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8 August 2019

Never far from controversy, NBN could face $20bn write-down

Australian consumers and businesses have had to endure the trials and tribulations of the country’s national broadband network (NBN) now for over a decade – an ambitious fiber network roll out which promised to propel the country into the big leagues. Billions of dollars and all manner of mishaps later, the project has passed the point of sour and the latest mark against the NBN’s name is a contentious package shakeup proposal. In the same breath, Australian telco Telstra conveniently claims it has the solution.

The wholesale access debacle that is the NBN – not exactly known for its track record of bright ideas – has now suggested scrapping the package offering speeds of 100 Mbps down, 40 Mbps up, instead making this specific deal a commercial exclusive. Naturally, the consumer backlash has been vitriolic, but perhaps without realizing that the 110 Mbps down, 20 Mbps up service, which is set to replace the aforementioned package, is arguably more in tune with the needs of the average consumer. But while the backlash may be warranted, many headlines have been misleading, suggesting that the fastest package has been scrapped but in fact the 250 Mbps download tier will be untouched. It is simply uplink which is being affected.

There is method in the madness though, according to General Manager at NBN Ken Wallis, who reckons the underuse of the higher uplink services are adding costs from a wholesale and retail point of view, talking to ITNews. And if the NBN needs anything, cost savings are most definitely it.

The NBN’s proposal arrived only days after Telstra declared its frustration at the state of the country’s broadband, commissioning a study which found Australia had the second most expensive wholesale broadband pricing in the world for 50 Mbps and 100 Mbps services. Telstra therefore wants to disrupt the disruptive NBN (and not in the good sense of the word) by reducing pricing of the standard tiers by AU$20 (US$13.54).

This is more than a little hypocritical from Telstra given how it actively attempted to stop the fiber rollout and then ended up receiving around AU$11 billion (US$7.45 billion) in taxpayers’ money for access to its duct, pipes and connections. That’s right, access to older hybrid fiber coax (HFC) technologies, the very network infrastructure Telstra’s latest tirade of criticism is targeting.

Telstra CEO Andy Penn isn’t wrong about NBN being overpriced since consumers were migrated to the national network, but at the end of the day, the project must bring a commercial return – something which has looked increasingly implausible since costs have ballooned. Unfortunately for consumers, these costs are passed on by the NBN to internet service providers at retail, and these ISPs are all demanding the same fundamental fix – a $20 billion ($13.5 billion) write down of the NBN project. Such drastic measures would, according to the telcos and various agencies, mean the NBN would be able to reduce prices, although taxpayers would still be hurt.

Costs soared from an initial estimate of $41 billion to $72 billion (US$27.8 billion to US$49 billion), but by backtracking on its overoptimistic country-wide FTTH promises and instead employing network technologies including G.fast and DOCSIS 3.1, from vendors including Arris, Nokia and Adtran, the NBN has saved billions and managed to reduce the current total projected costs to around $51 billion.

Arris supplies products for the existing HFC broadband network while Adtran was selected to supply G.fast products exclusively for the newer  fiber to the curb network. However, the NBN told Faultline Online Reporter in the past that the deployment of G.fast and DOCSIS 3.1 equipment has been to increase network capacity and is not directly related to construction targets. We’re not having that.

With Telstra demanding price cuts amid widespread calls for a write-down, it could again increase the NBN’s reliance on fiber alternatives, potentially deploying more equipment to “increase network capacity” (not with an eye on reducing costs, of course).

We recall an event in Berlin where Adtran claimed G.fast is a faster and cheaper alternative to the DOCSIS 3.1 standard due to the way it reuses twisted pair infrastructure, while Arris said cable operators can make cost savings of some 70% with its DOCSIS 3.1 portfolio (including cable modems, CCAP platform, converged edge routers, segmentable nodes, and management platform), while adding bandwidth, using less power and less space. Effectively, the NBN has been pitting its two networks against each other for years now – with the old HFC network set to make a comeback thanks to DOCSIS 3.1 amid shortcomings of the fiber project. The latter grossly misjudged the costs of deploying fiber outside cities in Australia’s rugged terrain.

Data published late last year listed Australia’s TPG as the fastest ISP, followed by Aussie Broadband, iiNet, Optus, Telstra and MyRepublic, according to a report from ACCC Measuring Broadband Australia, prepared by SamKnows. One positive for the NBN is that services continue to outperform ADSL, coming in three times higher at an average 22.7 Mbps.

Remember that Australia is in a unique situation with NBN being a monopoly, essentially meaning it can charge what it wants. The controversy doesn’t stop there though. A fee levied by NBN called the Connectivity Virtual Circuit (CVC) has been invented to balance the books, proposing to slap users of competing NBN services with a AU$7.10 (US$4.80) a month tax, on top of an additional tax for usage charges for video streaming services, known locally as the Netflix Tax.

This is modern Australia. NBN needs to be sold off or written down as soon as possible, or consumers will abandon the project altogether for 5G – potentially leaving NBN in an irrecoverable financial position and ultimately damaging the country’s economy.