Flat White

No end to the NBN nonsense 

24 September 2020

3:10 PM

24 September 2020

3:10 PM

The latest skirmish has erupted in the never-ending, highly partisan, NBN civil war.  

The NBN was a disaster at the outset based upon one single immutable principle: government should never attempt to pick commercial winners because they always fail. The broadband market was well served with an array of commercial offerings and there was no real business requirement for intervention. Labor Communications Minister Stephen Conroy felt otherwise and, with the tacit support of self-absorbed prime minister Kevin Rudd — and a budget of $4.7 billion –the NBN debacle began.  

Over time the objectives and expectations of the NBN project seem to have been lost or fogged from our collective memory with the political barbs now exchanged by politicians largely spurious in today’s telecommunications market. It might be helpful to apply some common sense and facts to dispassionately review the nearly-completed project.

Expectations and hype

From the outset, NBN deliverables were oversold by Labor politicians. During the 2010 election, the NBN was a key policy that proved very popular with the punters. My local MP promised that if you voted Labor you wouldn’t have to “stump-up” for the NBN because the government was funding the project. That is not a misprint. Even worse was the overoptimistic delusion that connecting every home with fibre would leapfrog Australia into strategic leadership in global technology. It must be remembered that in the frequently cited example of high-technology innovation, CSIRO’s wi-fi patents, the total amount of royalties returned to taxpayers is $500 million over the life of the patent. That equates to half the annual budget of the CSIRO. The politicians went into overdrive and the public lapped it up. Cooler heads who advocated caution, requested realistic metrics and ROI numbers were shouted down as Luddites, just like climate realists are today.  

Inane cost projections for an end-to-end fibre network 

In networking parlance, “trenching” means digging holes to lay fibre optic cable. The easiest way to budget for the finished cost of underground cabling is to pick a stupidly high number, double it and double it again. If that course had been taken the true “complete fibre” project cost would have been closer to $120 or $150 billion in a worst-case scenario. That equates to double or 2.5 times the finished cost today. If you find this blow-out projection implausible look no further than the current mess with the soil contamination with Melbourne’s Westgate tunnel project. The trouble starts as soon as a spade breaks the surface. Wise network architects dread trenching 

If you build fibre networks, they will come 

Actually, they won’t. In the Newcastle suburb of Mayfield, in a safe Labor seat rewarded early with a fibre deployment, you only need walk around the streets to count how many homes still aren’t connected to the fibre NBN: one in three after seven years. Older and younger residents make do with their mobile phone while families consider the NBN a mandatory requirement. Fibre take-up has been slow. Each connection had a build cost of between $3-5,000 depending on the location. Private enterprise would have rejected this return on investment at the project development phase. Not so in the case of government, however. It’s worth noting that Google abandoned its City Fibre initiatives in the USA. At the end of the day, there wasn’t enough profit to offset the risk. 

Market dynamics  


When the NBN project was kicked off one gigabyte of mobile data cost the consumer $50. In 2020 the market price is $1.00 per gigabyte or a 50:1 price reduction.  

NBN’s $4.5 billion  technology refresh

The politicians are going hysterical at this expense but seem unaware that technology refreshes are a mandatory requirement. New hardware reduces the use of energy, operates at greater speed and commands a smaller footprint reducing real estate and cooling costs. It also ensures security patching is maintained wherever possible. Most network hardware is replaced every 4-5 years and an annual maintenance charge is levied for ongoing software upgrades and failed equipment replacement. As equipment gets older it becomes less reliable, often leading to unplanned outages. Consumers see this as a major annoyance when their bank’s ATM network is unexpectantly offline. Older hardware cost more to operate and not replacing its false economy not to refresh it every few years, hence the $4.5 billion spend 

Is it really Zoom — or Netflix?  

One of the justifications for the NBN upgrade is to assist home-based workers deliver production output. It’s worth remembering that streaming media provider Netflix has already throttled bandwidth to reduce network congestion. In fact, between 15-20% of network usage is commandeered by customers for entertainment. Did taxpayers have this in mind when they “stumped up” for the NBN? 

Free market or monopoly? 

At a philosophical level, you either support government-funded enterprise or you don’t. The likelihood of any private enterprise taking on the size and risk of an NBN sized project was almost zero without large taxpayer-funded offsets. To make the project financially viable NBN’s competitors were forced to buy their broadband services from the NBN. Effectively, competition was outlawed and local network technology innovation has stagnated since then. It’s impossible to quantify the opportunity cost of this decision but history shows us that Telecom Australia’s transition to Telstra transformed the flexibility and flattened the cost of telecommunication service delivery across Australia. A decade after the launch of the NBN monopoly can the organisation be deemed a failure or a success? For many Australians the NBN has proven to be an unmitigated failure. For others it’s been a godsend. For most, however, the cost has increased with little to show for it.  

Is the NBN the gamechanger it was hyped to be? 

No.  

Mike Ryan is a technical copywriter living in the Hunter Valley.

 

 

 

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