Saturday, 25 August 2012

NBN: Politics trumps Economics, Business, Technical and Social needs.

In a previous piece, I commented on a set of posts on the Business Spectator site, centred around Alan Kohler and Malcolm Turnbull 'debating' the Liberal plan for a National Broadband Network (NBN).

Politics is The Art of The Possible, where Perception is Everything.
The NBN is first and foremost in the Political realm, not in the Business, Economics, Social or Technical.

For the last two years, we've had Tony Abbot leading, arguably, the world's Best Opposition Ever, loudly proclaiming Gillard's government is "The Worst Government Ever".

Well, no its not. On every economic measure, it is outstanding.
Post-GFC, we have an economy that's the envy of everyone in the G20...
Not something a "Worst Government Ever" could do, yet the ALP and Gillard trail in the polls.

The Perception of an incompetent leader and government has become the accepted 'Reality' in the Electorate and Media.

Why can't Gillard and her Government get "cut through" when they have actually done remarkably well and in the most difficult circumstances achieved an enviable legislative programme??

Because they can't easily achieve their legislative agenda.
With a minority Government, "The Art of the Possible", really bites.

Abbot can play "Dr No" and deny the ALP every rational move, forcing them into back-flips at every corner, even passing legislation against their party platform/policy (off-shore processing) and most egregiously, making the Prime Minister an unintentional liar, being forced into a single option, a Carbon Price that got labelled a "Carbon Tax" when she'd specifically ruled this out, in just one speech on the election trail, almost as an aside...

The Greens blocked reasonable Carbon Pricing legislation under Rudd, forcing Gillard to be at the mercy of "Dr No": giving her Government just one option, that dictated by The Opposition.

Unsurprisingly, Abbot and his Opposition don't mention this, but beat the drum on Gillard "being a liar", which, following the well-known rules of FUD, gets traction in these uncertain economic times.

I think it's a testament to her grit and perseverance that Gillard has continued to govern at all, and she cannot be praised highly enough for both pursuing her reforms and for achieving them. Due in large part to her personal capability as a negotiator. Not in the same league as Bob Hawke's Master Consensus Maker talent, but in the daily grind of governing, without peer.

John Howard didn't have to work this hard, against such odds nor for so long.
Howard got Meg Lees to flip on the GST and eventually implode the Australian Democrats, but that's minor compared to the multiple epic battles fought and won by Gillard.

She's won all the Battles and abjectly lost the War.

Surprisingly, I think she's performed better than anyone else could have.

But its a shame that a Best Performance can only result in Massive Electoral Loss.
Let's hope for the ALP Federally, its less of a landslide in 2013 than Anna Bligh's 2012 rout in Queensland. "The Minivan Opposition": includes an empty seat for a hired driver.

So back to the main game, the NBN...

What do we know:
  • The NBN Plan/Policy of Turnbull is solely about winning the next election.
    • The Libs have to create as many points of difference between them and the ALP: the NBN is just one of them.
      • Turnbull is emphasising "savings" of $20B, that has to be significant.
      • The Libs are reported to need $70B in cuts to fund their promises, and with a No New Taxes policy, they need to find a whole tranche of savings.
      • The Libs won't submit their costings/finances to Treasury, but will have an accounting firm check them. Presumably in elections, you only ask questions to which you know the answer...
      • These Electioneering Economic Estimates aren't about good Accounting or following the rules you'd use in Government, but creating a perception.
      • Political Promises are not enforceable. Whatever is said beforehand can be abandoned with lines like "that wasn't a core promise" and the classic, "things were much worse than we could've imagined". Expenditure promises aren't safe.
      • The Libs may well drop less affordable and more expendable parts of their election promises. But they won't be able to abandon declared savings:
        • Turnbull and the Libs are locked into this "saving" of $20B on the NBN.
    • The Abbot and the Libs have a long-running strategy of labelling Gillard and the ALP as:
      • "Worst Ever"
      • "incompetent"
      • "mismanagers"
      • "Great Big Expensive New Taxes/XXX"
      • "liars", and by inference lacking in integrity, not to be trusted, even 'slippery'.
    • An Abbot government will do everything it can to reinforce these mantras, even to the point of deliberately undermining and sabotaging any and all ALP initiatives it can to create failures. National Interest is irrelevant: this is a pretty personal political fight.
      • We've no reason to expect Abbot, if elected as Prime Minister, would ever resile from this style of constant attack. Putting the boot into an already defeated ALP would be seen as both justification and strategic attack: weakening the ALP brand nationally now and for the future. Racking up a lead in the polls...
      • Abbot proving his current claims, if he achieves office, this might be very important to him personally and strategically.
      • I suspect that discrediting the Gillard, Rudd and the current ALP government will be very high on his agenda. With Abbot's No Holds Barred style, every tool at his disposal would be used and he'd possibly prioritise "hurt the ALP" over anything else.
  • Gillard has to call an election before the end of 2013.
    • She controls the timing, though everyone expects her to hold on for as long as she can.
    • The time for Turnbull to challenge Abbot for leadership has passed. If he challenges now, Gillard calls a snap election before he can get this ducks in a row.
      • Into the foreseeable future, a serving Prime Minister can't be challenged for leadership following the Rudd/Gillard spill.
      • If Abbot becomes Prime Minister, Turnbull can't challenge.
      • Abbot is such a ferocious competitor, I can't image him ever standing aside as Prime Minister. Howard, much less obsessed with winning at any cost, couldn't do so.
    • Plus we know Abbot is a formidable campaigner, seemingly much more effective than Turnbull. The Libs party room would be loathe to change now.
    • We know that Abbot is fiercely competitive, to the point of being obsessed with winning, and if we rely on Tony Windsor, isn't just pragmatic, but exceptionally expedient.
      • Abbot is reported as saying he would do and say anything to have power.
    • We know that Turnbull has very different views than Abbot as shown by Abbot tearing up the Carbon Pricing legislation agreement Turnbull had negotiated.
      • Turnbull might even have a cohesive vision of the future, underpinned by some sound principles and ideologies. We know nothing of Abbot's "vision", its never been aired in public.
    • Turnbull has played the good party member and publicly toed the party line.
      • We know that he has different personal views to the Party Line [Carbon Price]
      • And know that he can subsume his personal views in public.
      • What we don't know is what he personally believes is the best NBN solution, Economically, Technically and Socially. Unless Turnbull becomes Prime Minister, we can never know.
      • What we do know is the financial interests he declares on the Register. This could give us insight into his personal views - where he's prepared to bet his money. France Telecom is making an FttP play, while BT is making an FttN play. Turnbull has invested in France Telecom because they were undervalued...
  • We know from the last 15 years of poor Internet access in one of the most compact, affluent and tech-savvy parts of the country, Gungahlin, ACT, that both Telstra and Politicians care exceedingly little about the pain poor Internet access causes their constituents:
    • In 1995, Telstra announced it would spend $20-$30MM on laying fibre-to-the-kerb in Gungahlin, a first for Australia. Important because it was an "everything underground" development.
      • The older parts of Canberra have "poles and wires" for phone and electricity through backyards. Cheap to install and reasonable to maintain.
    • What happened instead was they didn't even provide direct exchange lines, but the much inferior "pair-gain" services with roadside cabinets (RIM's: remote integrated multiplexors).
      • RIM's are owned by Telstra and can only work with their exchanges, not part of the ULL deal for direct exchange lines. The decision has the feel of a strategic, not technical basis.
    • Firstly customers couldn't get any broadband, ISDN or ADSL, over the RIM's.
      •  After years of very active campaigning, the got a upgraded RIM with a very limited numbers of ADSL connections.
      • Then quad-density cards, more ADSL connections. Enough for everyone? Don't think so. Were they limited to 1.5Mbps? not sure.
      • Then, the backhaul crunch. Telstra, after a decade, had provided an access network with better speeds and more connections, but failed to dimension the backhaul network from the RIM's and exchange to Interconnection Points to handle Busy Hour...
      • A notionally fast service that's unusable when you want it: ticks all the boxes for Telstra and the Pollies, but not the clients.
    • Where was the ACCC for all those years?
      • They couldn't demand Telstra either keep it's original Fibre-to-the-Kerb promise, nor fix the pair-gain debacle more swiftly.
      • What's changed??
  • On the SSU: Structural Separation Undertaking.
    • This involves no transfer of assets, only a requirement to disconnect the existing copper network when the NBN has installed optical fibre.
      • This isn't a deal set in stone, it can probably be trivially circumvented.
      • But it does have some constraints, namely the ACCC is involved in these 'regulated sevices' and the Libs/Turnbull may not want to disassemble that.
    • I can think of at least 3 ways to circumvent the SSU:
      • Repeal the laws.
        • Not ideal, but allows Telstra to do a BT Openreach public/private roll-out and hangs NB Co out to dry...
        • An expensive option, but buys great Political Capital ["Worst Ever ..."]
      • Use the Ministers' discretionary powers to vary both the end-date [1-Jul-2018] and exclude services/areas from the SSU.
      • Create a new Company, 'related' to NBN Co, owned by both Telstra and the Government to roll-out the FttN. Already allowed for in the Act.
        • Telstra has already created and costed a detailed FttN plan for the Rudd/Conroy submission.
        • They have the technology (RIM's), free access to the copper pairs (what stopped FttN mark 1), the network design and roll-out competence and resources, and probably good commercial contracts already in place.
        • Get sign-off by the ACCC if Telstra doesn't wholly control the service.
In 1988, Turnbull took on the might of the British Government and their "Official Secrets Act", and won "The Spycatcher Case". He's a good deal older and wiser, why won't he be able to take apart the SSU/NBN legislation?

The legislation, to my untrained eye, seems to be based on the assumption of a pro-FttP-NBN Government, not one hostile to a FttP-NBN. That's immediately broken by an Abbot/Turnbull government, and if the FttP-NBN isn't far enough advanced, it will be scuppered.

Turnbull is on record as having spent this last year consulting with a lot of people on how to build a FttN, I'd presume that would include David Thodey and Telstra. I haven't seen whether Thodey was pro-FttN Mark 1 or not: did he support Sol's repulse of Rudd/Conroy that led us to the NBN?

The most convincing argument for the Turnbull's FttN-NBN is simple:
  • Q: Will we lose this election or the next on this issue?
  • A: It's important only in a few regional seats.
    • And in the 2017 election, they can claim "Great Success at killing the ALP's Great Big Expensive White Elephant" and proudly point to some B/S figures on how good their FttN-NBN is, how many people it serves and how quickly it was done...
Addressing the very competent and insightful remarks of Paul Budde on Business Spectator ("why the BT model won't work for the NBN") using this "It's a Political not Rational Decision" lens:
  • " lack of vision and clear strategies, compounded by unclear targets, there has been little progress on whatever plans there are."
    • Telstra, we must assume, already has detailed plans and the means and experience to execute them.
    • Vision and Strategy are irrelevant in this Irrational model :-(
    • Telstra and the Libs will be triply motivated to roll-out their FttN post-hate:
      • Telstra gets to (part) own the distribution network and control the roll-out, causing maximum commercial damage to others.
      • The Libs get to block the NBN Co rollout and when the company flounders and can't meet its goals, loudly boast about how good they are and how bad the current mob were...
      • I believe it's in Telstra's strategic interests for NBN Co to be forced into a firesale. As the largest single customer, perhaps their only customer, they can dictate the price and terms of a sale. And if they have FttN-NBN Co as an alternate, they can block any other prospective buyer from being able to realise value from the FttP-NBN assets.
    • All along, one of the major problems for the Government with FttP-NBN has been preventing an overbuild spoiler from Telstra. Turnbull's FttN-NBN puts that back on the agenda, maybe via a partly-owned body.
  • Competitors will bristle...
    • Telstra, even under Thodey, seems irrevocably wedded to achieving monopolies where it can.
    • They own the copper distribution network, which means they have to be part of the FttN-NBN.
    • If Telstra, even structurally separated and without full ownership of FttN Co can't create an advantage for itself, they are not half as capable as I give them credit.
  • "no cost benefit study"
    • The FttP-NBN went ahead without a Cost-benefit study, so in this Irrational "Logic Does Not Apply" scenario, the Libs won't have to supply one.
    • But they can, legitimately, say:
      •  "We're going to save $20B over the ALP."
      • "So our NBN is better than their NBN. So there, we win."
      • It's politics, nothing better than schoolyard arguments are needed :-(
  • "provide evidence of a serious lack of cohesive national policies, regulatory difficulties, inadequate broadband delivery and undeliverable targets."
    • Do Abbot, Turnbull and the Libs care about any of those things?
      • More importantly, will they lose the election because of them? [NO]
  • "It would condemn Australia to the same outdated physical infrastructure which the UK is to be lumbered with"
    • And who would really care?
      • Not the Libs, not Telstra and not the ACCC because they have to act within their legislation.
      • The Gungahlin, ACT experience over 15 years shows all manner of promises can be made and broken and the Politicians and incumbent Telcos can just ignore it.
    • Public Opinion has to be translated into the currency that matters to Politicians: Votes.
      • With the amount of FUD that Abbot et al can generate on a huge number of issues, something 'theoretical' about our future broadband speeds won't rate for most voters.
  • "UK’s flawed NBN program lacks vision: it is short-term, and by being largely dependent on the commercial deployment of a single telco it has been hampered from the start."
    • Politics, especially as played by Abbot, is quintessentially short-term, in fact overwhelmingly myopic.
      • The only time-frame that matters is The Next Election...
      • Abbot, Turnbull and the Libs cannot be held to account for broken promises, under-delivering or putting either Party Political concerns ahead of the National Interest.
      • The only weapon against them is the very blunt instrument of the ballot box, and then it is always "after the fact".
    • Turnbull, Abbot and the Libs just need to "tick the box" on "we're creating an NBN", and they can make any claim they want about it: for campaigning Politicians, the future is a Fire Free Zone.
      • This isn't how I would like Politics to work, but perhaps we do have the Politicians we deserve... Self-serving, short-sighted and wilfully ignorant and unconcerned about the social impact of their ranting and poor legislation and actions.
  • " the government has opted to build a cheaper network without focussing on the broadband needs of the digital economy, e-health, smart grids, e-education, e-government, M2M and so on."
    • Yep, Political expediency trumps all other concerns.
      • Unless, you can impact the ballot box, or their proxy, the opinion polls, This is an Area That Logic Does Not Apply.
      • be clear, I don't support this view and would want a world where Politicians were required to show a Fiduciary Duty to the Public, individually and collectively, on pain of severe penalties...
        • Not going to happen, because the people who pass the Laws on Government are the ones that will be at effect of them. The system is Just Fine as it is, for them.
  • "an inappropriate regulatory regime which risks recreating a private monopoly provider in much of the country"
    • Not going to affect the next election, not an issue.
  • "leave large areas of the country with only the most basic service, which will retard consumer use of all but low-end services"
    • Not going to affect the next election, not an issue.
    • Can selectively promise the noisier "squeaking wheels" The Real Deal for Them, FttP-NBN.
      • Note: they don't have to deliver, only promise. Don't even have to properly explain why not, or fall back on the classic excuses "things were worse than we thought".
      • And another candidate, next election can trot out the same empty promises...
  • "dependence on last century’s copper network dramatically reduces available data rates"
    • This is a good argument in a rational world, but not for a Political decision.
      • Can the electors when they vote, know this?
      • Turnbull and the Libs are promising "cheaper, better, faster-to-deploy".
        • Who's to say, on election day, they won't keep that promise?
      • For the average mug punter, the Turnbull promise is understandable and probably believable. Most people don't know and don't care about the intricacies of the underlying networks...
  • "There has been no ‘cost benefit’ study, something the Coalition has been so adamant about."
    • As above, they can say:
      •  "We're going to save $20B. How do we know this? We've had one of the best commercial minds (Turnbull) in the country create this detailed plan. It's going to have an ROI five, ten or a hundred times that of the FttP-NBN. We've done the hard slog on the fine detail. It is cost-justified."
      • Note they never say they've done a cost-benefit study, but you may leave thinking they done it or something better. Politics, all about Perception.
  • "In the Australian market, FttN poses considerably greater burdens, and additional costs, given the need to deploy a far greater number of nodes to serve customers (70,000+). "
    • yes, and will that affect votes this election or next?
      • No? Don't care...
    • Will retail costs of the FttN-NBN be higher than FttP-NBN?
      • Absolutely, but you won't be able to know that, because the FttP-NBN will be sabotaged and probably sold-off as a dismal failure... (Great Big Expensive White Elephant)
    • Can the ACCC stop this scenario and force some sanity?
      • If Turnbull and his advisors are good, as I think they are, the new legislation will enable Telstra and their FttN-NBN to be completely free of ACCC interference.
  • "When KPN in the Netherlands began building out FttN it found that the network was not as cheap as originally envisaged."
    • Which will only happen after the next election and, Politically, the problem will be laid at the feet of the Gillard/Conroy government:
      • "The Worst Ever were so incompetent and mismanaged this so badly that...."  - add your own sad ending.
    • Telstra and its FttN-NBN only has to prevent FttP-NBN from achieving its mission to win. It only has to start enough of their roll-out, not actually spend all the money needed, to roadblock FttP-NBN.
      • This will be an exact rerun of the Optus/Telstra Cable-TV roll-out, with exactly the same tactics/strategies and same consequences and outcomes... Telstra can spoil the game for anyone else, if allowed. It doesn't actually have to build anything much itself. And the Board and management has shown a commercial willingness to throw away Billions in shareholders money to achieve their agenda.
        • So what's changed??? Nothing I can see.
      • Turnbull can adapt the legislation to allow only one of the two networks into a region.
      • FttN-NBN can always be rolled-out faster, because they get to leverage the installed copper distribution network. They've installed a lot of RIM's as well, have the process, contracts and crews to do it.
      • The FttN-NBN doesn't have to be connected to anyone, it doesn't have to achieve good access speeds nor does it have to have sufficient backhaul to be usable. It just needs to be installed for Turnbull and Thodey to win.
    • The whole point of the Turnbull proposal is that "FttN is but a stepping stone to FttP". If you don't look closely at the detail or understand the engineering and construction side, this is eminently reasonable and trivially obvious [and completely wrong, like most simplistic arguments!]
      • When Telstra's FttN-NBN is deployed, they will, rightfully, make the same claim they did with the pair-gain RIM's: These can and will be upgraded to the super-duper new standards as they come along.
      • Which, prime face, they were... Those poor souls in Gungahlin did get ADSL via RIM's. After considerable delays, to very limited numbers and at very low speeds, with ofttimes unusable service due to (avoidable, planned) network congestion...
        • The Telstra FttN-NBN RIM's will be upgradable to full FttP, "if demand requires".
        • Good luck for any customer getting a reasonable outcome under that regime.
  • "Another fundamental reason why Australia should avoid emulating the UK is that the latter’s broadband strategy is unambitious."
    • yes, and will that affect votes this election or next?
      • No? Don't care...
  • "It [BT Openreach] aims to deliver a base-level universal service complemented by broadband at up to 24Mb/s to 90 per cent of the population."
    • Which suggests that V 1.0 of the Telstra FttN-NBN will be ADSL2+, not VDSL.
      • We have the technology, why not use what we've got today?
      • And that buys us time to design good VDSL2 cards for our RIM's, alongside GPON bays for the FttP-NBN. 
        • delay, delay, delay. Poison the commercial environment and spoil others attempts...
        • Great strategy for a near-monopoly incumbent.
        • Do a little and let the others fail, seemingly "on their own merits".
  • " This is poor policy making, for rather than being guided by its own assessment of the long-term socio-economic benefits to be derived from the country’s broadband infrastructure, the government is limiting itself to the commercial priorities of a single telco."
    • yep, exactly.
    • And Would you expect it to be any other way?
      • Politics trumps everything: Commercial, Technical and Economic and Social interests.
  • "FttN may make sense in a copper-only environment, but the prime reason it makes sense is from the perspective of an investor who wants to slow down capex for a few years."
    • This is actually the reason for the Libs FttN-NBN. Can't emphasise it too much.
      • The interests of both Abbot and Telstra co-incide here.
      • For a modest outlay, Telstra's FttN-NBN can kill the FttP-NBN simply by delaying it.
  • "Also, by relying on copper for the last mile, FttN will rapidly run out of capacity."
    • yes, and will that affect votes this election or next?
      • No? Don't care...
    • Sadly, all of Pauls' arguments are exactly right and in the context of our Political environment, irrelevant unless they can be converted into a demonstrable hip-pocket result for voters.
      • Remember that voting is compulsory in Australia. We still have a sizeable "donkey vote" (straight down the page). This says we have a substantial segment of voters that are completely unengaged...
      • How do you make these voters care? Find out what they care about...
        • Which is why FUD and promises of Dollars in your pocket work. :-(
  • "Regulatory measures in place in the UK also risk recreating in the fibre age the same monopoly which BT for long enjoyed in the copper age."
    • Voters won't care about this.
    • Telstra shareholders, on the other hand, will be very, very happy.
    • And if Telstra does well, then Abbot/Turnbull can crow about how well they've turned around the "Great Big Expensive White Elephant" and brought real value to all those Mom and Pop investors who bought into the Telstra float...
      • Rational, no.
      • Self-serving by the Pollies and their mates in Big Business? Absolutely!
  • "No plan, and a lack of long-term vision"
    • Exactly, not alas, not a vote winner or of interest to Abbot and Turnbull.
      • Their mission is only to "get the job done", ie. get into Power.
      • And then it's "devil keeps the hindmost".
  • "The key, then, it to prepare national infrastructure for what cannot be anticipated, in the knowledge – from past and current experience – that it is preferable to have a capable network in the first instance than an inadequate one which entails additional cost, patches and delays as that network comes under increasing strain."
    • This is a superbly strong closing from Paul.
    • It is exactly right if this were a rational debate in any of the Realms but Political.
    • But there's no way that Abbot/Turnbull need to look further than their current FttN-NBN plan and still get into power at the next election.
This is a very discouraging and disillusioning analysis.

Hopefully at a later time I can address some ways this outcome could be changed.
In the meantime, we'll only know after the next election who's version of the future was broadly acceptable to the electorate.

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