The NBN Strategic Review: its dodgy accounting, and omissions (Guest Post)

By James Chisholm (james at chisholm dot id dot au)

Vindication is a bitter-sweet pill to swallow. We, the Australian taxpayers, have finally taken delivery of the Strategic Review into the National Broadband Network, which has shown what many of us have been saying since the Coalition announced their Fibre-to-the-Node alternative back in March 2013 – that there is no way that the Coalition can possibly provide 25mbps connections to all households by 2016. I’ve previously written about why I believe FTTN to be a completely inappropriate network architecture for this country, and many of the issues I raised in that post aren’t addressed in the Strategic Review. It did take me a while to get through, but I made it through the whole document. What stunned me was the way so much critical information was redacted from the document, and how much vital information was left out to make FTTP look like an inferior solution.

My provisional analysis is this – that the “multi-technology-mix” we are going to get now from NBNCo is a dogs breakfast of outdated technology for 76% of the country, with a lucky 24% who will get to get the next generation of Fibre-to-the-Premises connections, which we know are already capable of 1000mbps throughput (and were scheduled to have this capability made available this month). I call this MTM a dogs breakfast for several reasons, the primary one being that upload speeds are not addressed at all by this mix. Neither are fundamental details about the FTTN network, such as how many nodes are going to be implemented. Additional reasons are that the HFC networks are demonstrably congested in many locations already with only a small number of subscribers, that FTTN at 25mbps is (as I’ve pointed out with my other blog post) a totally inappropriate solution for this country, and that this technology mix puts control of the network firmly back into the hands of Telstra.

It comes as no surprise that, given the sheer volume of ex-Telstra employees that Malcolm Turnbull has appointed to NBN Co, that they are hell-bent on sending as much of the public funds back into the hands of Telstra, but to do it in such an overt manner is quite frankly disgusting. I, like many of my contemporaries, have a rather low opinion of Telstra – having previously worked for them, I’ve never before, or since, encountered a company with such incredible contempt for their own customers, nor worked with a company with such incredible incompetence. To get 6 phone lines installed for a former employers new SHDSL connection, took 13 visits by Telstra technicians in 2011. Personally I would like it to be placed on record the level of Telstra shareholdings of all senior NBN Co staff.

Anecdotal evidence of demonstrated small business needs for higher upload speeds, which will not be provided by either HFC or FTTN, is all well and good (and I wrote 6 paragraphs about personal tales of former employers and customers of mine, I’ve redacted this to keep this shorter) it’s straying further away from the analysis I’ve been meaning to do. So let’s get to that, shall we?

“The national broadband network policy was released many months ago by myself and Malcolm [Turnbull]. No-one has been able to question the costings. It is absolutely bulletproof.” Tony Abbott, 6 September, 2013

First of all, there is the cost blowout to the LNP bulletproof, 100% costed policy. After crying for months about Labor party waste, we now have a strategic review which revises the figure upward by 25% on the cost of a Multi-Technology-Mix network. The review also claims a cost blowout for a full FTTP network to be $72bn, whilst redacting the associated costs to date for the FTTP rollout.

Assuming that we believe these figures (and we really can’t, due to the fact the review has already been outed for fudging the figures; see this) one has to accept certain caveats to them – the actual rollout is now only going to occur to 70% of the population (24% FTTP, 46% FTTN), versus to 100% with the labor plan. So that’s really an unfair comparison – $41bn for a 70% rollout versus $72bn for a 100% rollout.

A more appropriate comparison is to scale the cost of the FTTP rollout down to 70% and then we can crunch the numbers slightly better – $41bn vs $50.4bn is more of an “apples vs apples” comparison of the figures.

Additionally, the strategic review also doesn’t mention how much it’s going to pay for:
a) the Telstra Copper network
b) the Telstra HFC network
c) the Optus HFC network

These networks aren’t going to be given to them for free. Telstra CEO David Thodey has stated Telstra expects to be paid the $11bn it was already contractually going to get for decomissioning the copper, as well as additional fees to access the copper they were supposed to decomission and there will be an additional cost to acquire or lease the HFC network for the remaining 30%. I’ve seen estimates that the two Telstra networks will cost $30-50bn on top of the $41bn for the FTTN – which would mean that the MTM network will far exceed the cost of rolling out FTTP to the whole country!!

By its own admission on page 19 of the strategic review, the MTM network is going to be outdated within 5 years of completion. Once it is outdated, it will need to be replaced with FTTP. Simon Hackett’s explanatory blog post about why he feels HFC is the right way to progress the rollout faster even admits that FTTP is the ultimate endgame. And this is the crux of the stupidity of this MTM – why bother rolling out last millennium’s technology when the limitations of it’s shared bandwidth potential are well and truly known, and cannot take us through the majority of the 21st century?

A big issue for me is the sheer number of nodes and footprint that each node will service – will it be 70,000 nodes for the country? 80,000? If the goal is to get everyone on 100mbps by 2019, it’s probably going to need to be more like 100,000 nodes. The Strategic Review does not specify how many nodes they think will be required, nor the maximum copper loop length. It also doesn’t factor in possible objections (in the form of lawsuits) by councils, replacement costs of equipment, specifications of these nodes and how well they are going to cope with the 47 degree days we’ve had in recent summers, or what is going to happen in Queensland when it floods and thousands of powered nodes end up underwater!

From a personal perspective, as most of you probably can guess, my household is a high-tech household. Judging by my routers IP address table, there are 22 devices on my home network at the moment. I’m lucky that when we moved a few months ago, we’re really quite close to the exchange – approximately 400m, as the crow flies – and hence my naked ADSL2+ syncs at 21mbps and I get about 17mbps throughput. However, when I’m playing online games on my PC, my eldest daughter is uploading a youtube video on her laptop, and my wife’s xbox-one decides it’s going to download a 2.2gb update for a new game (which is something that you get no choice in, and can’t be stopped without turning off the power), all of us suffer. So much of our entertainment these days comes from the internet – even our phone line is VoIP based so as to reduce our costs – and bandwidth needs are going to increase, not decrease. My daughter hopes to pursue a career in animation – she has already won an award at school for it – however I’ve had to explain to her that the reason her youtube uploads take several hours is as a direct result of this countries poor communications infrastructure. The NBN was supposed to alleviate these issus and drive this country forward providing a 21st century capable network – sadly, at this rate, it won’t happen.

I also do wonder if, when Tony Abbott said earlier this year “We are absolutely confident 25 megs is going to be enough – more than enough – for the average household.” if he actually understands the difference between megs and gigs? When referring to megs in the speed context, we are talking megabits per second of connectivity – and when talking about gigs, we are talking about gigabytes of data. To download a 1 gig patch for a new Xbox One game, on a 21 meg connection, takes 25 minutes. Put that connection speed up to 100megs and the download takes 5 minutes. Similarly, if we are wanting to download an entire game for the new generation of consoles, that’s currently around 40 gigs of download. On the 21meg connection I have, it would take approximately 30hrs. On a 25meg connection, about 24hrs. 100meg would reduce that to 6hrs – a speed which is approaching acceptable – but nowhere near the amazing speed of FTTP – which, once upgraded to 1000mbps (also known as a gigabit connection) would have that whole 40gb game downloaded in the time it took the 1gb patch to download on the 21 meg connection! It is a truly massive difference – and FTTP is so close to being able to do 1000mbps already!

In light of this, it seems completely and utterly stupid to spend $41bn to provide an outdated technology which must be replaced with FTTP in 2025. We cannot afford to waste this opportunity to do this network properly now, in 2013. If the cost-benefit analysis being commissioned looks at only the short term costs of this network over 10 years, then it will show that the MTM mix is correct – but if it truly is being done with Australia’s best interests in mind, then the terms of reference will look at the cost of the NBN over 20 years, including the cost and time to upgrade everything to FTTP.

Knowing that FTTP is the ultimate goal, to spend $41bn between 2013 and 2021 rolling out a network that will need to be replaced in 2025 with a full FTTP network is not cost effective. As the saying goes, measure twice, cut once – if the cost of rolling out a full FTTP solution by 2024 is $72bn, do it properly, and don’t waste this opportunity by rollling out an outdated technology that needs to be replaced fully 5 years after it’s completed.