Thursday, 19 August 2010

You think you'd get something for $43b

You'd think if you spent $43,000,000,000 on something you'd actually get something from your money, even if the project delivery wasn't really spot on - but ironically, the $43b the Australian Labour Government is proposing to spend on Australia's Internet will leave all Australian's with lower speed broadband with higher monthly costs.

Don't get me wrong - just like everyone else, I want the fastest Internet I can get & I know that the best way for me to get that is to have a piece of dedicated fiber running into my home serving me, in Stephen Conroy's words, data at the speed of light "and you can't get faster than that".

Two things could happen with NBN: (a) it is fabulously successful, is delivered under budget and achieves everything it sets out to achieve and (b) it stuffs around for several years, provides lightning-fast Internet to a few pockets of people (particularly in the second quarter of 2010 and a similar timeframe in 2013), but eventually dies in a burning heap of flames and is bought up by Telstra for far less than the $50b+ that was spent on it.

I really hope (b) happens and not (a).

You see if (a) happens then it means:
  • The Government will have paid Telstra $11,000,000,000 to switch off the copper network that practically all Australian's are currently using to access the Internet (yes, even if you're not with Telstra as your ISP) and make their home phone calls. Yes, this network that is serving 20Mbps+ Internet to many Australians, or around 2-5Mbps to a vast majority of Australians, meeting their needs quite adequately, will be turned off. We will not wring every last bit out of this network, we will not transition off of it through a gradual rollout of new technologies - instead we'll pay Telstra, a public company, $11 billion dollars to just turn it off!
  • You will have NBN fiber connected to your house. The Government will have legislated to require you to allow them to enter and install it. You see, they can't afford to roll it out according to demand - instead, they'll need to install it in each and every house as they make their way down your street, they can't come back and do your house next month or next year, it's too expensive to do that.
  • You'll be paying about $100/month for your Internet access, which you'll get from someone like iiNet or Internode. The price will be so high because they're paying NBN Co not much less than that for the wholesale service. This will be the base service available.
  • You won't be able to get Internet from anyone other than NBN Co because the copper network you used to get your modest Internet from will have been shut down.
  • Pensioners and other welfare recipients will get a subsidy as otherwise they won't be able to afford to have the Internet which is, of course, a basic entitlement just like electricity or a phone line.
  • You'll be stuck with this model for a long, long, long time. With a Government owned Monopoly delivering your Internet, any competitor who actually tries to innovate and deliver new, cost-effective services in medium and high-density city and suburban areas will be actively discouraged by the Government - after all, a return is required on those Infrastructure Bonds that were issued to pay for half of it! NO NEW SERVICES WILL BE ABLE TO COMPETE.
  • NEW SERVICES WILL COMPETE. Inevitably, new services will compete in this uncompetitive market. They will be wireless, they won't make use of fiber, as there's not enough subscribers left to warrant rolling it out, and they won't be on copper as they aren't allowed to use that, even though it's still in the ground. The wireless will be faster than we have now, not as fast as the NBN network, but it will be sufficient. Most importantly, this new, cost effective Internet will be WELL BELOW THE CURVE - much slower than users in other countries get on their commercially-delivered & demand-driven fiber networks & much slower than we could have had under a similar model. USERS IN REGIONAL AREAS WILL HAVE NO OPTIONS - just like in the days of Telecom, they'll get the expensive Government service.
Of course, eventually the NBN mess will be mopped up. The Liberal party will be running the country, they'll blame it on Labour, sell the NBN off to Telstra and we'll start building our real Internet.

So I guess we'll get the mess of (b) after all... I just wish we could have had it sooner.


Anonymous said...

Stop sucking Tony's you-know-what.

"Yes, this network that is serving 20Mbps+ Internet to many Australians, or around 2-5Mbps to a vast majority of Australians, meeting their needs quite adequately, will be turned off"

Yeah, and 640K of ram ought to be enough for anybody. I'm one of the Australians that doesn't even have 2mbps, and let me tell you, it sucks. I'd love to be able to have ADSL2+, but you know what? I'd love to have fibre. I could stream TV over it, have High-def chats with family members, take remote control of their PC's to troubleshoot/fix them. Not to mention the fact that it could open up a whole new industry for Australia, and attract plenty of IT jobs.

"You won't be able to get Internet from anyone other than NBN Co because the copper network you used to get your modest Internet from will have been shut down."

Explain to me how this is different from Telstra owning the copper in the ground and selling it onto ISP's? Its not. The NBN Co will resell the bandwidth onto ISP's (like iiNet, Internode, Telstra, Optus and anyone else who wants it). The only difference is that its NBN Co, not Telstra that owns the fibre.

Grow a brain and do some informed research, moron

Adam said...

"Yeah, and 640K of ram ought to be enough for anybody" - I'm not saying that what we've got now is sufficient, I'm saying that we will get a better result if it's commercially & market driven.

"Explain to me how this is different from Telstra owning the copper in the ground and selling it onto ISP's?" - It's not very different at all - but wholesale cost of that copper access (whether for phone calls or Internet) is cheaper the further it gets away from Government hands. Since the Davidson Enquiry of 1982 and subsequent deregulation of telecommunications in Oz, telecomms has just gotten cheaper.

Bear in mind the copper thats in the ground costs us very little for what we get from it. It's old & it's uses are limited, but it is already there & already paid for, might as well let people who are satisfied with it (people with basic Internet needs) make use of it.

Anonymous said...

I'm not arguing that copper should be turned off (In fact I think it should be left on for at least 10 years after fibre is laid in a particular area) but the market will drive down prices.

What was the original price of Telstra copper when it was first laid, I'm sure it was magnitudes greater than what we pay for it now. Over time the wholesale price of fibre will fall, while the speeds will rise.

I would rather have the NBN owned by the government (much like our roads). Privatise it (like Telstra) and suddenly it becomes a whole new ball game. Like Telstra selling their ADSL at below wholesale price. You can't tell me that thats fair to the other ISP's.

The government owned monopoly is just ridiculous. 99% of the copper in the ground belongs to Telstra, and there's no way in hell 'competition' will ever replicate something like that or like the proposed fibre ever. Instead, you'll see anti-competitive markets (like the US) where cities and towns are locked into a certain provider simply because they laid the fibre down and refuse to share it with anyone else.

Another way of thinking about it is our roads. Should they be privatised? By your argument they should be, because right now they are a 'government-owned monopoly' thats hurting consumers. I've never been on a major Sydney highway, yet my tax-payer dollars funded it.

So by your thinking, the competition out there should have built our roads. What you'll see is a mixture of wide roads, narrow roads, thick roads, thin roads, paved roads, cement roads, dirt roads. And you can be sure that all of these would require some kind of cost before you can use them, because they needed to be funded somehow, right?

Anonymous said...

This is a very old post, but sometimes people like to revisit their predictions and see where they went wrong.

NBN plans from $35 a month? Who would of thought it was possible?!?

It hasn't been rolled out everywhere yet, but I will be keeping my eye on how it goes.

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