Wednesday, 26 September 2012

NBN: Coalition Broadband Policy, Sep-2012 edition

I've a number of criticisms of Mr Turnbull's latest release of the Coalition Broadband Policy, not the least is that the NBN is equally about Business and Consumer/Residential use, not just residential.

The implied statement that I think Australians will find repugnant and unacceptable is the abandonment of equal-access, in the shape of both non-uniform pricing (pay more in the bush) and highly inequitable access: most people will be poor cousins with limited access speed, while many in urban areas, won't get a connection outside the 1km wire-path.

  • The fluidity of the Policy and uncertainty of its content greatly lessens their credibility and the believability of the Policy.
  • The Survey is poor and looks like a distraction.
  • The Coalition has a very poor record on a number of Policy fronts, especially Telecomms.
  • The Government was pilloried over the lack of detail in the NBN plans any number of times. Having hard questions and demanded answers, the Coalition should be prepared to be held accountable in the same way. They are making a pitch to the electorate to be the next Government.
  • Where's the Beef?
    • What's the "Value Proposition" for the Coalition Broadband Plan/Policy?
Nothing further needs to be said about the far too frequent "updating" of the Coalition Broadband Policy.

"Fast Broadband" Survey
I've had a look at Mr Turnbull's survey and was unimpressed, not for the obvious reasons of it being self-selected, open to rigging/bias and will bring little or no new information.

It's long and demands you supply personal information, with no mention of a privacy policy nor how the data will be used (Politicians are exempt from SPAM legislation).

I think there are only three explicit questions that should be asked, recorded against the originating IP number and/or a 'cookie':
  • Postcode
  • Would you commit to 50Mbps or greater service within the next 3 years.
  • Would you be prepared to pay $500-$2,000 to secure that service?
  • and, I liked Mr Turnbull's "Speed Test". That'd be a nice optional input.
But the really confusing thing for me is: Why a survey?
It can't be to get real feedback - it's a token at best and useless at worst.
Is it just a "look at me, look at me", a distraction/diversion or an attempt to be "seen to be doing something"?? I can't figure why someone as talented and knowledgable as Mr Turnbull would waste his time on it.

Coalition Policy Track Record
In 1996, the Howard/Costello/Faye government attempted to a general Outsourcing of IT Services within the Federal Public Service. This didn't go well, financially or in providing services. Most Agencies/Departments have made attempts to unwind the worst aspects, such as providing two levels of PC Help Desk: General and Special People. They are willing to spend more for a better service to Upper Management.

The privatisation of Government Assets, infrastructure and business, including Telstra, has a very chequered history.  Generally, like Outsourcing, Agencies/Departments have to pay more to get a worse service than they had with direct employees. What you might think of as the main push, reducing staff numbers in the Public Service, was not achieved at the end of the Howard Government.

Despite the massive uptick in potential revenues during the pre-GFC Mining Boom, the Howard Government underinvested in Infrastructure. Ports, railroads, roads and other facilities were not developed. Priority was given to "middle-class welfare", giving tax breaks or handouts to special interest groups.

Hiring contractors to run Prisons and Detention Services is problematic to say the least. Contract staff do not fall within the oversight and governance provisions of the Parliament, the Public Service employment provisions (Code of Conduct etc) nor Reporting and Accountability: Openness and Transparency.

Not directing Telstra in 2005/6 to proceed with its 12Mbps ADSL2 FTTN, when the Minister had the right to direct them in the National Interest.

Selling Telstra in 2006 without a demerger. What were they thinking?!?! That was never going to end well, either for consumers or on the Stock Exchange.

My personal favourites are:  The ACCC action against Telstra on ADSL access charges, not directing Telstra to co-operate with Optus in the National Interest for the Cable TV rollout (allowing the overbuild and incomplete rollout), allowing four Mobile Phone networks to overbuild one another with Telstra offering no roaming or 3rd-party access, and Telstra refusing to activate existing ADSL2 in Exchanges until competitors had installed their own DSLAM's, like the Optus HFC network, denying them full commercial value.

In light of the Coalition's short-sightedness and mishandling of Telecommunications Policy over a decade when they were the full or majority owner of Telstra and could direct it, I've no reason to believe the current Broadband Policy will be any better.

Criticisms: Make them, Answer them.
The Coalition doggedly pursued and criticised the Government over their NBN plans for years:
  • What's the Cost (of your Great Big Expensive White Elephant)?
  • Where's the Cost-Benefit Analysis for this Project?
  • Claims of "massive blowouts" (4%) in Project Estimates.
  • "Everyone is incompetent" because the Project hasn't achieved projected milestones within a framework of reluctant, recalcitrant and combative entities necessary to proceed:
    • installation contractors drawing out supply negotiations and attempting
    • Telstra causing very protracted negotiations and looking to maximise their payments under any and all schemes of arrangement.
    • Opposition tactics designed to obstruct and delay the project where possible.
The Coalition must now be prepared to answer all the same questions it has harped on, for having asked them, they've signalled the questions are important and implied that they are always concerned with exactly those issues:
  • A firm Cost Estimate, even with an Upper Bound.
    • Projected Project Cost Deviations. What we can expect the final amount to vary by.
  • A Cost-Benefit Study, not a simple user-intention survey.
  • How they'll ensure "Nobody we employ will be incompetent".
    • Ideally, how they know they their Plans and Projections will be met, within limits they define.
  • How they will control costs to better than 4%, because otherwise they deem it "a blow out".
    • Alan Kohler has convincingly argued with Mr Turnbull that by signalling he has both an absolute commitment to deliver an FTTN network and do it speedily, he will be at the mercy of some of the most viscous and opportunistic construction companies around. Exactly the same folks that gave NBN-Co such a hard time negotiating prices.
  • Just how many people and premises are they intending to supply fast broadband (12-25Mbps):
    • Within 5 years.
    • Within 10 yeas.
    • Never.
  • What Network Demand is the Coalition projecting over the next 35 years, the term of the SAU/SSU contracts?
Where's the Value Proposition for anything allow Hybrid NBN, mainly FTTN?
Is the Coalition proposing a Broadband Network that will last 35 years without replacement, like the pure-FTTP NBN?
If not, they are designing it to be thrown away before its time. That doesn't sound like good economic planning or management to me.

How much cheaper will the total build be? (CapEx)
 But at what cost in Operating Expenses (paying Telstra to lease their copper and maintaining/upgrading/replacing it for them)?
They can't promise a 70% CapEx savings, at best a 50% savings, if they want to place realistic contingencies in their Plan.
They are planning to double or treble the OpEx, by leasing copper to reduce CapEx. Telstra commented they were "spectacularly agnostic" about pure-FTTP or hybrid FTTN. They've done the sums and know they'll make a motza in OpEx charges from the Coalition plan.

The Coalition is only offering 25Mbps guaranteed peak information rate (PIR) with no upgrade path.
Plus, they won't nearly connect that to 90% of even urban premises with their 1km VDSL2-FTTN.

Contrast this with the 1Gbps FTTP equipment being installed now by NBN Co.
Forty time faster today, with a near infinite in-place upgrade path.

The kicker is that these comparisons can't be done just for 2012-2015, or even to 2020. They've got to cover the full period of the current contracts: 35 years. (~2045).

The other side of the coin is roll-out speed.
We know that in 2005 Telstra said they could roll-out 20,000 Nodes (at 1.5km) for 12Mbps in 3 years, at a capital intensity they could support.
The 25Mbps FTTN-NBN now proposed with need ~50,000 Nodes to cover 75-80% of the 6.5M premises Telstra planned for.
Fixing and tuning the copper lines to support twice the speed will take more time, effort and cost.

Allowing for a crash-program of just 1 year design, planning, testing, training and contract negotiations, the network would still take 7.5 years to roll-out. If they started in Jan 2014, straight after the election, they could be done in 8.5 years, by July 2022.

Or they could fast-track the project by spending money a lot faster and costing more per house with higher risks of large budget/schedule blow-outs, but to go faster takes more time planning and training people. A VDSL2 FTTN could be rolled out to 75-80% of urban premises in 3 years, but it'd need 1.5-2 years preparation before construction: 5 years, or the end of 2018.

The Coalition can trade their "cheaper" for "sooner", but not achieve much better either way.

The most respected Network Demand Projections are by CISCO, the preeminent network equipment supplier. For just the next 5 years (2011-2015) they are forecasting:
  • aggregate demand up four times
  • busy-hour demand up five times
  • and demand video and games services will explode after 2014.
If this rate of growth continues for 35 years, it's a 15,000-fold (1,500,000%) growth in demand. You'd have to be foolish and stupid to forecast that far into the future, but what the Internet experience after the iPhone/iPad has taught us is: The Internet is still a high-growth industry, chock full of surprises.

All we know is that we don't know the Future of the Internet, but it's likely to next speeds far beyond what we now expect.

Saying that 25Mbps will keep most people satisfied for 5 years is a safe bet, for 10 years is a risky bet and for longer, you'd be a complete fool.

What the Coalition Broadband plan is offering seems to be:
  • For 50-60% less upfront,
  • but probably 2-3 times more in running costs,
  • we'll provide you with Forty times slower links
  • up to 20% sooner
  • that has no current upgrade path
  • that might have an economic life as little as one third (10 years) pure-fibre
  • will connect far fewer people than pure-fibre,
  • but we'll still connect all new houses with fibre,
  • and charge some people higher prices.
To me, that's a stinker of a deal the Coalition is offering to 90% of the population.

If it was a car, it'd be cheaper than half to buy, would use twice the petrol, need constant maintenance and repair, have a top-speed of under 10kph and you'd have to throw it away while needing to buy three for every one of the competitor, while they'd cost more when you needed them more.

But you could order one and have it delivered a bit sooner. 

The only virtue the Policy has is: it's cheaper to buy!
Nothing else about it, I find, is worth the downside.

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