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NBN write-down now inevitable despite Turnbull Government denial

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Cartoon by Mark David / @MDavidCartoons

A write-down is imminent for the failed NBN and the debacle will continue until our telecoms strategy is developed by technical experts and not politicians, writes Paul Budde.

IT WAS INTERESTING to see that the ACCC has now indicated that a different financial structure for the NBN might have to be the next major step in the Australian broadband saga.

After it became clear that, following his proper election in 2016, Prime Minister Turnbull didn’t take the opportunity to introduce the essential structural changes to the NBN strategy, I indicated that without these changes, one way or another, a 50 per cent write-off of the company would have to follow.

That was obviously not welcomed by the Government, but over the last 18 months, many others are arriving at the same conclusion.

The fact that the ACCC has now joined the chorus is a significant development. It is important to mention that the ACCC is not a political organisation and that it genuinely operates in the best interest of the country.

But the Government is flatly rejecting any such calls. However, if they don’t take the lead it is important that the rest of the country (industry and users) start looking at what would be the best strategy in the wake of the inevitable write-down and restructuring that will result in a major change to the Australian telecoms market.

First, it is important that NBN Co finishes the rollout and leaves the infrastructure they are building in the best possible condition. This means that those 400,000+ connections that are currently in the too-hard basket will also have to be properly connected.

This would be a good basis for whatever happens from here. But let us think through what we, as a country, want.

Eventually, we would like to see most premises connected to gigabit networks. Not that we all will use all of those gigabits, but it would be an advantage to have the capacity and all of the other technical advantages of such a network — essential for any modern society. We already see that cities such as Adelaide, Newcastle and Brisbane are developing their own gigabit networks.

If you compare a gigabit network to a freeway, no individual person or household needs a freeway, but a freeway can handle, let’s say, 100,000 vehicles per 24 hours — that’s why you need it. Then take into account that you will never have an equal volume of cars over a 24-hour period, so you end up needing a freeway that can handle (again, let’s say) 200,000 cars in order to avoid traffic congestion at peak hours.

I am more than happy to leave the technical aspects of this gigabit broadband network configuration to our very capable network engineers, but for heaven's sake, let's not get politicians involved again in dictating technologies!

What is certain is that in the end, we will either need fibre-to-the-premises or fibre-to-the-curb — the latter with either good quality copper or wireless connections from the curb to the premise. At this point in time, it is unfortunately not yet known whether a 5G connection for the last 50 or 100 metres is technically viable and, importantly, if such a connection will be able to provide affordable high-speed broadband to the users.

As a proper 5G network will require a fibre optic network to most of its towers, we should take a holistic approach and take both fixed and wireless technologies into account in the next national telecoms review.

So, in whatever way we look at the overall broadband network, 90 per cent of all of the telecoms infrastructure will be fibre-based and in this part of the network, there is very little opportunity for competition. Nobody is going to build competing fibre optic networks for residential use. So that infrastructure needs, in one way or another, to be managed through regulation. Of course, we could – and should – have full retail competition beyond that.

However, my worry is that we won’t get a rational solution along the abovementioned lines. Since I first became involved in the Australian market in 1983, telecommunications has been a highly politicised environment and it would be a miracle if that were to suddenly change now.

Doomsday scenarios include continued political denial leading to increased regulation to prop up a financially struggling NBN company, creating further market distortions; this will further block innovation will lead to higher prices for the users, and in general, hamper economic growth and productivity.

Splitting up the NBN company and selling it in bits and pieces could be equally dangerous if there is no long-term strategy in place on how to move the whole network towards a fibre-based one. One could easily end up with monopolies based on technologies such as fixed-wireless, HFC and FTTN, and again the fibre optic backbone network needed for the next development of the mobile networks (5G) will need to be included in a holist national infrastructure strategy.

I advocated for a long-term strategic NBN plan when we started to discuss the network in the 2005-2009 period. With the government of the day and over 400 industry and consumer experts involved, we started off well, but without bipartisan support, and with the Coalition Government taking over in 2013, we ended up in the mess we are in today.

Can it be any different once a serious discussion about the future of the NBN begins in the run-up to the completion of this network in 2020? I remain an optimist and say we certainly can do it, but without bipartisan support, whatever we do will end up in disaster again.

It certainly would be worthwhile for both political parties to sit down together and discuss this like grown-ups — taking into account the national interest and not party politics. Apart from the Trump Administration, there is no other government in the world that doesn’t have bipartisan support for its telecoms strategy. Surely this should be an area that needs to be developed by technical experts and not by politicians.

Could the industry perhaps take the initiative here and mediate the politics?

Paul Budde is managing director of Paul Budde Communication Pty Ltd, an independent telecommunications research and consultancy organisation. You can follow Paul on Twitter @paulbudde.

This article was originally published on BuddeCom and is republished with permission.

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This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Australia License

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