It's also why the 4-5 ISP's with major DSLAM investments didn't get compensated: they can't undercut NBN Co pricing.
People in Rural and Remote areas should be picketing Parliament House, or the Liberal Party HQ:
Without a robust, viable fibre business, the implicit subsidies for their expensive "Fixed Wireless" and Satellite, won't be possible. Labor is subsidising 7% of the population, thinly scattered across our wide brown land, with 25% of the construction costs and more than that in operational costs. Turnbull has increased the high-cost proportion to almost one-half and reduced the revenue targets/margin for the cash-cow.Under the Turnbull Plan, the situation is doubly worse:
- The Wireless/Satellite Networks are being kept by Turnbull, but now they represent almost 50% the construction costs requiring proportionally twice the subsidy, and
- the revenue and gross margins of the FTTN, 75% of the fixedline network, will be considerably (25+%) less than fibre, meaning NBN Co won't make enough to subsidise the Rural & Remote subscribers. The Turnbull Plan trumpets "more affordable" without saying how it will cover costs it is now taking on.
there is only a single correct number of CAN's, one, any more will be expensive, inefficient and unprofitable.
Turnbull knows this, yet is deliberately ignoring this very basic economic law. He's defying "economic gravity" and it won't go well for the saps, us voters, who have to pay for, and use, his offering.
We saw in the Cable TV wars of 1994-97 what happens when two players, Optus and Telstra, attempt to compete, not co-operate, in common infrastructure market:
$5 billion was predictably wasted, with neither player fulfilling their promises and only a small fraction of customers (28%?), even in the "top 5" cities getting coverage, but with 80% of the favoured few being able to get both!
This is not "choice": 72% of the population had no service, while the lucky few could sign-up for either of two very poor services. The proof is in the pudding: Cable TV failed as a business here when it should've done well.
The very small subscriber base meant Content Providers, like FOXTEL, didn't have the income to buy sufficient programming, making the service expensive and limited and consumers found it unappealing, staying away in droves. The Telcos deliberately turned what is a long-standing, highly profitable business everywhere else in the world, into a struggling, marginal business here, unable to pay its way even after writing off most of their costs.
What Telstra and Optus guaranteed by trying to compete in a Natural Monopoly was high prices and an uneconomic business, which is exactly what happened and they knew it would.
They wrote off around $2 billion between them within just a few years. Did the CEO's who took this disastrous decision have to compensate the shareholders whose money they just threw away? No, and they got bonuses for doing it.
Because the two Telcos were perverse and moronic in setting themselves up to fail and the Government didn't step in, Cable TV in Australia has barely survived the last twenty years when it easily covered an urban population, the Big 5 cities, comparable to New York (50% the size). If the Americans have made Cable TV pay its way since the 1950's in one of the fiercest market-places in the world, how did our businesses, with all the advantages of mature & cheap technology, not make a go of it?
From this excellent overseas piece on TelecomTV:
In areas where an alternative infrastructure exists, the commercial success of NBN Co will inevitably be affected, especially as well managed HFC and FTTP will offer superior performance.
By lowering the performance of the access network, it opens up the possibility for Telstra and other mobile operators to position LTE as an alternative to wireline.
In addition the Coalition plans to significantly lower the NBN Co’s wholesale prices.
One wonders about the compounded impact of all this on the revenue side of the equation, a topic that is not addressed in the Coalition’s plan.The TelecomTV also highlights that the Coalition plan is quite risky and they have carefully chosen data to support their arguments:
Another question mark regards the feasibility of the FTTN deployment at the costs mentioned in the Coalition document. Questions have been raised in Australia on the quality of the copper, but that’s a hard element to assess. More importantly, the assumption that FTTN is systematically cheaper than FTTP can definitely be questioned.
It’s most likely that the Coalition hasn’t done an in-depth geomapped assessment of FTTN deployment costs, and experience in other countries suggests that the low costs of FTTN are largely dependent on targeted deployments. In other words, the numbers quoted by the Coalition are from deployments in select areas where deployment is feasible and deployment costs are low. Nationwide FTTN on the scale the Coalition is contemplating has not been undertaken anywhere (even in Britain). That doesn’t necessarily mean the Coalition is wildly off, but it’s a further level of uncertainty.Summary
Allowing "cost-effective" competitors, like HFC, to steal NBN Co traffic, not everywhere but only in the cheapest and most profitable markets, shows either a complete lack of business acumen, an unbelievable naivety and/or cynicism or an agenda to deliberately destroy NBN Co.
The Coalition has form in this area:
Howard et al rejected the 2005 Truillo NBN plan and refused to heed his very cogent and clear message that Telstra was a distressed asset and should NOT be sold "as is".
I think it's credible that Turnbull actually sold Abbot on this plan precisely because it will fulfil his mission: destroy the NBN.
Turnbull turned himself into an investment banker and made a motza in Telecommunications: we have to assume he knows what he's doing, and with the public enmity between him and Mr Quigley, CEO of NBN Co, rivalling Howard v Trujillo, we could assume the cause is the same - a CEO defending his business against very poor outcomes being foisted on them by Politicians.