Thursday, 4 April 2013

NBN: The Coalition has it backwards - it should be pro-Fibre.

In 2001, Prime Minister, Howard was seen by his own party, as "mean and tricky". Not only that, but they had things backwardssummarised on "7:30" as:
The Government was "mean and tricky, out of touch and not listening" and it had deserted its own voter base, especially small business and self-funded retirees. 
If Fibre-to-Business was not a good idea, then why did the Coalition not block a $23 million project to upgrade 252 electoral offices to "Ultra-fast Internet Cables"? This is the very worst hypocrisy by a cynical cohort of politicians living high on the publicly funded hog: "I'm alright, Jack, blow you!".

Messers Abbot, Turnbull, Fletcher and Joyce are repeating this same wrong-headed blindness and being allowed to get away with it, unchallenged, by their own constituency and the Labor Party.

If you ask THE question about the NBN, "Who Benefits, Right Now?", then the answer is plain and unequivocal. it is NOT the urban dwelling middle-class who benefit. It's the Coalition's heartland:

  • Country voters:
    • The outlying 7% are getting 25% of the NBN project budget spent on them, in a free subsidy by the rest of us, paid out of our monthly rental fees without costing anything but a little interest in the Federal Budget.
    • Those outside the major conurbations (NSW, VIC, QLD, SA, WA) get included in the fibre rollout. Remember the 2005 Telstra offer?Those  4M premises were only in "the 5 major cities". That's what a "private sector" NBN will look like - just like the 1994-1997 Cable TV rollout.
  • Telecommunications Service Providers:
    • Telstra, Optus, iiNet, TPG and all the other ISP's/RSP's.
    • For the publicly listed businesses, especially their shareholders.
  • Digital Content Providers:
    • Streaming, Stored and Software.
    • Editorial, News and Time Sensitive Content Providers
      • Mr Murdoch, FOXTEL and Youtube pay-TV spring to mind.
      • Fairfax, Global Mail and the ABC all push content on-line as well.
  • On-line Retail and Service Enterprises, including Government and Not-for-Profits
    • Every mid- and large-enterprise provide extensive websites to interact with their users.
    • They do this not because it's "Trendy", but because:
      • it's much, much cheaper than every other method of C2B interaction.
      • they can provide huge swathes of information and product comparisons for those that want it.
      • they can provide 24/7 access for people, for nothing extra.
  • Small Business for whom "time is money":
    • e-mail, secure B2B, advertising and automatic website orders/payments
    • these are all strongly affected by available bandwidth/latency, affordability and network capacity/congestion.
      • Being the low-end of town, they can only afford domestic-grade services
I can't understand why these folks, all of whom are the Coalition heartland, aren't banging on the doors  of the Coalition and demanding better.

It's taken me some time to phrase and ask THE question, and to understand what the unrelenting driver of exponential growth in demand for Internet services really means:
ARPU's for providers and increased business turnover or savings. Like On-line Retailers vs Bricks and Mortar operators.
Internet traffic demand is growing currently at 30%/year, a doubling time of 2 years and 8 months.
In just 10 years, service providers will need to provide 15 times more capacity to keep up with demand, that is if no new breakthrough products arrive, like GIS+3-D visualisation, Augmented Reality or IP-TV.

Think iTunes, iPhone and iPad: all obvious after the fact, all high-impact on the Telecommunications infrastructure, all bringing very big smiles to many different Board Rooms around the globe.

What's different between Interent traffic growth and other essential infrastructure?
  • Nothing stops or fails if the service capacity doesn't keep up with demand, things just take longer:
    • compare to phone (circuit congestion or "no lines available, you have to wait a year or two while we install some") and reticulated electricity, gas, water. Or roads and bridges.
    • Tangible and identifiable essential infrastructure is GO/NO GO. When it runs out of capacity, the effect can be sudden and brutal. Not so much for Internet access.
  • all the benefits accrue to businesses & service enterprises, not to customers.
  • and all those outside the big conurbations, businesses and users benefit from additional services, allowing them to be competitive with those in the well-served, dense population areas.
This is the same difference as between Consumer Price Index & Producer Price Index... It's on the Input side, not the Output side.

Which makes a nonsense of the Coalitions' stance of "we don't want no stinking Fibre NBN!".

Messers Abbot, Turnbull, Fletcher and Joyce are repeating the Howard 2001 stuff-up, when their constituency realises this, I'm sure they won't be happy.

Much as it pains me to say this, it seems that Sol Trujillo, just 5 weeks after he took the reins at Telstra, pretty much nailed both the profound problems in the business and the solution, a single National Broadband Network.

His solution, 6 Mbps for $5.7 billion or 12Mbps for $15 billion via ADSL2 @ 1500m, was a creature of its times. Today it won't meet the next 5 years traffic demand that businesses selling these services need, let alone the 20 year economic life (200 times increase in traffic demand!) of a DSL FTTN solution.

On Mr Turnbull's call for "Cost Benefit Analyses", the effect on business, as revenues, expenses and valuation/share price, should be straight-forward to calculate just on what they are doing now, in major urban areas or not.

The only business segment I've named that could benefit from some real research into the effect of bandwidth on turnover and wage-costs are small businesses.

This can be done reasonably easily and quickly. I'm surprised Labor hasn't funded any University or Productivity Commission studies (or I've just not heard of them):
  • For a number of representative business chosen across a range of industries,
    • First, baseline worker output and typical tasks reliant on Internet access: email, VoIP, uploads/downloads, B2B sites, web research, ...
    • vary the connection speed in 3-4 steps for a hour or whole day at a time, and measure either the time-per-task or total transactions performed.
    • "Time is Money":
      • Plot the relationship between connection speed and output, the precise contribution to labour productivity due solely to Internet connection speed can be established.
      • This is a precise and definitive measure of the added value to small business of "faster broadband". This goes to the heart of a real Cost Benefit Analysis.
      • I'd expect an upper limit, or plateau (asymptote), on the curve. When I.T. systems respond faster than human response times, over 300-500ms, there is no increase in human transaction throughput. If a small business doesn't congest a 12/1 link (minimum NBN Co service) and the latency is acceptable, they will see NO benefit at higher speeds. Conversely, I've written  that the upstream speed, 1Mbps in this case, may be a "silent killer", causing congestion and unusably long latency on real-time services, like VoIP and face-face video calls.
Here are a few other wrong-headed statement about Information Technology, that share a common logic error. The absence of data is not proof of absence of effect:
  • Nobel Laureate in Economics, Robert Solow, named the "Productivity Paradox" in 1987:
    • “You can see the computer age everywhere but in the productivity statistics.”
    • The paradox has been defined as the “discrepancy between measures of investment in information technology and measures of output at the national level.”
  • In 2003, Nicholas Carr wrote in the Harvard Business Review:
    • “Why I.T. Doesn't Matter”,
    • If this were true, then all Software Companies, especially those producing systems, would be equally profitable. Apple vs Microsoft, Google vs Yahoo! for me, conclusively disprove his naive notion.
      • Whilst the best companies use I.T. creatively and use them as profound Cognitive Amplifiers, companies that replicate the appearances, not the practices and culture, will fail to see a benefit.
  • The Coalition saying "We don't need no stinking Fibre to the Home!"
    • It's NOT about the Home User, but all about the businesses selling to those Users.
    • Just because we don't have the data we need to show a clear benefit, doesn't mean this is no benefit. There are many ways we can infer those benefits, like looking at the economic drag on small businesses outside the major conurbations and the effects on lowering their turnover and competitiveness.
Just because a statement sounds good and confirms you expectations, doesn't make it correct.
The Coalition is in good company, Nobel Laureates and the Harvard Business Review, in this respect.

Their constituents and the electorate now get a chance to discern the Coalitions' real agenda. Is it:
  • "We'll do NOTHING that Labor wants", or
  • "We are trying to do the best for business, small and large, workers and all Australians".
I hope they guess right.

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