The two-man debate between Malcolm Turnbull, Shadow Minister for Communications and Broadband, and Alan Kohler, respected financial journalist of more than 40 years’ experience, is heating up the web. The issue is Turnbull’s proposed changes to the NBN rollout, should the election go favourably for the coalition.
Turnbull proposes that instead of a fibre to the home/fibre to the premises (FTTH/FTTP) network Australia should instead embrace a fibre to the node (FTTN) approach. The positives here are immediately evident and plainly laid out by Turnbull; an FTTN network could offer a potential short-term saving to the Australian public of up to $20 billion.
Kohler argues vehemently against Turnbull, stating that:
- The plan relies too heavily on Telstra’s willingness to play nice
- Broadband speeds will be severely limited
- A number of Australian homes and businesses will already have FTTH by then, creating a two-tiered system where some users unfairly have much better internet
- FTTN will require large ‘wardrobe-sized’ nodes to be built on nature strips, decreasing from local aesthetic appeal
- FTTN relies on copper between the node and the home and that degrading copper networks require large sums of money for regular upkeep.
What’s the difference between FTTH and FTTN?
In very general terms, FTTH (aka FTTP) is a system whereby super-fast fibre-optic cable carries the broadband signal from the provider all the way to a home.
The reason this is so fast is that fibre-optic cable uses light to transmit data, rather than electrical impulses sent along a copper wire. Fibre-optic cable also requires less maintenance than copper, as it does not degrade. However, it is much more difficult to repair if damaged.
FTTN, once again put simply, runs fibre-optic from the provider to a node somewhere around your house and then relies on traditional copper wiring to take the signal the rest of the way. It’s much cheaper, but the drawbacks are numerous, as Kohler points out.
Kohler seems to believe that an FTTN network is a sort-of half-baked solution. While it is cheaper, he says that we’ll probably only be looking at speeds of between 12Mbps and 50Mbps, whereas the current NBN model is aiming for initial speeds of 100Mbps that could eventually go as high as 1Gbps (10x faster than the initial speeds and 200x faster than Turnbull’s 50Mbps).
Reliance on Telstra
Telstra is not particularly renowned for being the nicest kid on the block when it comes to hammering out multi-billion dollar deals. NBN Co. found this out the hard way with their recent $11 billion deal that took approximately nine full months longer than expected to negotiate, pushing back the NBN rollout severely.
Kohler points out that Turnbull might be relying too heavily on Telstra’s geniality, as a new deal will have to be pushed through if a change to FTTN is made. The problem for Turnbull, Kohler says, is that Telstra will be in the position of power. Turnbull will have made an unbreakable election promise, meaning that Telstra can delay and demand even more, knowing that Turnbull will have considerable pressure on him to get the deal done as quickly as possible.
Kohler facetiously states:
Telstra chief executive David Thodey is a very nice man and it probably wouldn’t enter his head to use the fact that the new minister has made an election promise to screw him for more money.
Too far to Turn Back
Another argument is that too many homes will already have been connected up to FTTH to suddenly turn around and tell the rest of the Australian public that no one else will be getting in on the fun. While we agree somewhat, this is probably the least strong of Kohler’s arguments.
Initially Kohler states that about a million homes and businesses will be connected to FTTP by the time Turnbull is in the position to make any drastic changes. This isn’t particularly accurate. Turnbull points out only 54 000 premises will be up and running by June 2013. These figures run contrary to an SMH article released a few weeks back, which puts the number at 92 000 by mid-2013. Still, 92 000 is much closer to Turnbull’s estimate than the 1 million of Kohler.
In a later article Kohler clarifies by stating that the figure of 1 million is of work that has been “commenced or completed” and says that this is relevant because “the Coalition has said it will fulfil existing contracts”, assumedly meaning that work which has been commenced must be completed. Kohler’s understanding of unofficial internal estimates of NBN Co. are that 1.2 million premises will be “commenced or completed” by mid-2013.
Kohler has raised a valid point here, but only after clarification. The initial claims of a million homes and businesses being connected to FTTP by mid-2013 is misleading to say the least.
Nothing Saved, Less than Nothing Gained
Probably the bit we’re most interested in is Kohler’s claims regarding the continued maintenance costs of an aging copper network. According to Kohler, the current copper network costs $600-700 million per year due to continuing deterioration. He goes on the point out that, over 20 years, those numbers add up to around $15 billion.
As you might remember, Turnbull hopes that the FTTN network will save a full $20 billion, leaving only a $5 billion saving if Kohler is accurate.
There Will Be no Bitterness
Turnbull, in his most recent response, states that while there will definitely be some areas with FTTP and others with FTTN most Australians will not even notice or care. “The vast majority of Australians are only concerned as to whether their connection enables them to use and enjoy the services and applications they want.” We would agree with this, of course. However, we’re interested to see what happens in a decade or so when even more of our society has become internet-dependant if FTTN speeds will cut it.
He goes on to claim that “business centres, schools, hospitals, universities and so on should have FTTP”. We have to admit that this brought an audible sigh of relief from our lips. While it’s possible that customers may not need faster than 50Mbps for the next decade or so, businesses certainly will, the fact that Turnbull has openly recognised this is, at the very least, promising.
Plenty Saved, Plenty Gained
In Turnbull’s latest response to Kohler, he addresses the issues of copper maintenance. With fibre running to the node, only the copper between the node and the premises will remain, drastically reducing the amount of copper that will require constant care.
Moreover, Turnbull stated that in areas where copper maintenance is an issue, such as chronically damp areas, it may make more economic sense to install FTTP.
Unfortunately no numbers are given regarding copper wire maintenance costs under Turnbull’s proposed FTTN network, so it’s difficult to decide between Kohler and Turnbull on this point.
Turnbull does make reference to a “CTO, from North America” who discussed comparative costs of fibre optic and copper upkeep with Turnbull.
Another CTO, from North America, told me that in his experience maintenance on outside fibre plant was about 50% less than on outside copper plant and that they worked on an average maintenance cost for copper connected customers of $US3 per month per premise – so $US36 a year or about $US18 a year more than for fibre. He said that the additional capital costs of FTTP so dwarfed the opex savings (they don’t even pay the interest) that the additional maintenance costs of FTTN were not a significant factor.
Turnbull goes on to say that the TUSMA contract with Telstra allocates approximately $230 million annually for the continued upkeep of copper wiring for the 7% of homes remaining on the old standard. The contract is a 20-year deal, meaning that this figure of $230 million per year will remain in place for that period of time despite Labor’s wishes for an FTTP network.
How Far is Too Far?
Regarding Kohler’s claims that around one million premises will fall under the “commenced or completed” category by mid-2013, Turnbull questions the exact definition of “commenced or completed”, stating that it could be as simple as “a shovel in the ground”.
Turnbull states that the only metrics of importance are “premises connected” and “premises passed (and therefore capable of connection once a customer asks for a service).”
We’re seeing good points on both sides of this argument. On one hand, Turnbull is promising to complete the NBN faster and with a substantially reduced cost. On the other, Kohler is questioning the validity of the new plan from a technical, social and financial viewpoint.
Division of the Masses
We agree with Turnbull that a 2-tiered system, where some Aussies are jealous of others who have FTTP, will not be a major issue, but not for all the same reasons as the honourable Shadow Minister. Turnbull mentions many times that the internet is made up of many different kinds of systems – ADSL, Cable, 3G, 4G and all the different subcategories within them – but we don’t see this as a truly valid argument. With the media focus that’s been on the NBN for years now, we think that Aussies will notice that others have received preferential treatment for no reason other than that they were lucky enough to be connected under the original scheme.
One of the main points of the NBN is to create a uniformed national network, essentially democratising internet access, as far as the end-user is concerned (ISPs may feel differently), across Australia. Simply waving off concerns such as Kohler’s by stating that the internet has always been multi-faceted sounds ill-considered to our ears.
The reason we don’t feel this would ultimately become an issue is that comparatively few homes should end up being hooked in with FTTP by the time things switch over to an FTTN system, should the election prove favourable for Turnbull and his gang.
Loss and Gain
We do like the idea of a cheaper NBN and we absolutely love the idea of getting it faster. But at the end of the day we’re not comfortable with settling for a system that’s not as good as the one currently being implemented, even if it is cheaper.
A simple and undeniable fact is that, barring remarkable or cataclysmic social change, we’re going to need faster and faster internet as we roll forwards in to the future. Many people may not think so now, because they’re fine with the speeds at which they currently download movies or browse the web.
But just think about it for a minute. Eventually the internet is going to be in everything and it will be used for everything. Television, movie rentals, radio, phone-lines, messaging and even your house and car are all going to have serious and integral internet reliance of varying degrees. Mark our words. TV, especially traditional cable TV, will eventually die. Houses will become smart houses. Cars will have in-depth internet functionality for not only getting around, but finding stuff for you to do, or even finding your friends. It’s not all going to happen in the near future, but it will happen, so what’s the point in building a halfway done NBN only to come back to it again a decade or two or three down the track?
An FTTP/FTTH network may cost more, a lot more, but it sounds to us like the kind of thing that a government should spend its taxpayers’ money on.
Ultimately we have to throw our lot in with Kohler, which is kind of where we were at the start anyway. It’s not that we find Turnbull’s plan foolish or poorly thought-through, we just think that if you’re going to build a massive, nation-wide super-fast broadband network that you may as well build the best one that you can. Some things are worth forking out the extra cash for.