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5 December 2019

NBN sets date for punishment tax – which won’t solve problems

Australia’s nbn (national broadband network) continues to apply tiny plasters over gaping wounds as it finalizes the date upon which it charges all its naysayers with a disloyalty fee. From June 2020, all those who have sensibly avoided the network will be punished with a A$7.10 ($4.86) monthly tax – creating a piggybank to the tune of just $383 million a year. While paltry in overall terms, that’s still $383 million worth of vendor opportunity.

Faultline has long been suspicious of the monopoly broadband organization. It has stumbled at every obstacle in its quest to be Australia’s broadband network. This tax seems to be a deeply unpopular means of offsetting costs that were too high in the first place.

This is just the latest test of patience among Australian consumers and businesses, who have endured endless trials and tribulations of the nbn for over a decade.

Not only is the tax a finite, unfair, and seemingly unpopular source of revenue, but it does not solve the main issue for nbn – poor management of its various networks.

The Telecommunications (Regional Broadband Scheme) Charge Bill was first proposed in September 2017 to houses and businesses which are not using the nbn’s services. We calculate that it will be levied on 4.5 million homes and businesses, raising just $383 million each year, less than 1% of its total costs.

Revenue raised will subsidize the less economic parts of nbn expansion – satellite and fixed wireless footprints – and prevent further federal bailouts.

This is just the latest financial misstep by the company. Initial cost estimates of FTTH implementation soared from A$41 billion to A$72 billion – forcing the company to backtrack, instead employing technologies such as and DOCSIS 3.1, to reduce projected costs down to A$51 billion.

The tax also does not solve the lack of effective planning. We noted in August how nbn seemed to be pitting its two networks against each other, with the old HFC network set to make a comeback – thanks to DOCSIS 3.1 – amid shortcomings of the over-hyped nbn fiber project.

It will be interesting to see whether the introduction of new technologies complicates things further. The nbn Corporate Plan Report 2020-23, released this August, reveals more investment plans, including the next evolution of HFC, Distributed Access Architecture (DAA), which will operate on the company’s deep-fiber deployments.

The Plan also promises to stay interested in emerging HFC technologies, including Full Duplex DOCSIS 3.1, Extended Spectrum DOCSIS (ESD), and DOCSIS 4.0 which promises lower latency and downloads of 10 Gbps.

The Plan’s ‘future technology roadmap’ lists FTTP, FTTN/B/C (node/building/curb), HFC, Fixed Wireless, Sky Muster satellite, XGS-PON and NG-PON2 all as future enabling network technologies. Based on past events, it seems the report’s commitment to “placing customers at the center” of its strategy, is naïve at best.

Which vendors are likely to prosper from the roll out of new technologies, such as DAA? Arris or Adtran are obvious choices. Arris is well versed in the country’s network layout, having designed the original HFC broadband network. The firm has provided nbn its E6000 converted edge router (CER) portfolio and its CCAP platform, as well as other products.

Equally, Adtran is a prospective vendor. The firm was recruited in 2017 to supply products exclusively for the newer fiber to the curb network after nbn grossly underestimated the costs at which it could roll out the network. Nokia has also provided nbn with network equipment before.

Most recently, nbn came under investigation in October from the Australian Competition and Consumer Commission (ACCC). The ACCC questioned the affordability of nbn plans, which have been criticized for forcing poorer consumers out of the market by raising prices while keeping services the same. Many basic plans were cut in April.

In August, nbn announced it was scrapping its package which offered speeds of 100 Mbps down, 40 Mbps up, replacing it with a 110 Mbps down, 20 Mbps up service. This cost-cutting measure was arguably in-line with the needs of the average consumer, but nonetheless, public backlash was vitriolic.

The Australian Taxpayers Alliance has been highly critical of the Telecommunications Charge Bill, starting a ‘Scrap the NBN Tax’ petition.

This is not the first time the project has haunted the taxpayer. Major humiliation came this summer when Australian ISPs demanded a A$20 billion write down of the project. Any commercial return for nbn has looked increasingly implausible since costs have ballooned. Such drastic measures would, according to the telcos and various agencies, mean nbn would be able to reduce prices, although taxpayers would still be hurt.