The Coalition NBN Policy – Stage 2 The Renegotiations

I am writing this blog to address the misinformation, the unsaid, and the blind spots in the public debate on the NBN.

The NBN has become a heavy political issue. My own politics are to support politicians of substance and courage who truly act for the people. There are more of these types of politicians found among the Greens and as independents, and I find both major parties to be dominated by policies that serve their benefactors.

There has been much criticism by the Coalition of Labor’s NBN. Some of the criticism is probably fair, while some of it has been making issues of non-issues like the asbestos in Telstra’s pits which has always been Tesltra’s problem and is not news and not of NBN Co’s doing.

Much of the criticism is coming from Rupert Murdoch’s News Corporation empire, and there is good reason to look at why that might be.

Rupert_Murdoch_-_WEF_Davos_2007

The Current Labor NBN

The Labor NBN was designed as a network that in most metropolitan and major regional areas would bring Fibre To The Premises (FTTP). It began life with the following options for customers:

  •          100 Mbps Download       40 Mbps Upload
  •            50 Mbps Download       20 Mbps Upload
  •            25 Mbps Download         5 Mbps Upload
  •            12 Mbps Download         1 Mbps Upload

The Labor NBN capital budget as currently being executed by NBN Co is $37.4Billion. A funny thing happened though on the 9th April 2013 when the coalition announced their NBN Fibre to the Node Policy for which he claimed speeds of 25 to 50 Mbps from the node to the premise using VDSL. Malcolm Turnbull began to compare the Coalition NBN speeds to the Labor proposals and noted that on affordability most people would subscribe for the 25Mbps option under Labor and thus would experience no difference.

Sleight of Hand

Both parties here are guilty of sleight of hand:

  • Labor were guilty of ‘hold back’ in offering 100Mbps as their top offer. I speak from personal experience, having been a CFO for a medical device company, in saying that electronics manufacturing costs for Fibre Modems designed to operate at different speeds would be almost identical between a 100Mbps device and a 1,000 Mbps device. Cost differences consumers experience in shops are in the main artificial and determined by marketers who charge more money for perceived value which need not have any relation to cost. The only valid cost drivers are Intellectual Property and alternate technologies. For a country the size of Australia 1,000 Mbps should have been set as a minimum spec (it is in Googles Fibre roll out in the US). The actual fibre is capable of speeds that universities are experimenting with of up to 10,000,000,000,000 Mbps and it is only the device on either end of the fibre that controls the speed, as outlined in this news article.
  • The Coalition were well aware that Fibre ultimately will deliver many times the speed of the Coalition NBN and that the Coalition NBN offers no upload guarantee (which I will come back to), however Labor created that opportunity through a market offering that was holding too much back for the future for artificial marketing reasons.

Labor NBN Speed Lift

So 10 days after the announcement of the Coalition NBN on April 19th 2013 the NBN Co announced that from December 2013, it would add higher speed offerings to its range of:

  • 1,000 Mbps Download   400 Mbps Upload
  •    500 Mbps Download    200 Mbps Upload
  •    250 Mbps Download    100 Mbps Upload

Now the public could get a glimpse into the true potential of the NBN and would not be fooled by sleight of hand comparisons claiming close to equivalence.

Funnily enough Labor did for a time plan a 1,000 Mbps service as announced in August 2010.

Somewhere between 2010 and 2013 they pulled back from offering better than 100 Mbps to the public at this stage of the NBN rollout.

Coalition FTTN NBN

So let’s look at the Coalition NBN policy in some detail.

The Coalition NBN takes Fibre To The Node (FTTN). From there the Coalition propose to instruct NBN Co to provide a solution that uses the existing copper lines from the Nodes every few blocks in to the premises in the area covered by that node. The Coalition have proposed that NBN Co offer a minimum download speed of 25 Mbps to 100 Mbps by the end of 2016, and 50 Mbps to 100 Mbps by the end of 2019 when the rollout would be planned for completion.

The Coalition claim a budget for their NBN of $29 Billion.

The core technology that has been discussed for use from the node to the premises is VDSL. There are all kinds of VDSL options, and it is true that some are delivering speeds up to the speeds targeted by the Coalition.

Sadly VDSL like any DSL based technology using copper wires gets much slower when it is travelling more than about 800 metres from the node, unlike Fibre. DSL technologies are also subject to a variety of factors that can impede speed and in a copper network at the end of its life many of those factors are likely to be present. Some can be rain affected, and I have been a victim of that frustrating situation in a business paying a premium for a BDSL service on copper.

Most of Australia gets its internet on ADSL or ADSL2/2+ today. Any user of this technology can tell you that the variability in speed is huge. We wont know how variable it would continue to be when matched with a cable service at the node, but there is good reason to be sceptical about claims of achieving a minimum 25 Mbps and particularly at peak times. It is easy for the Coalition to posit an untested demand upon NBN Co to deliver a minimum 25Mbps for a budget of $29 Billion, but we have no idea what can actually be delivered and how much NBN Co will have to over-engineer a solution on copper to make it viable and reliable.

Upload Speeds

A massive issue with the Coalition NBN plan is that they are studiously avoiding any mention of upload speeds. Download speeds are important for downloading content from the internet, such as movies, music, and youtube clips.

Upload speeds are tested by the sending of data heavy content up to the internet. For Video Bloggers who publish video content and then need to upload it to Youtube using current technology can take hours. That is an issue of significant inconvenience and inefficiency.

More importantly though is Australia’s ability to interact with the world using technologies like Skype. As an executive doing business in international companies and often skyping at all hours of the day including the wee hours of the morning, and late at night from a home office the ability to join a teleconference or video conference is important.

For a teleconference the sound and video you generate from your PC needs to be uploaded to the internet to send to the other parties. For even a voice call to be practical and not to descend into a farce as they so often do when involving Australians a good reliable upload channel is necessary, for video even more so. You don’t need the 400 Mbps that NBN Co can now offer under labor as an upload speed for Skype, in fact the 5Mbps upload speed in Labor’s 25Mbps download package if consistently delivered will handle it with ease.

Reality of Demands on a Home Internet Connection

As anyone knows who has attempted Skype Sound or Video Calls, the key to effectiveness is consistency.

The reality in every family household nowdays is something like this:

  • One or two adults doing: some extra work from home, Facebooking, Youtubing, or watching movies.
  • Two to three children: Gaming (which also sends data back up the pipe), Youtube (very possibly uploading very heavy video content in uncompressed formats), and Facebooking (again often uploading content), or watching movies

If anyone in that typical household is trying to conduct a Skype video call on a Coalition NBN they will fail to get reliable video, so will switch off video. Chances are they may also get breakups on the voice signal and particularly their’s to the other party.

The Labor NBN at the 25/5 level gives a service that would be adequate for the typical family. If Skype Video Calls were a regular part of either adult’s life, the 250/100 service would provide a service more than adequate for the family as a whole.

The Coalition’s proposal just does not cut it in the family scenario, and particularly given no minimum upload speed, and even more so where multiple people are uploading at once.

Content Creation

We live in a world where the internet puts the ability to interact with the world in the hands of the individual. No longer is it just publishers and broadcasters who create content. Individuals create content and it is often very heavy content by volume of data.

Furthermore ‘The Cloud’ is now becoming the standard for where both business and individuals store their data, their systems, and their multimedia. Storing it in the cloud also means uploading it to the cloud simply and efficiently.

The reality is that the Labor NBN is giving Australians the tools we need as a country physically remote from the rest of the world to compete, to deliver, and to innovate.

The Coalition NBN restricts us, keeps us even from meeting today’s demands, and makes our nation an embarrassment among developed countries with no reliable upload solution.

Rupert Murdoch, News Corporation & Foxtel

I have been among those who look at Rupert Murdoch’s actions and his interests and see him using his newspapers and influence to attack the Labor NBN, and conclude that his position is a commercial one. I look at the Coalition policy and I see one that is far more favourable to Murdoch’s interests in Foxtel.

Here are some undeniable facts:

  • Murdoch’s papers have been extremely critical of the Labor NBN to the point of bias.
  • Murdoch’s papers have shown undisguised extreme bias against Kevin Rudd
  • Murdoch’s papers have been strongly pro-Abbott and the Coalition while much of the country wonder how Abbott can be offered as a Prime Minister candidate and his personal approval rating is negative.
  • Murdoch (a US Citizen) has taken such a strong interest in influencing the Australian Federal Election that he has personally dispatched Col Allan, a man known throughout News Corp as a flamethrower to “provide extra editorial leadership” just as the election campaign starts in earnest.

Murdoch clearly wants a coalition government and the Coalition NBN policy.

Since reports in Social Media and then the Sydney Morning Herald have called Murdoch on his bias in his papers and drawn links to his commercial interests in the sector through Foxtel, Murdoch and the Coalition have argued that Foxtel is actually better off with the Labor NBN, because the Coalition NBN will supposedly deliver an NBN that can expand access to Foxtel Content sooner. It was a clever response, but it actually draws the eye away from Murdoch’s real interests.

The Coalition ideology is that the government has no place getting involved in commerce. It’s the same ideology behind the sell-off and privatisation of so many government services and assets and through the insertion of the profit motive has resulted in increased costs for consumers. A ‘for profit’ entity will try and maximise sales. They may drive costs down harder than government, but that in no way is guaranteed to flow through to the consumer.

The ideology says that competition is what keeps the commercial participants honest. That may once have been true, but that is not a truth in many sectors with the dominance of global players like News Corporation, Microsoft, Apple, and many more who have the resources to buy anything that gets in their way.

Murdoch’s track record is one of an acquisitive strategist. He is a wily fox, and it is ironic that the Fox network was one named before he acquired it but which is so fitting for his personal style. Murdoch’s record is of domination and achievement of monopolistic or duopolistic positions. He had achieved that with Foxtel in Australia.

Murdoch’s problem with the Labor NBN is that the Labor government took the time to create through NBN Co a very fulsome product offering that genuinely opens up every Australian household to better access to content, and which gives far more players than the usual two in a duopoly access to becoming a player in creating offerings to the public.

The extent to which NBN Co has paved the way for Foxtel’s competitors is very well articulated in the NBN Co’s presentation here.

 

With their multicast facility NBN Co are providing first class dedicated infrastructure to Foxtel’s IPTV competitors which makes it dramatically easier for them to compete. Until now IPTV competition has generally been delivered on PCs and has not been well integrated into the lounge room. NBN Co makes it plain that their ‘Multicast’ product will bring that integration, and the kind of assured quality that only a purpose designed product delivered by Fibre can assure.

How the Coalition NBN Policy Affects Murdoch

The Coalition NBN Policy creates a vacuum. The Coalition NBN is built to the Node and then relies on the decades old copper that Telstra described some years ago as being “five minutes to midnight” to carry the signal from the node to the premises.

I believe the flaws in that solution have been clearly articulated above.

The Coalition have articulated that there will be those who will need or want fibre to the premises and they have indicated if you want it you can pay the capital cost of the connection.

What has not been discussed properly is that the Coalition are reopening negotiations with Telstra and Foxtel and Optus around Telstra’s Copper and  the uses allowed on the Foxtel & Optus Hybrid Fibre Coaxial (HFC) networks.

When you combine the renegotiation opportunities with the vacuum created by the removal of Labor’s Fibre to the Premises this where Murdoch’s real interest lies. Murdoch is a deal doer, a strategist, and will use the Coalition’s reopening of the whole realm for renegotiation to position Foxtel as a major player in content and fibre delivery.

Murdoch, Abbott, and Turnbull may well be able to put their hands on their hearts and say they have not discussed Foxtel’s interest in the NBN. For people in these position’s plausible deniability is important. What I would lay money has been discussed is Murdoch’s dislike for government’s role in the market, and a call for the Coalition to get out of the way and let the commercial interests negotiate a market solution.

Murdoch knows he has the capital, the influence and the organisational capability to resecure a dominant position for Foxtel once the Coalition sets the ball rolling on an FTTN NBN and with the opportunity to renegotiate the environment.

A further point worth watching is Murdoch’s Connection on the inside at NBN Co. The recently appointed Non-Executive Chair of the NBN Co Board is Ms Siobhan McKenna who is Managing Partner and Director of Illyria Pty Ltd Lachlan Murdoch’s media investment company. Ms McKenna had been a Non-Executive Director for NBN Co since 5th August 2009. Lachlan Murdoch now days it seems, to some degree runs his own race separate from his father though he is on the board of News Corporation. I draw no conclusions about the connection, but it is one worth noting and especially now Ms McKenna is Chair of NBN Co.

Which NBN Does Australia Want?

It is interesting to look at the Google Fibre solution in the US. Google are offering only one core speed offering 1,000 Mbps up and down. As a side offer Google have one artificially restricted product which after a $300 installation fee is free and offers 5 MBPS download and 1 MBPS upload.

For $70 per month core Google Fibre users get  1,000 Mbps service and 1 Terabyte of storage in the Cloud. For another $50 they also get a 200 HD Channel TV package with Netflix On Demand content.

It is unfortunate that Labor did not recognise that creating ‘the appearance’ of constraints on the NBN was unnecessary. Fibre has so much potential now and in the future, and to put in place equipment that artificially constrains most users to less than 10% of the real capacity today is such a shame.

Google is showing the world Conscious business culture. When there are no physical barriers, we should stop designing them in to create marketing tiers that have little relationship to cost of delivery.

Labor in Australia at least had a vision of a future with fibre in every home. Anyone making pronouncements, like Tony Abbott has, that any more than 25 Mbps is unnecessary does not understand our changing world or technology. Labor at least have had the foresight to see that Internet access with high speed download and upload is essential to our future and has created a model by which it will be delivered in a way that keeps interests like Murdoch from getting commercial control in a monopoly or duopoly.

The Coalition offer you a different kind of NBN. They well understand that the VDSL from the node in reality is not going to cut it. Their real intention is to let Murdoch, Telstra and Optus battle it out and cut new commercial arrangements to fill the vacuum the Coalition propose to create between the node and the premises. Its hard to predict an outcome from the outside looking in, except that Rupert Murdoch will be very clear where he wants to end up, and it wont be as a bit player among many competitors. That’s never been his style.

My vote will go to the Greens who support the continuation of the NBN Co’s current policy.

Ura P Auckland
Company Director, Corporate Advisor
Advocate for Conscious Governance & Conscious Business Culture
GAICD, FCPA
www.authegrity.com 

A 'Do It Yourself" Online Marketing Journey

Image Attributions:

  1. Rupert Murdoch – WEF Davos 2007‘ by World Economic Forum on Wikimedia Commons licensed by CC BY-SA 2.0

3 comments

  1. I think most are ignoring wireless solutions. I can get 4 Mbps down and 1 Mbps up now on my phone via 4G. What will 5G and 6G do? (Don’t forget in the family scenario above we all have 4G enabled phones or iPads, so not sharing bandwidth) These solutions will probably be here before most of the NBN… No asbestos, no fibre, relatively easy to deploy in regional areas… And will we really want to go scurrying back to our office or home to enjoy the same speeds there when we can have them anywhere? Government, Business and industry probably need a more stable FTTP service and will pay for it, but for “working families” I think wireless will win…

    • Hi Steve, there seems to be industry views both ways on the wireless argument.

      4G certainly provides a wonderful service when one has a solid signal.

      Wireless in place of cable would require some big business model shifts obviously. Wireless data is rationed out at present. I dont know to what extent that is a marketing position versus physical constraints and costs. I imagine wireless would be much hungrier power wise.

      Weak signal areas are still a big issue too with current technologies, though that may change.

      My greatest concern is the big sleeper issue of what all the radio waves are doing to us. I become even more concerned if we will become more and more bound to personal devices transmitting high power signals to distant cell towers. There was a student study recently in Europe which showed that cell phone signals dramatically impacted the growth of seeds. Those who should be looking at the science and doing proper large scale studies don’t want to know.

      http://www.mnn.com/health/healthy-spaces/blogs/student-science-experiment-finds-plants-wont-grow-near-wi-fi-router

      It will be interesting to see how the personal device market unfolds. For my money though I think theres still a fair life left in physical connections.

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