A riposte to Nick Ross and slipshod NBN advocacy from the ABC

Posted on: Friday, 22nd February 2013

Nick Ross has established a reputation as Australia’s highest profile media advocate of the NBN. There’s nothing wrong with supporting the NBN – many sensible people do and one’s support for it is really dictated by what one thinks public policy should prioritise or not prioritise. There are legitimate debates to be had between both sides.

But Nick is a special case. He is the technology and games editor for ABC Online, the website of the national broadcaster and one of the most highly read sources of Australian news and analysis on the web. He is subject to a code that governs how he exercises his duties – specifically in terms of the need for balance and standards.

However,  Nick has used the web platform he edits to publish article after article expressing highly personal views that advocate the ALP Government’s NBN policy and totally disparage the Opposition’s.

All websites have their biases: there is obviously a great degree of support for NBN on say Whirlpool and some of the specialist tech sites, less so in say News Limited outlets and the Australian Financial Review. These biases often reflect their audiences. A website with a largely financial audience may find it hard to support the NBN policy as it stands both through editorial policy and the types of comments its readers make; a website with say a pro-gamer or IT industry audience will tend to the reverse.

This week Nick attended a tech media conference in Queensland and challenged speaker Malcolm Turnbull to an extended argument over the NBN (basically over what Nick saw as the superiority of the ALP’s Fibre To The Home network over the Coalition’s proposed Fibre To The Node alternative). His actions were unpopular with other attendees who thought him both rude to Malcolm (I am using first names here for the sake of consistency) and others who were denied the opportunity to ask their own questions. Malcolm implored Nick to undertake more balanced journalistic inquiry on the NBN and, voila, several days later, Nick has published a several thousand word opus which purports to compare the ALP and Coalition policies, and, inevitably, finds almost complete fault with the Opposition’s.

Well, the best that can perhaps be said is that Nick is a consistent believer. But in reading this opus last night, I was struck by Nick’s loose construction of research, argument and expression. Not only is the piece unbecoming of acceptable editorial standards regarding bias, but also those of accuracy and logic. It is a disservice to both the ABC’s audience and the cause of NBN supporters.

Let’s take a quick look at some examples of Nick’s looseness with logic and facts:

“Over 80 per cent of the nation’s copper network is over 30-years old and copper expires after 30 years” -  if the copper has truly expired how can it still be operational? Telstra reports fault-free performance of over 99% after all (98.7% for line faults, 99.98% for service availability).

“A standalone reason for the NBN is that it replaces the expired ‘rotting’ copper network” and “The Coalition has not addressed copper’s age and need for refresh with its choice of technology” -  actually, the FTTN topology replaces a substantial percentage of the copper line length with fibre, so presumably the potential for faults and diminished performance reduces accordingly. That’s actually the whole point of adding fibre.

“In short (fibre) will revolutionise healthcare for everyone especially the elderly and those living in remote communities” – The NBN calls for lower speed wireless and satellite connections to remote communities. It is also quite likely that many elderly people will choose not to subscribe to NBN internet services if they lack digital literacy skills.

“It will revolutionise power distribution through the ability to micro-manage peak electricity demand” -  There are already substantial smart grid projects underway across Australia aimed at doing that and they almost all use wireless platforms which are superior at tracking spatially disparate assets. The NBN can be used for smart grids but it will not revolutionise them, mainly because FTTH will lack the granularity of wireless coverage. For example, http://www.ericsson.com/article/ausgrid_1595655399_c

“Fibre also offers revolution to television with every household being able to access the bulk of the developed world’s TV channels” -  right now using a DSL connection, I can watch many channels using third-party Justin.TV-style portals or original websites of the broadcasters. Fibre access in my last mile may help my experience a touch but probably won’t solve many of the issues of buffering and quality which come from the international side of the network. I can also quite easily watch many of the developed world’s TV channels using a satellite dish or other pay TV service.

“Fibre is the only medium capable of broadcasting to the new Ultra High Definition “4K” TVs” -  Not at all. The world’s first 4K channel is actually available by satellite from Eutelsat and Qualcomm is developing mobile chips which support the standard. The first mass 4K broadcasts, of the next Soccer Asia Cup, will be broadcast by satellite in Japan. One suspects that future physical media formats will also support the new display standard. At the moment there is not much 4K content and the television sets cost $A10,000. Free-to-air HD is already stillborn in this country, not because of the limitations of terrestrial broadcasting, but because of a lack of content and business case.

“Fibre also means an end to paying phone line rental and expensive phone calls” -  One of the more cutting edge NBN RSPs, iiNet, does offer a VoIP-based “no phone line” service over the NBN. But it requires a $9.95 monthly service charge and it does charge for calls: to mobiles which account for 2/3rds of all possible phone terminations in Australia and for all international calls. Phone calls will still have a cost under the NBN. VoIP is available over DSL and mobile; ever heard of Skype?

“Telecommuting means many more people won’t have to commute to work anymore and nor will they need to live in cities” -  Telecommuting takes place now using today’s technology. The NBN may enhance the capabilities of telecommuting but it isn’t a pre-requisite. Personally I work with telecommuters everyday in Asia, Europe, North America and regional Australia and none of them are on the NBN.

“For instance, if people could communicate with CentreLink by talking to their TVs instead of spending time travelling to offices, hardly any offices would be required – everything could be outsourced to a low-cost regional location. There are over 900 offices in Australia” -  The very nature of social welfare suggests that the people most likely to be in need of CentreLink services are the ones most likely to not have an high speed NBN connection, either because of expense, their lack of permanent residence or their socio-economic or socio-educational level. A mobile-centric effort would be more meaningful. President Obama has identified this and acted accordingly in the US.

“The ‘telehealth’ opportunities afforded by fibre are so dramatic that the savings to the vast $120bn (and rising) annual health budget will pay for the entire rollout on their own, while simultaneously revolutionising healthcare for all Australians, particularly the elderly and those living in rural areas” -  One big problem with this, the government has just abolished Medicare rebates for telehealth consultations in metro areas, the ones slated to get fibre. Sorry Nick, but your revolution is dead in the starting gates. http://www.medicalobserver.com.au/news/rebates-slashed-rural-gps-forced-to-cut-telehealth

“National emergencies, whether fire or flooding, are becoming a part of Australian life. Consequently, the benefits of a fibre-based NBN are becoming increasingly important” – Despite Nick’s belief that fibre is water proof, the NBN didn’t hold up too well in the recent Queensland floods. Like other tech platforms, it is a touch vulnerable itself to natural disaster. As always, wireless techs prove best in these situations. http://www.zdnet.com/au/nbn-co-telcos-continue-to-combat-qld-flood-outages-7000010466/

“Fibre-based broadband requires very little power to transmit a full-speed signal over many kilometres. Conversely, a network based upon VDSL and wireless technologies require so much power that, according to Rod Tucker at Melbourne University, Australia will need to build two-to-three small new power stations to make it work” – One loves the logic here. FTTH allows you do all these great new things not possible on VDSL: for example, home-based health care monitoring, giant 4K ultra HD televisions, 3D printers and so on but apparently these have zero impact on the power grid! FTTN by definition stops you from doing all these things but doubles the power requirement!

“The Coalition has not yet addressed this” -  Again, Nick is guilty of not performing basic research. Nearly a year ago at CommsDay Summit 2012 in Sydney, Malcolm Turnbull said “A key advantage often cited for FTTP over FTTC/VDSL2 is reduced energy usage, given GPON is not powered. But in practice this saving is minimal compared to the vast gap in capital costs. According to Verizon, annual central office power usage is 32 kWh for a DSL line and 12 kWh for a FIOS line. At 25 cents per kWh, a move from copper to FTTP therefore cuts annual energy costs per line from $8 to $3. Across the 8 million premises forecast to be connected to the fibre when the NBN Co rollout is complete, FTTP therefore saves $40 million a year in power costs.” http://www.malcolmturnbull.com.au/media/speeches/three-years-of-nbn-2-0-what-have-we-learnt/

“Fibre maintenance is much cheaper than that of copper” -  Again Nick seems to forget than FTTN network replaces much of the copper with fibre and that under the NBN, the most expensive part of the copper network – covering the most uneconomic and sparse 7% of the population – is retained!

“The net cost is zero and it will pay for itself in at least four different ways” – The net cost is not zero! The NBN is not forecast to recover its costs for between twenty years and twenty seven years, depending on the scenario. Fibre networks are commonly depreciated after 25 years!

“Rather than using tax-payer’s money that could be used on other things (a common myth) it sees Australia borrowing $27bn using its Triple-A credit rating (Australia is currently one of only seven countries in the world to have this. It provides us with the cheapest form of borrowing) to use in addition to another $11bn of private investment” -  Actually 15 countries have AAA ratings and there is no planned private investment at all in the NBN. There is a plan for it to raise its own debt. That is a different thing.

“This money ultimately comes back to the government with a seven per cent profit” -  That is a projection, not a guarantee. Many business plans fail to come true.

“In addition, the cost savings to existing infrastructures, particularly health and power generation are such that the money saved from their annual bills will pay for the network on their own” -  How are these savings captured and quantified in order to pay for the network? I’m intrigued.

“Here’s the premise: all of the Coalition claims about its ‘FttN-based technology being around one-third or one-quarter of the cost of the current NBN’ are based on overseas examples where an incumbent telco already owns a copper network (which presumably is well-maintained and in good condition). But neither the government nor NBNco own a copper network and that means it must obtain one. A new one would cost around $40bn and is subsequently non-viable. That means enacting an election promise to buy or lease Telstra’s copper network” -  Telstra has already signed a deal with $11 billion of “net present value” – which means more than $15 billion in actual cost – to retire its copper network, lease its ducts and transfer customers to the NBN. The government already has declared Telstra’s network and has the legal power to appropriate it for third-party access. There is also legislation in place that allows the minister broad discretion to structurally separate and otherwise punish Telstra if it doesn’t co-operate with the NBN. In aggregate, this combination of legal powers and already agreed upon expropriation of the copper network suggests a deal can be done that will probably accelerate revenues to Telstra simply because FTTN can be built faster. Right now, Telstra can’t get full earning potential from leasing to the NBN until next decade.

“It’s difficult to envisage private companies investing in a copper-based network which is already moribund, literally on its way to the scrap heap and comes with enormous power bills, maintenance costs, no premium applications and no obvious return on investment” – That’s exactly what Telstra and its access seekers do right now. It’s called the DSL market.

“It’s not clear why the Australian public would, en masse, subscribe to the new network” -  Perhaps because they are already subscribers and they would simply be leased or sold new modems?

“Malcolm Turnbull recently and bizarrely said of the fibre-based NBN: “There is no evidence whatsoever that the massive increase in speeds delivered by fibre-the-home will deliver any extra value or benefit to Australian households.” One can’t help but wonder what the reaction would be if that statement was read out at an international broadband conference” -  Indeed, Malcolm made a similar statement very recently at an international broadband conference in Europe held by Informa. Given he has been cordially tweeting with Informa analysts as recently as last week, everyone seemed calm about it. Again, Nick betrays his lack of research. http://www.malcolmturnbull.com.au/media/dont-suspend-the-laws-of-economics-malcolm-turnbull-speaks-to-broadband-world-forum-paris-27-september-2011/

“It appears that the Coalition’s broadband alternative will be colossally more expensive than the current NBN and not cheaper by any reasonable definition” -  It won’t be if the Coalition simply sets a finite budget for it, rather than the current approach of defining the network topology first and costing it later. I would really wait and see for the policy/CBA given that at $5000 per home the current NBN is much more expensive than the $350-600 per home figures cited across several vendors and carriers in Europe for FTTN. But if you don’t believe me I simply submit what Stephen Conroy said on April 20 last year: ““It would be quicker and will cost less to build a fibre-to-the-node network.  That is just an unambiguous fact.” http://www.malcolmturnbull.com.au/media/conroy-coalition-alternative-%E2%80%98quicker-and-will-cost-less%E2%80%99/ and http://www.abc.net.au/radionational/programs/breakfast/stephen-conroy-on-telstra-and-nbn-co/3962212

“After completion it will likely be sold but the government will remain in control of maintenance (a good idea)” -  Why is it a good idea for the government to maintain a repair force for a privatised NBN? When has this been suggested?

“The wholesale price drops over time (Page 67 of NBNco’s corporate plan) and, once sold, will be subject to market forces – the initial requirement of them being artificially high (to subsidise the rollout to rural and remote Australia) will no longer exist” -  NBN Co’s actual corporate plan envisages a doubling of ARPU over a decade, this is hardly a fall in price. Why will there be no requirement to cross-subsidise rural and remote Australia in the future? Will the wireless, satellite and loss-making parts of the fibre network have no opex or replacement costs? Or is this going to be placed on the federal budget?

“An enormous problem with the current system (and with networks around the world) is that incumbent operators are in charge of everything” –   No they are not in “charge of everything.”  This is nonsensical. Is Telstra in charge of Optus? AT&T in charge of Comcast? They are heavily regulated in the first place.

“That said, a potential problem is that some smaller-scale players won’t be able to afford the minimum AVC (Access Virtual Circuit) from NBNco. Their option will be to buy rolled-up NBN wholesale from the likes of Nextgen and AAPT.” – Again Nick reveals he doesn’t understand how the NBN works. The AVC is the capacity sold on the end line eg the $24 12Mbps link. There is no way to get a cheaper version of it by buying it from a wholesaler. Nick is confusing this with the backhaul behind the POI where there is contestability and arguably the Network-to-Network Interface which potentially could be wholesaled or shared between smaller RSPs.

“When Telstra last looked at implementing FttN in 2008 it said that sharing access to its cabinets with other service providers using all manner of different contractors would cause all manner of problems, that “In practice it would be a disaster for customers” -  This is misleading. Telstra was still bidding in tenders to build FTTN the following year using a bitstream protocol, the same as the proposal put forward by Optus and other service providers under Terria at the same time. The NBN topology of bitstream with a network POI interface remains the same whether FTTH or FTTN is used.

“Alcatel-Lucent Zero-Touch vectoring is a single-vendor solution. Without vendor competition, you have a monopoly supplier” -  Again, where is the attempt at research? Huawei are selling a vector DSL solution to Swisscom, Adtran are also tendering for contracts for vectored DSL right now in the US and Europe. And as it so happens, Alcatel-Lucent is the lead supplier for the FTTH network right now!

“Vectoring is incompatible with “local loop unbundling” – So is GPON! So what! You use bitstream for both GPON and FTTN! There is no proposal for local unbundling on the NBN as it stands.

“Low-density, long-loop areas are non-viable because you’d have a DSLAM serving fewer than 100 customers, because most cable fanouts today serve fewer than 100 customers. In other words – VDSL2 plus vectoring would serve more like 50 per cent of the country than 93 per cent (a rough estimate; significant time and resources would need to be spent turning that into hard data)” – Indeed, between 2006 and 2009, Stephen Conroy proposed to serve 98% of the country with VDSL and there was not a peep of objection that he could only technically achieve it to half. Where was Nick then? Right now about 93% of the population can get DSL. To suggest only half of them can receive a capacity improvement from the deployment of what Nick himself suggests elsewhere in the article would be a 50,000 node network is fanciful. With no new nodes and simple exchange-based vectoring, about 50% would get an improvement already!

“In the absence of wide adoption of the Vectoring standard, No telco will deploy a technology like vectoring on a wide scale. Experience suggests it would take at least 3-5 years. In other words “VDSL2 with Vectoring” deployment would be unlikely to start until 2017 or so.” -  As it so happens, Swisscom, Belgacom, Deutsche Telekom and Fastweb Italy are all planning multi-million line deployments beginning this year and reaching full scale in 2014. These are announced contracts.

“Any suggestion that an NBN monopoly inflates prices is already disproved as nonsense” -  The experience of the last few years is that wholesale prices have been stable or declined (ULL has been priced at between $12 and $17 in Band 2, LSS nationally (DSL only) at just $2.50). The minimum NBN wholesale access price is $24 and wholesale ARPUs are envisaged to climb to $52 in seven years as customers climb speed tiers and RSPs order more connectivity circuits. The average price for a retail broadband service currently is around $50.  In eight years the average wholesale price will exceed that under NBN forecasts ($52). This reverses the trend for more capacity for the same or less end user price.

“There are many plans available right now and they are practically all better value and/or cheaper than existing alternatives”- Nick again seems unaware that initial NBN wholesale prices are designed to meet the DSL market with price rises to only come later through the CVC and speed tier bracket creep. The same higher speeds that are apparently so essential to realise NBN benefits.

“The Governments already own public infrastructure like the electricity network and the road and railway networks. It does this to facilitate economic growth and social benefits” -  Indeed, but the trend of late has been towards privatisation, deregulation or toll-compensated private investment in these fields.

“Regulatory intervention is frequently required to maintain services and competition, and prices (for example in the electricity sector) have risen in spite of the expected efficiencies of private ownership. The question is raised, why should the communications network be any different?” -  Is Nick unaware of the pervasive thousands of pages of regulation which cover telecommunications competition, incumbent obligations and other rules? Perhaps there is a clue here as to why there was an investment failure in the local loop in the first place, specifically dating back to 2001 when the ACCC first mandated local loop unbundling?

“Unless a detailed alternative is released by the Coalition we’re forced to assume that its “market-driven” plans will only cause local monopolies, duopolies and inflated prices because that’s what all of the available information and overseas examples (such as the United States, Canada and New Zealand), currently point towards.” – Malcolm has said on several occasions he will persist with a separated Telstra and a neutral wholesaler. Again, where is the attempt at research?

The boost to business has been measured (by IBM) at $1 trillion over the next few decades while last year a Deloitte study stated that the digital economy will increase from $50bn to $70bn per year in the next five years due to expectations from the NBN. Also a Nielsen study found that 93 per cent “of Australian businesses believe that participation in the digital economy is important to their on-going business strategy” and 75 per cent said “National broadband infrastructure will increase their ability to engage in the digital economy. Meanwhile the OECD (and others) believe that the NBN will increase GDP by at least one per cent ($15bn per year). That’s before cost savings and revenue from the system itself. As such the NBN would cover the cost of capital in just two years” -  The digital economy is based on many things: use of ICTs, mobile technology and fixed networks of varying speeds. There is no evidence, as Nick implies, that economic gains from the digital economy can only be made through pervasive FTTH. Indeed, he has spent so much time telling us how the NBN allows us to avoid costs, one wonders if he has thought about the losses that might accrue to some quarters of the economy from it as well? His example of how we can all bypass retirement homes might not be seen as a positive in that industry. For example, he says “Why spend a fortune on a new server that has a short life expectancy and requires expensive support when you can rent one in the cloud?”

“The Coalition might just be the only government entity not to even refer to the importance of the cloud or broadband benefits to business in general.” – The Coalition is a political party (two in fact) and not a government entity, but as it so happens its state equivalents in power in Victoria and NSW both have advanced digital economy strategies.

“As long-term licensing agreements expire in Australia, more and more premium content will become available over the next decade and we’ll see US-like traffic usage where one-third of ALL internet download traffic comes from video distribution service, Netflix” – which begs the question, can we bill Netflix for a third of the cost in building the NBN? But I make a serious point here. Is this worthy of so much government mindshare if the main beneficiary is American movie distribution? Can they help build it, like cable TV companies do?

“There are many other benefits to seniors. This is particularly important with so many baby boomers hitting retirement age – apparently there are over 800,000 65th birthday’s every month” -  So there are 9.6m Australians turning 65 every year?

“The bad state of the ducts is a double problem for the Coalition because the technology also relies upon the quality of the copper within those ducts and most of it is over 30 years old. In NBNco’s case, where the Telstra duct is declared unusable, it makes its own new one. For the Coalition to do this would involve rolling out new copper – a ridiculous notion” -  An FTTN rollout doesn’t rely on disturbing the ducts with last mile copper in them, it doesn’t touch them. It deploys fibre to replace the bundles of copper that feed exchanges.

“The Coalition’s FttN technology node requires mains electricity power being connected to every single cabinet in the street. NBN contractors have already queried how this could possibly be achieved as local power companies are the only ones who can install power to infrastructure. The notion of coordinating electrical engineers with NBN engineers without massive delays, across 50,000 to 70,000 nodes drew very cynical comments from leading NBN contractors” -  Yet mysteriously every telco which bid for the 2009 FTTN tender didn’t see this as a problem and somehow all those street lights, payphones and traffic signals manage to work!

“In the UK the standard cost of connecting a node to power has frequently ballooned from 2000 UK Pounds to 25,000 UK Pounds” -  The actual quote he links to says “sometimes” not “frequently”.

“But many such people don’t already have broadband because they are either too far from an exchange or are connected to poor-quality copper FttN technology won’t fix all of these issues” – the whole point of FTTN is to place the nodes closer to people far from the exchange. That is its underlying principle and purpose for existence as a platform.

“Some have said that having the large fridge-sized FttN cabinets outside your house will lower value. It probably depends on the premises’ outlook. Some won’t care, but as Selling Houses Australia tells us repeatedly, they are likely to polarise buyers and reduce the market – some will view them as monstrous carbuncles” -  Is Nick aware that the NBN requires tens of thousands of fibre distribution hubs in streets that look just like… bar fridges?

OK enough is enough and I have made my point. Yes, there are legitimate questions to be asked about FTTN in Australia and in between the nonsense and inaccuracies, Nick manages to ask some good ones. Yes FTTH is a great, albeit expensive, technology that would appear to be future proofed for many decades.

But that isn’t the point. The point is that in a world of a noisy blogs and message boards there are some “institutions” that should be making an effort to research their facts, attempt to provide balance and help us all get closer to truth. The ABC is one of them. I help pay for it, you help pay for it, and its mere existence crowds out the economics for other quality media.

I have just provided nearly 50 examples from one article published by our national broadcaster that arguably fail to meet basic standards of fact, accuracy and logic. Not everyone will agree and no doubt I will be accused of bias and having advanced my own apologia for the other side of politics. That’s not what I am really attempting though. What I am trying to do is to directly influence Nick to start servicing his own side of the debate with more effective arguments and to actually consider the merits of the opposing side. Because right now he is letting down the cause of NBN advocacy with his slipshod and embarrassing campaign. It is a serious enough issue that it deserves more than this tawdry analysis from the national broadcaster for something that remains Australia’s most ambitious infrastructure project – ever.

Grahame Lynch