MARK GREGORY
July 12, 2017

NBN versus the natural gas rollout

Communications

NBN versus the natural gas rollout

Roll-out density: We've managed to build a natural gas network, but can't do fibre

In a blog posted on 5 July, NBN Chief Networking Officer Peter Ryan makes a series of misleading statements about why NBN Co is building a national network dominated by copper-based technologies to more than 60 per cent of Australian premises.

In the first part of two articles looking at Mr Ryan’s blog post and how it relies on unsubstantiated, misleading and discredit statements, I’ll focus on how Mr Ryan’s blog post closely follows the approved NBN “hymn sheet” that I saw in the hands of an NBN spokesperson at a recent media interview.

Australia is now ranked 50th in the world for fixed broadband speeds and sits 18th out of the 139 countries ranked in the World Economic Forum’s Networked Readiness Index. At a time when the Coalition government is responsible for spending between $46 billion and $56 billion on a second rate NBN, Australia is slipping in global broadband and networked readiness indexes.

In February last year, Infrastructure Australia released the Australian Infrastructure Plan, which included modelling by PricewaterhouseCoopers (PwC) showing that the NBN would cost about $56 billion to build but would be only worth $27 billion.

Earlier this week, the University of Melbourne Emeritus Professor Rod Tucker told the Joint Standing Committee on the NBN “Australia’s FTTP [Fibre to the Premises] rollout is likely to be one of the most expensive, if not the most expensive, in the world” and that his research “shows that there are many countries with high GDP per capita, like Australia, where the cost of deploying FTTP is much lower than in Australia.”

In response to this discrepancy, the NBN Co media machine has ratcheted up the spin. The cost of this politically motivated spin is excessive and it is time that the media focused on the claptrap coming from NBN Co.

Mr Ryan’s blog post contains nothing new. We’ve heard the same discredited arguments many times over the past four years from NBN Co senior management and from its media and communications team.

The multi-technology mix won’t be cheap, won’t be rolled out faster than FTTP would have been, and it will end up costing this nation far more than the original plan that included FTTP to 93 per cent of premises.

Why? Fibre to the Node (FTTN) is being rolled out to about 60 per cent of premises. FTTN is already obsolete so it will need to be replaced sooner rather than later. FTTN is expensive to operate and costs close to twice as much as FTTP (maintenance and operations), according to New Zealand’s wholesale broadband provider Chorus.

What this means is that after about seven years, the cost of installing and operating FTTP drops below the cost of installing and operating FTTN, even though FTTN was cheaper to install in the first place.

So, for the decades to come, the higher cost to operate FTTN will keep the cost of Australian broadband higher than it should be, and don’t forget we’ll need to replace the FTTN in the 2020s, whereas we would not need to replace the FTTP for 50 to 80 years.

The blog post contains many “gems”, all of which have been discredited and it is typical NBN Co to be ignoring history and argument based on fact in an attempt to overstate what NBN Co has been tasked to achieve, and why we should accept a second rate NBN.

To set the scene, Mr Ryan starts the blog by describing how early FTTP rollouts first occurred in several large Asian cities, and due to the population density the FTTP installation cost per premises was low. So what? Sydney and Melbourne are comparable cities today.

The blog then goes on to describe Australian cities as “vast, sprawling outwards for many kilometres” and argues that this drives up installation costs. To drive home the point, Mr Ryan highlights that Australia has “the 14th-lowest population density in the world, with fewer than three people per square kilometer.”

What a zinger! If you take out the areas within the satellite and fixed wireless zones, the population density rises rapidly.

If you then look only at Brisbane, Sydney and Melbourne or the eastern seaboard you find that 80 per cent of the population lives within 50 km of the coast in the zone from Brisbane to Melbourne.

And Mr Ryan has failed to mention that most nations are predominantly rolling out FTTP today, including other large nations like China and Russia. The broadband, IPTV and VoIP market intelligence company Point Topic has identified that nearly 80 per cent of new fixed broadband connections around the world in 2016 were FTTP.

Why? Because FTTP is the most cost effective fixed access technology available today.

Is Australia’s size insurmountable? Mr Ryan failed to mention the Australian natural gas rollout, first commenced in the 1970s, that connected the vast majority of premises to natural gas over the next decade, replacing the need for briquettes and gas cylinders.

The cost of laying gas pipes down suburban streets to connect premises to natural gas is about $5,000 per premises today, far higher than the $2,800 per premises to connect FTTP.

The natural gas rollout continues today due to consumer demand in regional areas and over the next couple of years, state governments, including Victoria, will provide natural gas to many of the regional towns that have yet to be connected to the vast natural gas network.

The argument that Australia’s size in some way inhibits rolling out FTTP or makes it prohibitively expensive is nonsense.

Natural gas was rolled out because of the benefit to consumers and to national productivity and it is for these reasons that Australia should be rolling out FTTP. We need to be building infrastructure with a 50-80 year lifetime.

NBN Co is a depressing sight. The blog posts are not helping. The senior management team is floundering, bereft of reasonable argument and hiding behind misleading and discredited spin.

We continue to hear from NBN Co that it is doing a fantastic job. Yet Australia’s digital standing is sinking like a stone and our future as a leading participant in the global digital economy is looking bleaker as every day goes by.

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