Thursday, August 26, 2010

Australia - the country's newspapers were using the poro markeing of the NBN as reason to vote for the opposition

[abc] The last week and a half of the election campaign was characterised by something amazing for us geeks: Access to the internet was lodged front and centre as an election issue.

How times change. Communications Minister Richard Alston used to deride broadband internet access by labelling it as nothing more than a high-speed pornography delivery vector, and here we are, less than eight years later, and ubiquitous access to broadband is actually swinging an election.

As desperation mounted during the election campaign, Prime Minister Julia Gillard and current Communications Minister Stephen Conroy spent a Thursday morning in mid-August pushing a big blue button to officially open the Opticomm-built NBN trial network in Midway Point, Tasmania. NBNCo CEO Mike Quigley enthusiastically added to the political booster-shot by claiming that speeds of up to 1 gigabit per second will be possible.

But somehow it wasn't enough. The sales job behind the NBN was so bad that the editorial pages of some of the country's newspapers were using it as part of the reasoning behind throwing their support behind Tony Abbott.

Online, the Australian Network Operators Group (AusNOG) has hosted weeks of energised debate about whether the NBN is actually needed. You read that correctly: The Government has done such a catastrophically bad job of communicating their broadband vision that they can't even convincingly sell it to broadband ISPs.

Why is that? Ubiquitous high-speed broadband ought to be a no-brainer, especially in regional areas which have been very poorly served by virtually every type of infrastructure.

So what might a hypothetical independent MP say to the Government if he was so bold as to sit down to tell the Communications Minister how to do his job?

Firstly: cut out the hyperbole. We're all told that South Korea is "leaving us behind" in the broadband stakes, having had 100 megabit per second fibre to the home for years. But that means we know that most of the pie-in-the-sky innovative new services that NBN boosters wax lyrical about are probably hyperventilative garbage. Having had near-ubiquitous high-speed broadband for so long, the South Koreans use it in more or less the same way that we use our own internet access, only faster. It stands to reason that we'll probably use it in the same way too.

That's not to say that innovation won't happen, but let's get a grip: It's hard to believe that the NBN will transform schoolrooms given that most schools already have broadband internet access; and I'll believe that we'll all make widespread use of telemedicine as soon as malpractice laws are amended enough to make my GP feel comfortable about prescribing a glass of milk and a good lie-down without an in-person consultation.

The benefits arising from the NBN will be far more mundane. They'll be more concerned with ubiquity, not speed. They'll remove the tyranny of distance that causes people and businesses in Forbes or Hamilton to be disadvantaged against people and businesses in Melbourne and Sydney. And they'll be incremental, quietly displacing offline parts of our lives in the same way that Google has quietly displaced the White Pages.

Secondly: cut the guts out of the financial arguments. $43 billion sounds like a lot of money, but as one of my colleagues points out, it's only about twice as much as Australia is intending to spend on replacing the Collins Class submarines it bought less than 15 years ago. If the Government can run an economic stimulus programme that sees $44 billion spent in a year and project a surplus less than four years later, we should be able to spread the same amount of expenditure out over a ten year NBN build cycle without going broke. We survived the GFC, so we actually do have the money.

Thirdly: The price for access. Neither the Government nor NBNCo have yet made any statements about how much NBN broadband services are likely to cost. Indeed, Quigley's admissions in the May Senate Estimates round could be indicative of an attempt to cloud the issue. Mr. Quigley confirmed that services on the NBN trial in Tasmania are being offered to ISPs for $0 setup fee and $0 per month ongoings - meaning that retail prices offered by trial-participant ISPs will likely be something of a bait-and-switch: There will be a future day when NBNCo will increase their wholesale price. What will Tasmanian broadband prices look like then?

It's not difficult to do some back-of-the-envelope calculations to work out what the access price can be. The Government has said that the entire $43 billion enterprise will be sold to private investors five years after the network is built, and those private investors will want a commercial return on their money. Picking a number out of the air, 8% of $43 billion is about $3.44 billion per annum. Divide that over the 8 million premises expected to receive an NBN service to get $430 per household per annum, or about $36 per month. That's assuming that the network costs nothing per annum to operate, never needs to be maintained, and carries no additional debt which needs to be serviced from operating income, so perhaps bump it up to $50 per month per service to be conservative (and bump it up again if take-up isn't 100%: What if commercial returns must be yielded from 4 million premises instead of 8 million?)

Building the NBN non-business case

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