I learned nearly 50 years ago as a youngish administrator with significant responsibilities. I had the habit of going over old decisions in staff meetings, trying to find out whether we’d made the best decision in the circumstances. My deputy, at 35 years old about 6 years older than I was and more experienced in the field came to me and said something like, “For Chrissake, Brian, can we stop re-making all the decisions we’ve made and get on with making the next one.”

    Since then I’ve regarded decisions made as part of the new landscape within which we find a way forward. When Laura Tingle said the NBN train had left the station it seemed to me that in 3 years time the NBN installation would be approaching the half-way point. Time then before the next election to see what the best way forward is from there, rather than to agonise now whether we set off along the right path.

  107. Andrew Reynolds

    Sorry, Brian – I have to respond to that one (my excuse is that it is a new perspective).
    Do you apply that to every decision of a government or only the ones you agree with? For example, did you issue a peep at all about the decision to go into Iraq or Afghanistan after that decision was made other than perhaps making it an issue that you might change your vote over?
    If we apply that reasoning to government decisions then there is no need to protest anything. “Oh well, they have decided. I don’t get a say again until the next election – I will just grin and bear it.”
    I can’t say that I agree with that logic at all – and I suspect that most here would disagree with you. At least I hope so.
    The other two comments above are not new, so I will stay with what I said earlier.

  108. joe2

    I just think you are frightened of change, debt, new ideas, the future and letting go, Andrew. Not uncommon amongst conservative commentators.

  109. Fran Barlow

    Brian Said:

    Since then I’ve regarded decisions made as part of the new landscape within which we find a way forward. When Laura Tingle said the NBN train had left the station it seemed to me that in 3 years time the NBN installation would be approaching the half-way point. Time then before the next election to see what the best way forward is from there, rather than to agonise now whether we set off along the right path.

    That’s reasonable up to a point. If a prior commitment was wrong, sunk costs accepted since that time have to be factored into any attempt to change direction. On the other hand, in a more general sense, a poor decision generally is the result of a poor process. Sometimes exigency forces the organisation to abandon good process, but it would be good to know if the process or unknowable unknowns drove a poor decision, precisely so that one could foreclose poor decisions in the future.

    I see nothing fundamentally wrong with the NBN process, though it would have been better if the decision ultimately taken had been their first choice rather than one forced on them by the breakdown of the bidding process. That of course is the benefit of hindsight, so I will not be too critical and perhaps that was simply how it had to be.

  110. Andrew Reynolds

    joe2,
    You will need to find a conservative commentator to find out if you were correct.