Mark Gregory
April 10, 2019

NBN future is a numbers game

Policy

NBN future is a numbers game

Deep hole: The future of the NBN under a future Labor government determined by difficult numbers

The Shadow Minister for Communications Michelle Rowland has released Labor’s election policy for the National Broadband Network (NBN). The plan focuses on the future and tackles key issues including improved access to broadband, reducing NBN downtime and fixing sub-standard connections.

There are three key challenges for an incoming government after the May Federal election. The first is to improve consumer outcomes and performance.

The second is to reshape NBN Co’s business model so that it becomes financially viable, able to meet competitive challenges and provides affordable broadband access to Australians irrespective of where they live or work.

The last challenge is to move the NBN to an all fibre network, a basic requirement for the first two challenges and for Australia to be able to fully participate in the global digital economy.

Labor has addressed the three challenges, whilst taking an honest approach by conceding that there will be no quick fix.

During the policy announcement at the CommsDay Summit in Sydney, Ms Rowland said "in these proposals, we have sought to present a responsible plan to improve the NBN while being honest about the challenges."

Labor’s NBN policy includes five points:

  1. Get more elderly and low-income households connected.
  2. Improve speeds and reliability for Fibre to the Node (FTTN) households.
  3. Better protect small businesses and consumers against excessive NBN downtime.
  4. A responsible approach for targeted co-investment in fibre over the medium term.
  5. Reviewing the economics of the NBN.

If Labor takes office after the May election, it can expect to find contracts in place that would extend to the completion of the Coalition’s second rate copper based NBN. For this reason, the pragmatic approach is to take the time necessary to review the NBN and to formulate a plan that achieves the three key challenges.

The priority for an incoming government must be to improve accessibility, cost and the connection speeds and reliability of the obsolete FTTN.

Labor’s election policy is focused on achieving these outcomes whilst not making wild promises similar to those made by the former Prime Ministers, Tony Abbott and Malcolm Turnbull.

In 2013, the Coalition made a number of promises when releasing their NBN election policy. The Coalition has done everything possible to make this policy disappear from the internet, as it does not want Australians to be reminded the unachievable promises made at that time.

Currently, NBN Co is $21.4 billion over budget and four years behind the promised delivery date.

Australia remains languishing with broadband that can only be described as third world as a result of the Coalition’s flawed broadband policy. Telecommunications is an essential service that underpins the Australian economy.

In coming decades, leadership and participation in the global digital economy will become vital for Australia’s future – something that the Coalition simply does not understand if the Coalition’s broadband policy is a guide.

When the NBN is built and fully operational in 2022, with legacy networks turned off, NBN Co will have between $20 to $23 billion in assets and roughly $22 billion in debt.

It will owe Telstra about $14 billion in present value for leasing costs. The cost of shifting to an all fibre network is expected to be about $16 billion, though by partnering with retail service providers or permitting self-installation between home and pit the CAPEX cost to NBN Co could be reduced by up to 40 per cent.

If the NBN is not moved to an all fibre network, then it should be expected that between 10 to 30 per cent of connections might move to 5G or alternate technologies supplied by competitors. NBN Co has a goal of about eight million connections with an ARPU of $52 per month by 2022.

If ten per cent of fixed broadband customer connections move to mobile networks, NBN Co would suffer a revenue loss of about $500 million annually in present value by 2022. This short fall would be difficult to make up.

Mobile network operators know there is a window of opportunity to take unsatisfied customers away from NBN Co and they will be working hard to do so.

This competitive challenge to NBN Co’s viability is an important feature of a future open, fair and competitive telecommunications market.

The high cost of broadband in Australia affects everyone and as a result about 86 per cent of Australians households connect to broadband.

In Labor’s NBN policy it quotes S&P Global figures showing that “the top ten ranked countries have household broadband take-up rates ranging from nearly 100 per cent in Singapore and Switzerland, to 99 per cent in New Zealand, to 95 per cent in France and the United Kingdom.”

Improving the FTTN will be an important short term step to improve customer outcomes and this program could benefit up to 750,000 households that have degraded service due to the legacy copper network.

The Communication Minister Mitch Fifield’s response to the Labor NBN policy launch provides strong guidance that the Government will not adopt a bipartisan approach to telecommunications policy.

Having been responsible for the biggest and most costly infrastructure disaster in the nation’s history, it is not unexpected that the Coalition government will continue with its flawed telecommunications policy.

Labor is to be applauded for the sensible and forward looking policy that Ms Rowland has announced. It is time for telecommunications policy to focus on the challenges and not political point scoring.

Mark Gregory is an Associate Professor in Network Engineering at RMIT University and is the Managing Editor of the Journal for Telecommunications and the Digital Economy

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