NBN: Issues with Copper vs Fibre comments and claims.

Renai Lemay on Delimiter posted: Turnbull “copper” NBN plan “bizarre”, says Albo. Renai is one of our better and more informed Tech Journos. I generally don't consider commenting on his pieces.

I disagree with two comments in his 'news' section and want to elaborate on a para in his 'opinion/analysis':


Para 1:

However, it is also true that the FTTN rollout methodology proposed by Shadow Communications Minister Malcolm Turnbull in the Coalition’s rival NBN policy has also been used globally with great success to upgrade broadband speeds and fundamental service delivery to millions of premises in countries such as the UK, Germany and the US.

No, these services cannot be said to have been rolled out "with great success".
Yes, they are in the process of being rolled out or have been finished recently.
They might be approximately "On Budget" for initial expenditure, but their business plans run for very much longer, 10-20 years.

The mark of "success" in any infrastructure project is simple: did it achieve its commercial goals, past tense.

I contend none of the FTTN projects have yet gone onto achieve break-end, let alone their returning their anticipated ROI. We'll only know in 10-20 years. Like Climate Change, the real data can only come in long after you have to take action. Exactly wrong if you're trying to make sound decisions.

This is the question: Will these "cheap" Copper solutions perform commercially? The initial deployment project is NOT nearly the whole deal.

That is, a) will they achieve or exceed their own business plan objections and b) will they be more profitable than alternatives (do nothing, FTTP, 3G/4G, Hybrid, ...).

Para 2:

However, the Communications Minister did not mention that under both NBN policies, if they deliver as they are planned, the actual cost of the network will end up being somewhat immaterial. This is because both policies plan to ultimately deliver a return on the Government’s investment in either, meaning that the funding involved of building either can only be counted as an investment, and not as an expense.

The NBN Co business plan is based on very detailed costings and conservative growth assumptions.
It contains a very explicit cash-flow plan, with break-even times and a long-term ROI (Return on Investment) of 7% by 2040.

The Coalition Policy documents are wishes and guesses at best, that have never been subjected to substantive independent analysis or checking, yet they are quoted as gospel.

Renai has made a mistake, the Coalition have NEVER promised a ROI on their "more affordable" plan. To be "more affordable", it must collect lower revenues, for the same premises active, and in the face of the acknowledged higher Operating Expenses (OpEx), a lower profit margin.

The closest I can find is a single reference buried on page 8 of the full Coalition Plan in "New statement of expectations". There is nothing in the summary, nothing in the Background doc about the Coalition's ROI or IRR (Internal Rate of Return), though all documents extensively criticise and pillory the current NBN Co plan and contend, without apparent basis 'they cannot (probably) achieve their target returns'.

NBN Co will be required to achieve these objectives while providing a positive after-inflation return on all post-election equity invested by taxpayers.

This weak statement is in the face of, Summary Financials, pg 31 of the Background doc.

• Revenue over 2012‐2021 is $16 billion, versus $23 billion in the current NBN Co plan
• Opex over 2012‐2021 is $22 billion, versus $26 billion in the current NBN Co plan
• Capex over 2012‐2021 is $22 billion, versus $37.4 billion in the current NBN Co plan.
• Capex to 2019, when the rollout reaches 100 per cent coverage, is about $20.4 billion
• The NBN is projected to be cash flow positive in 2020‐21.

What the Coalition doesn't explain is their 50% extra Funding Gap, $7 billion less in revenues and $4 billion less in Expenses (unexplained) which could be their $3 billion difference:

• The NBN Co 2012 Plan has a $37.4 billion CapEx and max Funding of $44.1 billion, a $6 billion Gap
• Coalition CapEx of $20.4 billion vs max Funding of $29.5 billion, yields a $9 billion Gap, 50% more. Why is this so?

These issues are front of mind in the Coalition documents, but they go very quiet on the weaknesses and targets of their own plan. Odd, given they are self-styled Financial Experts and heavily criticise NBN Co plan on exactly these grounds:

• "The capital funding already required by Labor’s NBN will probably never earn a return". p33 Background.
• Sub Section: A ‘Fair Return’ for Taxpayers? p 18, Background.

Para 3:
[The following is NOT a partisan political view, it's a verifiable and accurate reporting of the facts. I shan't publish comments on this point, supportive or derogatory. It's a contentious position, I know. You're welcome to discuss it elsewhere.]

Meanwhile, in broad terms, the availability of broadband to the actual public hasn’t really changed much over the past half-decade. Most people are still stuck on low speeds on ADSL2+, a few of us are lucky enough to be able to access the at-times-congested higher-speed HFC cable networks, and most of the rest are quota-constrained on the 3G/4G mobile networks being rolled out.

How did we end up in the position Renai describes? It wasn't accidental, nor was it unforeseen.

The failure of Commentators to note this and for the Coalition to avoid ever taking responsibility for their role in creating a predictable, preventable and inevitable mess is one of the worst and most pernicious problems in this whole "debate" (it's really an argument).

The urgent need for a Broadband Network was created by the Liberals and Nationals during the Howard era. Within 6 weeks of taking the helm of Telstra in 2005, Sol Trujillo, was presenting the dire state of Australian Telecomms, and the need for immediate action directly to Prime Minister Howard. Infrastructure issues get worse the longer they are unaddressed, increasing in severity and cost to fix the longer they are ignored. Like road pot-holes, they worsen if left, not improve, and get worse at an accelerating rate.

Howard and his cabinet knew there was a problem, knew it was pressing, knew it would cost more to fix the longer it was left, knew that privatising Telstra without first structurally separating it would lead to a commercial disaster for every other Telco and knew from the "magic triplet": the Cable TV debacle, the ADSL mess and non-coperation between mobile network operators, that the private sector would never, could never deliver a National Broadband network, that a National Broadband solution had become only possible as a Public Sector initiative - that the private sector had entirely failed to meet National Strategic & Economic needs, and it happened on their watch.

It is on record that in the early 1990's Frank Blount, then CEO of Telecomm/Telstra, had formulated a plan, to be complete by 2010, to replace the entire Copper Customer Access Network with Fibre - funding it entirely out of Operating Revenue. What happened?? This was a major failure of Public Policy and good government.

This long-term failure of the Coalition cannot go unmentioned in the context of them bemoaning that 'Labor has failed to deliver a fully working network in 5 years'. Yes, Big Projects take time. Labor is trying to fix more than 10 years of Coalition ineptitude and inaction. In 1996 when Howard came to power, the upgrade of the Australian network was a small, non-urgent project, which was neglected until it's become large, expensive and urgent - and now Turnbull et al have the gall to criticise Labor for wanting to fix their mess and not fixing it overnight!

There is only one Party/side at fault here and it is the Coalition, the Liberals and the Nationals.