Yesterday’s announcement by Samsung of a 5G wireless breakthrough in the 28GHz millimetre wave band likely brought wry smiles to industry students of historic hype cycles.

It was nigh on 20 years ago that the same 28GHz band was similarly in play as the likely launch pad for a wave of new so-called Local Multipoint Distribution Services. These were going to bring on the information superhighway and end the dominance of copper and coaxial local loop. I can find quotes from as long ago as 1996 when then Bell Atlantic CEO Ray Smith opined that “wireless cable” as he termed it was “working” and required no more than a household window-mounted antenna.

The US Federal Communications Commission saw LMDS as a key way to break down the Baby Bells’ dominance of the local loop and prevented them from bidding for the spectrum. Nevertheless, the spectrum was eventually auctioned to a motley crew of challenger telcos for a then-cool half a billion US dollars. A year later, the Australian regulator followed suit, preventing Telstra and Optus from buying the spectrum which was eventually bought by AAPT for around $A66 million.

From the vantage point of the late 1990s LMDS looked set for a sweet future, given its “capex” was mainly centred on success-based CPE installation. Cellular telephony was still at 2G stage with 100Kbps EDGE seen as the outer limit of expected speeds. ADSL was barely out of the labs and few were contemplating further deployment of HFC networks. LMDS was seen as the most cost effective route to the then much ballyhooed 500 channel information superhighway.

Clearly that didn’t happen. DSL, 3G and HFC DOCSIS technology put paid to LMDS’ ambitions along with some of the technical difficulties associated with millimetre wave tech such as its arbitrary line-of-sight requirement and susceptibility to rain fade. A small wireless ISP sector persisted but they have subsequently made the jump to other forms of wireless access such as WiMAX and now LTE.

With AAPT’s 15 year spectrum license coming to an end next year, it doesn’t even seem to have the stomach for a costly renewal of its rights over the entire band, recently volunteering to share it with emerging Ka-band satellite applications. Not too long ago it even gave up its claim to some of the spectrum by selling it to NBN Co for its satellite requirements.

And then along comes Samsung with news of its 5G plans, just as spectrum regulators the world over were preparing to rip expiring spectrum licenses off the remaining legacy LMDS users and re-allocate them for satellite Ka-band usage.

Should we be as sceptical of 5G as we should have been about LMDS? Well, LMDS had a problem right from the start in that regulators effectively prevented incumbents from deploying it, leaving it as the technology of choice for small under-capitalised and weak challenger telcos. This damaged the viability of the vendor ecosystem for it, a not dissimilar outcome to what we have more recently seen with WiMAX versus LTE.

5G is an entirely different case: a legitimate technology response to the growing demands of extremely large cellular operators to find new ways to accommodate increasing data usage and promote revenue growth. Significantly, many of these cellular operators don’t have significant fixed network investments to protect. Ditto, there is now a demonstrated broadband market for wireless in countries with limited fixed local loop. As much as one is wary of buying into the promise of technologies not slated for commercial availability until next decade, one would have to be of strong constitution to bet against 5G.

The timing of Samsung’s announcement this week could not have been better from an Australian point of view. With the current LMDS licenses expiring next year, the Australian Communications and Media Authority is at the mid-way point of a review process over what to do with 28GHz going forward. The ACMA is coming under extreme pressure to provide an outcome advantageous to the satellite industry. Samsung’s announcement, timed as it was to satisfy European demands for technology roadmap visibility through next decade, will make the ACMA pause for thought.

NBN VS 5G: As an aside, it was hilarious to see the online debates yesterday regarding 5G vs. NBN: NBN opponents, of course, seeing 5G as a vindication of their scepticism over all things fibre, NBN supporters dismissing 5G as another wireless also-ran that could never be more than a complement to fibre.

One suspects both sides are wrong, the mere presence of NBN as a monopoly juggernaut will distort the market so as to hinder 5G, but the obvious consumer preference for wireless that is often ignored by technology determinists will ensure that 5G becomes a very dangerous ‘complement’ in terms of NBN ARPUs and share of wallet.

Much of the online debate wasn’t too bothered by facts. 5G will not obviate the need for more fibre in the network. However, it will not be your grandfather’s “shared and congested” wireless, given the antenna theory behind 5G essentially mimics a point-to-point network.

FTTP advocates seemingly don’t understand this essential difference between proposed 5G tech and traditional cellular nor the fact that their preferred fibre access network also has several points of physical and economic contention, and is not as “dedicated” in favour of high speed as they seem to think.

Nevertheless, the NBN will also possess great market power, particularly in terms of its gifted public capital, while a 5G network will likely receive little policy favour. NBN advantages are as much economic as technical. The most likely outcome of a full blown 5G versus NBN contest would not be victory for one side, but more a likelihood that they will retard each other’s business cases in what would be a spectacular episode of mutually assured destruction that would make the 90s HFC wars look like a lover’s tiff.

But that’s a topic for another day.

Grahame Lynch

Malcolm Turnbull has a point about FTTN. Copper is showing itself to be more resilient than many would have you believe. Copper is more than cable of delivering speeds up to 100 Mbps on a fibre to the node network, if vectoring is applied. That’s the claim on this week’s podcast from Stefaan Vanhastel, a Director in Alcatel Lucent’s Fixed Networks Division, based in Belgium.

Kamalini Ganguly, an analyst at Ovum, describes how FTTN networks are being deployed across Europe and the US, as operators attempt to match speeds offered by competing cable providers.

In Australia, iiNet, through their acquisition of TransAct are the only operators of a VDSL network. John Lindsay, their CTO, says he expects it will increase speeds on parts of their network by as much as 50 percent.

Meanwhile, what’s required to deliver common applications, like video, is decreasing. John Maizels, Governor at Large (great title!) at SMPTE (Society of Motion Picture and Television Engineers) says the h.265 codec will deliver a better picture than its predecessor, with half the bandwidth requirement.

The moral in this tale? Technology is a moving feast. That surely makes a nonsense of any approach to prescribe a technology over any time period – particularly over eight years or more.

The NBN has dominated discussions on government policy, almost to the total exclusion of other telecommunications initiatives.

Whilst the government has pursued its gold plated fixed line solution, Australia has become one of the world’s fastest adopters of smart phones. The mobile industry did this with little in the way of government intervention.

Some would argue that this is a prime example of how government involvement only slows progress. But Bill Morrow, CEO of Vodafone, says we will miss the longer term economic benefits if we don’t fix up our telecoms policies, recognising the importance of mobile in the communications mix.

In this week’s program you’ll hear him argue for the use of public subsidy for regional services that guarantees open access, whilst Chris Althaus, CEO of the Australian Mobile Telecommunications Association, describes the economic benefits derived from mobile usage.

We ask industry commentator Paul Budde and Greens Senator Scott Ludlam whether the government’s approach to broadband needs to be updated to take into account the mobile opportunity.

NBN Co budgeted $11.3 billion to build the network past 10.2 million existing (or ‘brownfields’) premises by 2021: that’s a cost per premises of $1100.

The Coalition has been pressing NBN Co for some time to reveal its actual cost per premises on the parts of the network built to date.

The company has consistently refused – although at a parliamentary hearing in October 2012 it said (without giving numbers) the cost had reduced over three successive rollout stages.

Last week, at another parliamentary hearing, NBN Co finally gave some hard numbers.  It said actual cost per premise was $5,000 in stage 1 of the rollout (in Tasmania); $4,000 in stage 2 (also in Tasmania) and $3,100 in stage 3 (the five ‘first release’ sites on the mainland).

NBN Co also said that its ‘estimate at completion’ of the cost per premises on parts of the network currently being rolled out was much lower: between $1100 and $1400.

Taken at face value, that sounds like encouraging progress.

For several reasons, though, I think taxpayers – the people funding this rollout –should be wary of taking these numbers at face value.

To start with, these numbers are estimates or forecasts – not actuals – and NBN Co has a bad record of failing to meet its forecasts.

For example, in its first corporate plan issued in December 2010, NBN Co said the fibre network would pass around 1.3 million premises by 30 June 2013; in the second corporate plan issued in August 2012 that forecast dropped to 341,000; just weeks ago NBN Co admitted it would miss even the second forecast badly, with the expected number now between 190,000 and 220,000.

Second, even if these costs are achieved in the areas presently being rolled out, we do not know how representative these are of the 10.2 million premises which must ultimately be passed.

There is an interesting comparison available from New Zealand company Chorus, which is rolling out a national fibre network in that country.

Recently Chorus said that it was finding very high variability in the cost per premises – varying from NZD 1,000 to as high as NZD 8,000 – with very high costs being experienced in around 10 per cent of areas.

This meant its average cost per premises passed across the whole rollout – which was forecast to drop from NZD 3,300 last year to NZD 2,500-NZD 2,700 for work commenced this year – was in fact not dropping, and would instead increase somewhat in the second half of 2012-13 compared to the first half.

When NBN Co says that it will achieve costs of $1100-1400 in the areas it is currently building, we do not know if these areas are representative of all 10.2 million premises to be passed by the brownfields network.

Feedback from contractors suggest the actual cost is very sensitive to factors like terrain (rocky ground is much more expensive); speed of approvals (for example, from electricity network owners approving NBN Co using their poles in areas where the network is being built overhead); and the speed at which Telstra remediates ducts which are damaged.

If the more difficult and expensive areas been left until later, then the cost per premises could rise as the rollout continues.

A third issue is whether the contractual prices negotiated between NBN Co and its contractors, which are doing the physical work to roll out the network, can be relied upon for the long term.

Because NBN Co is largely doing the build using contractors rather than in house labour, its cost per premise depends on how much it pays its contractors.

We know that the relationship between NBN Co and the contractors has been difficult, with contractors complaining that NBN Co is not paying them enough to make a reasonable profit.

Earlier this year, NBN Co disclosed substantial problems with one contractor, Syntheo, which had been contracted to build the network past 48,000 premises in South Australia, Western Australia and the Northern Territory.  Syntheo was making very slow progress – which may suggest it is finding it difficult to make money under the contract.

If the build in current areas is occurring at contractual prices which allow NBN Co to meet its target cost per premises passed – but if the contractors will not continue in other areas at current prices – then taxpayers should be worried.

A fourth question is the speed at which NBN Co says it is going to get these sharp cost reductions.  NBN Co says its average cost per premises for 2012-13 will be $1200 –a reduction of more than 50 per cent on the cost it incurred for its mainland first release sites.

When an experienced network business like Chorus tells the market that it expects to get its costs per premises passed down from current levels of NZD 2900 to NZD 1300-NZD 1500 – but it will involve a steady reduction over several years – that helps to calibrate the ‘degree of difficulty’ in what NBN Co is claiming it will do.

It is pleasing that NBN Co finally provided some hard data on rollout costs to the Parliamentary NBN Committee.  But it is too early to celebrate.

When NBN Co can show actual rollout costs rather than expected costs; when it can demonstrate they are truly representative of the entire rollout; and when it can show they are achieved using sustainable business arrangements, then we can satisfied that this cost element is under control.

Until that time, taxpayers should remain very concerned about how much this rollout is actually going to cost.

 Paul Fletcher is a Liberal MP.  He serves on the Parliamentary NBN Committee.

This week, with the Coalition’s broadband policy just around the corner, NBN Co’s rollout seems fraught with delays.

Mind you, it wouldn’t be the first government sponsored initiative to run behind schedule. Yet, in this week’s CrossTalk podcast, Liberal MP Paul Fletcher asks whether the NBN Co management team really understands its own business. That would seem to imply he thinks the whole project is being mismanaged. Would that go away if there was a change in government?

Well, the coalition will be pushing for fibre to the node, a technically inferior alternative that does, at least, negate the need to connect-up the customer’s premises. But is that the real issue? If Fletcher thinks NBN Co is mismanaged, does it matter what technology they deploy? The issue of governance remains.

We’ll also hear from Mark Gregory, senior engineering lecturer at RMIT University. He is concerned that, under the current approach, the NBN could be delayed as much as 10 years and costs could double – but he’s not a fan of the coalition’s alternative.

His preference is that we maintain the fibre to the premises approach, but we resolve the operational issues that are slowing the progress. In fact, he doesn’t understand why the Coalition wouldn’t promise to deliver on the NBN’s technology but manage it in a more expedient manner. Surely that would be a vote winner all round?

LISTEN HERE: https://soundcloud.com/crosstalkcommsday/nbn-delays-process-or

An article published on the ABC’s Technology+Games website yesterday has inadvertently emphasised how much of a winner Malcolm Turnbull might be on to when he releases his alternative NBN policy, possibly as soon as next month.

The article, written by Richard Chirgwin, is headed “21 billion dollars: The cost of upgrading the Coalition’s NBN alternative to FTTP”, and attempts to calculate the cost of Malcolm Turnbull’s proposed NBN policy and the future cost of upgrading an FTTN topology to FTTH.

It broadly concludes that the capex cost of nodes and DSLAMs for a 90% reach FTTN network would approach $9 billion, leaving $6 billion spare out of a $15 billion budget for additional costs and contingencies including the fibre feeds to exchanges. It then goes on to calculate that to build an FTTH network from these nodes would cost a further $21 billion (the article appears to model this as a FTTH P2P network with apparently some 35 times the fibre route length proposed by NBN Co for its GPON topology).

What is interesting about the article is that it uses 2006 “bottom-up” estimates from Allen Consulting to model FTTN costs: namely these assume a $130,000 cost per 200 line node and a $250 per DSL port cost. The author tells me he used these seven year old figures because they could be referenced.

Perhaps this is understandable given the paucity of credible Australian broadband cost analysis since then, but the recent story of FTTN and DSL has nevertheless been one of major price drops, even apparently within months of that Allen analysis. The same year, the Department of Communications costed a 20,657 node network at effectively $28,000 per node, or $60,000 including line cards and other costs such as cut over and power connection, a year later Ovum came out with a cost of around $59,000 for the same. I’m told that these days, nodes are as likely to support 392 lines as 200 lines, again improving the economies of fixed fibre feeds, power and other costs by a factor of half. Likewise there are now so-called “pizza box” nodes supporting outlying areas and provisioned for 48 and 96 lines, often able to be enclosed in existing cross-connects.

What about that modelled $250 per DSL port cost?

Well, the latest Broadband Trends global research suggests that the average cost per DSL port shipped last year was more in the order of $32. I’m told VDSL2 is a little higher at $42 or so. Add a premium for newer vectoring technologies, but again, a disappearing one as volumes rise through 2013 and 2014. At worst, one gets change out of $100 and even $50. A far cry from $250.

In other words, the $8 billion cost for nodes and DSLAMs modelled by the ABC article starts to look like a lot less—perhaps even half—when price reductions, service capabilities and exchange rate appreciation in the ensuing seven years are considered.

Of course, these costs don’t incorporate the cost of leasing the end mile copper which would likely be treated as opex under a Turnbull NBN, just as duct payments and the like are treated under the current NBN. But the end result is clear: time has been kind to the FTTN model, as competition and volume shipments have slashed unit costs by 50% to 80% and service capabilities, via such techniques as vectoring, have increased. Another big advantage is that FTTN avoids many of the labour costs and supply difficulties which are incurred under FTTH and which, evidently, have not eased with time.

If the Coalition can credibly promise 12-25Mbps minimum speeds and 50Mbps typical peaks for a fifth or less of the projected capex cost and a third or less of the rollout time of the current NBN it might just be able to turn its biggest policy negative into a positive.

But there is one issue. As with FTTH, the cost of FTTN escalates dramatically when you get into those final percentiles of the population. Back in the days of NBN Mark 1, then Pipe Networks CEO Bevan Slattery blew apart Stephen Conroy’s then estimates that he could extend FTTN out to 98% of the population for less than $8 billion by pointing to the inefficiencies of a node topology in rural Australia.

Much of the credibility of Malcolm Turnbull’s policy will likewise rest on the extent to which he maps actual technology cost to its fit-for-purpose business case. Neither FTTH or FTTN look good for non-urban Australia. LTE and satellite still look like the best option for that final decile.

Grahame Lynch

Yesterday’s report in CommsDay that NBN Co has only passed a further 1,400 brownfield premises with fibre in the last ten weeks has added to the confusion over whether or not the much hyped ramp up of the NBN’s rollout is actually happening.

The confusion is widespread. For example, tech writer Renai LeMay of Delimiter complained in late January that the rollout was proceeding at a ‘snail’s pace’ and that NBN Co had “‘wasted much of the past three and a half years”. Yet last week, writing on the ABC’s Drum website, he said that “since 2007, the NBN has proceeded at a decent clip,” adding that NBN Co “is now firing on all cylinders as it rolls out high-speed fibre around the nation. “

Certainly, the hard sell on the ramp up has added to the confusion and created an illusion of progress that may have misled some.  Since early January, the minister’s office has put out eight releases promoting either the launch of NBN services or the start of construction in various areas as proof that the rollout is “ramping up.” NBN Co has also been doing the hard sell, with CEO Mike Quigley telling Senate Estimates in mid-February that “we are in fact ramping up.”

But the numbers that Victorian RSP Devoted has posted and subsequently deleted from its website tell a very different story.  They suggest that the brownfield rollout has all but stalled and that it’s not just the headline numbers that must be concerning NBN Co, but the underlying trend.

The daily run rate of brownfield premises passed by fibre is at its lowest ever.  In the last ten weeks just 28 additional premises have been passed each working day.   NBN Co’s target run rate for 2013, based on 250 working days in the year, is 1,028 – so the daily rollout is 1,000 premises shy of the target.

Worse still, if the critical mid-year figure of 286,000 brownfield premises passed is to be met, the run rate for the next three and a half months must approach 3,200 a day.  According to last August’s corporate plan, that rate was not going to be achieved until 2014.

NBN Co has already acknowledged at February’s Senate Estimates that the rollout is falling behind in Western Australia, South Australia and the Northern Territory –states which account for 17% of the  mid-2013 target. According to Quigley, the targets to be met by Syntheo, the lead contractor in those states, have been the subject of a “significant reduction,” but he assured the committee that NBN Co is “working closely with Syntheo to try and recover their original forecast.” Quigley explained that these delays had come about “because the contractor is ramping up and obviously facing some challenges.”  Clearly, ramping up for the ramp up can take some time.

Quite some time it would seem.  Syntheo was awarded an initial $174 million contract with options for an additional $474 million worth of work for Western Australia in September 2011, but as yet no brownfield services are available in the state. Similarly, other than the initial Willunga first release site, no brownfield services are available in the Northern Territory or South Australia – despite Syntheo having been awarded a $141 million contract, with options worth a further $341 million, in November 2011.

When NBN Co announced the Northern Territory and South Australian contracts, it said that work in these regions was already underway. “We engaged contractors on a temporary basis for on-site design and other preliminary site works so Syntheo can hit the ground running.” But in which direction?

Curiously it seems that, in at least three states, NBN Co was undertaking design and other work which the company subsequently claimed couldn’t be undertaken because of the prolonged delay in ratifying the Telstra deal.

In the boom mining states, Syntheo is no doubt facing problems attracting labour given the sub-contracting rates common in other states for NBN work. Offering $38 an hour for a labourer or $65 an hour for a technician, with their own vehicle, is hardly going to bring them flocking back from the mines.

There’s little question that despite the vast sums of money being paid to the lead contractors, it’s a trickle down to the sub-contractors.  If NBN Co is going to meet the daily run rate demanded by the June target based on their own labour force projections they’d need nearly 8,000 workers out in the field now, which is impossible given the acute shortage of skilled labour in all states. Indeed, the shortage is so acute that NBN Co has even been mobilising its own formerly desk-bound technical staff.

Each month that goes past without real progress calls the very NBN Co business model into question.  The flaws in fully contracting out the build are obvious. With nearly 2,000 staff, NBN Co is no longer the lean and hungry team leader we were promised, and the contractors are not proving to be as nimble as NBN Co had hoped.

And with June approaching, it’s all threatening to be very embarrassing for the government.

Kevin Morgan

Smart phone subsidies hit telco bottom lines today. But what if Facebook decides to become a service provider in its own right? What chance do retail phone companies have then?

LG, Blackberry and HTC all have new smartphones out, ahead of the launch of the new Samsung Galaxy S4. The mobile carriers, it seems, are falling over themselves to tie up deals and offer the best price to customers.

Often the devices come with hefty subsidies from the service provider. Take Vodafone’s offer of a free iPhone4 on a $30 plan, for example. Can they really make money on such a high cost of acquisition on a low ARPU customer?

So, are the phone companies getting pushed around by the device manufacturers? It’s clear they are. People are more interested in the latest gadgets than the humdrum facets of the network they use, so telcos are having to cut costs to compete.

The situation could get worse. What happens when Facebook starts to offer voice calls globally? Worse still, what if it becomes a service provider in its own right? They could subsidise the cost of access with the extra opportunities from advertising.

In such an environment do mobile carriers really have a future in the retail space, or could they be forced to become wholesalers only, servicing the big international brands who control the relationship with the customer?

This week Phil Dobbie talks to:
- Mark Spoonauer, editor in chief for Laptop Magazine
- Foad Fadaghi, senior analyst at Telsyte
- Paul Budde, managing director of Paul Budde Communication
- John Strand, CEO of Strand Consult

We’d love to hear your thoughts too. Leave a message on the CrossTalk feedback line: 612 9304 5198

Subscribe to CrossTalk on iTunes: itunes.apple.com/au/podcast/cross-talk/id597713172
RSS feed: phildobbie.com/crosstalk.xml

Blogger and commentator Steve Jenkin has attempted to tote some objections to my attempt to catalogue nearly 50 errors of fact, logic and accuracy in ABC technology and games editor Nick Ross’s now infamous 11,000 word NBN advocacy opus. I contend that Ross’s errors exaggerate the benefits of a pervasive FTTH network and misrepresent the attributes of alternatives.

As the reasonably neutral arbiter ABC Mediawatch host Jonathan Holmes noted last Monday night, Ross may not be guilty of lacking enthusiasm or displaying partisanship but he is guilty of becoming an advocate for a specific cause, in violation of his employment guidelines. That vindicates my core argument, that Ross is guilty of over-stepping the line that an ABC employee should observe.

In turn, Jenkin has attempted to debunk my piece point-by-point. I have an initial response, on first read, here and will return later with some more detailed points.

Firstly since this is a response to a response to a response, I will not bore people with colour-coded quotes and so on. I will simply itemise some of his objections.

Unlike Ross, who mostly resorts to hypothetical scenarios of what could be done with an FTTH network (videoconferenced healthcare and social welfare consultations apparently saving billions, an easy build) and a skewed take on an alternative FTTN network (latently more expensive than FTTH, competition-killing, slow, difficult-to-build, hindered by monopoly, immature tech), Jenkin, refreshingly, attempts to rebut my points with actual facts, numbers and observed reality. Thank you Steve for not treating your audience with the contempt Ross displays.

But unfortunately Jenkin also falls into the trap of assuming I am advocating a complete FTTN network and argues from that viewpoint. I don’t. His entire opus suffers from this misapprehension and assumes I am defending FTTN.

I am very happy for there to be as much FTTH as is cost-effective. Greenfields, definitely. Places where the copper cannot be upgraded, certainly. Fibre to the kerb or basement and then VDSL2 to many of the 30-35% of Australians in multi dwelling units with existing Cat 5 or other internal cabling. I’m happy with that given the difficulties in getting fibre to their premises, a policy that was the orginal intention of NBN Co itself.

Ditto, the prioritising of network remediation and investment in the places which cannot get +8Mbps ADSL now, which means that premises getting high speed Docsis 3.1 and other platforms are placed at the back of the queue. Suddenly we have a scenario where by reducing the extent of FTTH from 93% of premises to maybe just half overall, we still end up with most people getting 50Mbps to 100Mbps and everyone getting 25Mbps minimum.

But surely Jenkin makes some authoritative technical smackdowns of my arguments? Well, to the layperson, they look impressive. But let’s take some of his factual takedowns one by one.

1) JENKIN CLAIMS IT IS “A NONSENSE” TO CLAIM THAT AN FTTN NETWORK REPLACES SOME OF THE COPPER WITH FIBRE

He claims I am “asserting that all designs with some fibre in the network are identical.” I am not, I merely pointed out that one cannot attribute the “rotting attributes” and other negative aspects of copper to an entire network that probably will replace one half to two thirds of a typical loop length with fibre. He then goes on to argue against the cost and practicality of  fibre-on-demand which has nothing to do with the point I am making. He misunderstands the original point, which regards the bundles of copper – described by VDSL expert Paul Brooks as the worst of the copper - that feed exchanges. These bundles are replaced by fibre, eliminating at least a proportion of the alleged issues with copper.

Jenkin also displays his ignorance of how the NBN rollout will work. He claims the fibre will replace the copper. It will not – they will coexist in those allegedly narrow ducts for 18 months and NBN Co bears the cost of any damage done to the copper by the installation of the fibre. The copper will not be decommissioned until 18 months after the fibre is laid. Any issues with ducts will be pronounced in an FTTH rollout that is forced to remediate the existing copper.

2) JENKIN CLAIMS THAT ELDERLY PEOPLE AND THE REMOTE GET TEN TIMES BANDWIDTH INCREASE GUARANTEED – THUS MEANING THEY CAN ALL ACCESS TELEHEALTH SERVICES OVER THE NBN.

HE DENIES MY POINT THAT THESE PEOPLE ARE MOST LIKELY NOT TO BE ON FIBRE – WHICH ROSS CLAIMS IS ESSENTIAL FOR TELEHEALTH

Jenkin completely misses the point here. The people most likely to be 50km or more from a health facility will be usually on satellite and wireless services – but Ross says that fibre is essential for telehealth. No one is suggesting these people will be on FTTN as Jenkin mysteriously thinks and insinuates, introducing an unfortunate tendency in his thesis to project assertions on me that I never made.

Added to the reality that the government is only funding Medicare telehealth consultations in outer metro and rural areas, it is very clear that any pervasive telehealth scheme will not require fibre but something more in the order of 12Mbps at maximum. Also, the NBN also does not guarantee 12Mbps real speeds, it guarantees a 12Mbps access circuit subject to the contention ratios set by the RSP’s requisitioning of connectivity virtual circuits and other associated contention charges. And these benefits are only achieved if one actually subscribes to the NBN.

It is extremely unlikely that FTTH will revolutionise health care for these and many other reasons.

3) JENKIN CLAIMS THAT MY POINT THAT WE DON’T NEED FTTH TO SEE GLOBAL TV CHANNELS IS “BOGUS”

Utterly ridiculous. The best of the world’s television channels are watched right now across Australia. Foxtel, available anywhere in Australia with a roof for a dish, offers several hundred channels representing most global TV brands. For tastes less mainstream and more eclectic, TPG IPTV offers a range of other channels from places as diverse as Turkey, Russia and Thailand. Anyone with a 2Mbps connection can stream whatever channel is available over the web from either orthodox sources or unorthodox ones such as Justin.TV. There are literally thousands of other channels available via satellite dish. Any restrictions on availability of global television are mainly because of their own licensing restrictions, not because of the lack of access media in Australia.

But where Jenkin’s argument runs into the surreal is his assertion that “Bringing that back to an FTTN design, every 250-line Node will have 1Gbps as it’s base load, every night. Were the FTTN designs going to run the 20 times more expensive 10Gbps links to every node? If they don’t, the laws of networking says, nobody will get good TV service over the Internet.” These 20 times more expensive links? Let’s see, I can buy the small form-factor pluggable transceivers needed for 10G for as low as $94.

And Jenkin makes the silly mistake, made by many NBN advocates, of assuming everyone will consume TV over their Internet connection, simultaneously. Free to air TV will still exist in the NBN world, accounting for significant percentages of viewership by virtue of its legacy programming smarts. Much TV over the NBN will be multicasted. In the Foxtel footprint, HFC will be retained for TV while satellite TV will remain as well.

4) ROSS CLAIMS THE NBN WILL END PHONE CALL CHARGES. JENKIN CLAIMS HE DOESN’T UNDERSTAND MY OBJECTIONS TO THIS.

Again FTTH or no FTTH, any call to a mobile or international phone will attract a termination charge and even VoIP services available over the NBN charge monthly service fees. Free VOIP calls to users of apps such as Skype occur today. It is misleading of Ross to claim any benefit for FTTH here and amazing that Jenkin could claim not to understand the objection to this. Phone rentals as we know them today will end but not associated call charges.

5) JENKIN IMPLIES THAT ONLY “AN ELITE” CAN CURRENTLY TELECOMMUTE & THE NBN’S UNIVERSALITY CHANGES THIS

This is obviously silly given the amazing amount of outsourcing work taking place with freelancers in places such as India and the Philippines with poor quality access tails, often involving complex file and data transfers. Telecommuting and other home based work does not require FTTH to exist or be pervasive.

6) JENKIN SAYS THAT JUST BECAUSE MEDICARE WON’T FUND TELEHEALTH IN METRO/FIBRE AREAS DOESN’T MEAN IT WON’T HAPPEN OR CANNOT BE COUNTED AS A POTENTIAL NBN BENEFIT

One thing is for sure: until there is funding for telehealth in fibred areas, it certainly can never be contemplated as an “NBN benefit”. So given the same government building the NBN doesn’t want to fund use of it in metro areas for telehealth, I think I can comfortably stand by this rejection of what actually constitutes Ross’ central thesis for why pervasive FTTH is cost justified.

7) JENKIN ARGUES THAT THE FAILURE OF FTTH NETWORKS IN FLOODED AREAS WAS A BACKHAUL PROBLEM COMMON TO ALL NETWORK ACCESS MEDIA & THAT FTTN IS NO BETTER

Granted and I rest my case, any network is only as good as its most vulnerable powering point. At no stage did I say that FTTN was more reliable than FTTH in a flood as Jenkin again misleadingly asserts. Indeed, given the FTTH network and associated devices are all powered in the home from mains, my best advice in a flood would be not to use the NBN at all given the risk of suffering electrocution! Having been in a flood in Thailand two years ago in a FTTB enabled block, the arguments presented by Jenkin & other correspondents on this matter are astonishing. Ross claimed FTTH would be better in a flood or a fire, I would argue it is one of several bad options given its power vulnerabilities.

8) JENKIN SUGGESTS THAT IT IS “NONSENSICAL” TO ACKNOWLEDGE THE POWER USAGE IMPACTS OF CUSTOMER DEVICES ON A FTTH NETWORK

Not at all, I repeat the point that FTTH apparently enables all this increased economic activity through increased use of 3D printers, high end video cameras and 4K televisions and so on – literally billions of dollars of increased economic output – but under Ross’ logic apparently only FTTN requires a new power station. It is unbelievable that neither Ross nor Jenkin can see this simple contradiction. As Malcolm Turnbull later quotes, Verizon quantifies the increased cost of the FTTN line over an FTTH one as $5 per line per year – about one and a half cents a day. By way of comparison, the carbon tax alone adds many multiples of this to the average power bill.

9) ROSS SAYS TURNBULL HAS NOT ACKNOWLEDGED FTTH/FTTN POWER ARGUMENTS WHEN HE DID AT SOME LENGTH IN APRIL 2012

Jenkin at least concedes this point but then goes on to suggest I have scored an own goal because I suggest that an FTTN network adding 1.36c a day of power costs to a individual line is “power hungry”. But all those new FTTH-enabled devices – the 5 HDTVs per home and so on – won’t be even equally meaningful?

10) ROSS CLAIMS THAT THE NBN’S FTTH TOPOLOGY WILL BE CHEAPER TO MAINTAIN, IGNORING THAT THE MOST EXPENSIVE PART OF THE COPPER NETWORK – IN THE BUSH – IS RETAINED. JENKIN CLAIMS THIS IS DEEPLY WRONG.

No it is not. The copper network in the last 7% of the country will be retained and it accounts for more than a third of the cost of maintaining the network today. As Jenkin points out, not only is that copper retained but overlaid with wireless. The opex savings of FTTH may or may not be meaningful but the current NBN topology retains the most expensive part of the copper with the worst return and overbuilds it with a new wireless/satellite network. As to Jenkin’s other claim that FTTN will be associated with higher failure rates, because of “vandalising, accident, water ingress, insects, frost/condensation or overheating”, I’ve looked for evidence in FTTN markets of significantly increased fault rates as nodes are deployed, specifically at AT&T and BT, and I can find none. Jenkin should back his inference that this is a major ”deal breaker” issue with evidence.

11) JENKIN AGREES WITH ROSS THAT THE COST OF THE NBN IS A NET ZERO

Let me quote Kevin Morgan who writes in the Australian on this point “Ross claims “when it (the NBN) is sold 15 years after completion, it will go for five-to-eight per cent profit meaning the net cost of the rollout is less than zero to begin with. Small wonder Turnbull’s plan can’t be less expensive, given that according to Ross the cost of the NBN is an unfathomable “less than zero”. And his curious take on economics doesn’t end there. Ross believes the NBN investment will ultimately generate “a seven per cent profit.” Ross has made a fundamental error and confused the NBN’s 7.1 per cent internal rate of return with profit. Small matter, as Ross states the NBN has been fully costed and “recently had its renewed corporate plan verified by Analysis (sic) Mason”. Unfortunately the Analysys Mason report Ross cites was on the prudency of the design of its networks. They have never offered any opinion on the corporate plan.”

I will return to this point later today or over the weekend when I get a chance as well as his later claim that the profits from the NBN sale down the track will capture the value of the externalities of the project.

12) ROSS SAYS HE DOESN’T UNDERSTAND WHY PEOPLE WOULD SUBSCRIBE TO AN FTTN NETWORK, APPARENTLY NOT UNDERSTANDING THEY ARE ALREADY SUBSCRIBED TO THE COPPER ACCESS NETWORK

Jenkin agrees and apparently doesn’t understand that if you are already connected to the copper and it is upgraded to FTTN, no decision to “subscribe” as such is required, just as the users of HFC and ADSL2+ had seamless upgrades requiring nothing more than a new modem or set top box. He says “Here Lynch isn’t citing sources or shows he’s done any research. If he’s handing out judgement, then he must be prepared to be both consistent and to live up to higher standards.” This is daft!

13) ROSS SAYS NBN MAINTENANCE WILL REMAIN NATIONALISED WHEN THE NETWORK IS PRIVATISED.

I rhetorically ask when this decision was made as it clearly has not and Ross seems to have made it up, and Jenkin replies “Questions are not answers”. Thanks Yoda!

14) ROSS CLAIMS INCUMBENTS CONTROL EVERYTHING, WHICH I STATE IS NONSENSICAL GIVEN OPTUS DOESN’T ANSWER TO TELSTRA AND BOTH ANSWER TO GOVERNMENT

Jenkin says this is rubbish. OK…

15) ROSS SAYS SMALLER RSPS WON’T BE ABLE TO AFFORD THE AVC & WILL BUY IT “WHOLESALE” FROM AGGREGATORS

The AVC is a tail circuit which starts at $24 a month and cannot be bought in bulk discount through a wholesaler in order to make it more affordable. POI based charges such as the NNI fee and backhaul may be too expensive for some RSPs and they will likely be wholesaled. Ross showed he didn’t understand the NBN topology here but Jenkin then confusingly describes my assertion alternately as “rubbish” and “to be determined”.

16) JENKIN SAYS “Since 2005, Telstra has steadfastedly demanded sole access to an FTTN it builds”.

This is completely wrong. From its first major FTTN proposal c. 2005 through to its bid for NBN mark 1 in 2008 it constantly offered open access as part of its plan. In fact, the very reason its plan was spurned by the ACCC was because of a disagreement over the proposed open access prices, specifically the degree of rural cross subsidy. This was the fundamental theme of telecommunications policy debate in that period and was widely reported and commented on. It is unbelievable that Jenkin is unaware of this.

17) ROSS SAYS VECTORING IS INCOMPATIBLE WITH LOCAL LOOP UNBUNDLING, SEEMINGLY UNAWARE THAT GPON IS TOO UNDER NBN PLANS

Jenkin makes the same mistake as Ross on the apparent inadequacy of FTTN on the ULL front going on to say “Vectoring only works when all the active DSL lines interfering with one another connect to the one same equipment == single supplier == NO  “ULL” (as we have now).” All FTTN and FTTH proposals since 2008 from all parties have called for bitstream to replace ULL. This is uncontroversial and supported by all and it is quite frankly disappointing that Jenkin would perpetuate this meme. He then goes on to fudge Ross’ obvious error on the availability and timing of vectoring shipments by suggesting current deployments are taking place in the absence of a standard. Despite the myriad of European telcos deploying vectoring he claims all telcos understand the peril of deploying it.

18) JENKIN DISMISSES NBN CO’S OBVIOUS PLAN TO INCREASE ARPUS THROUGH SPEED TIER AND CONTENTION CHARGING IMPOSTS AS “CONFUSED”

A rising average price is a rising average price. Consumers are used to receiving more or the same for less, not more for more. Telstra and Optus have raised concerns about this.

19) JENKIN CLAIMS THAT THE NBN IS A RESPONSE TO THE 15 YEAR FAILURE OF THE “FREE MARKET”

Jenkin is seriously claiming that the telecommunications sector, with its myriad of price caps, carrier obligations, USOs, incumbent legacy overhang, unbundled local loop obligations (since 2001) and impending and then actual threat of government overbuild for the past six years has constituted a real, live “free market.”

20) JENKIN DEFENDS ROSS’ CLAIM THAT THE COALITION POLICY WILL LEAD TO LOCAL MONOPOLIES AND INFLATED PRICES

I responded to Ross that Malcolm Turnbull intends to retain NBN Co and a separated Telstra. He has stated this on several occasions on speeches contained on his website. Jenkin claims this is rubbish and demands a source. Ross clearly makes this claim unaware that FTTN would support bitstream in the same fashion as FTTH. Again Jenkin knowingly perpetuates a false meme.

OK enough again, before I lose what readers remain this far in! To be fair to Jenkin he shows a considerably greater knowledge of the issue than Ross, but again too many of his ripostes are either factually contestable or silly ad hominem putdowns followed by a grudging admission that I did have a point.

The answer though does not lie with me or any other journalist or blogger.

It lies in a proper cost benefit study that dispassionately examines all the technologies and their likely cost/performance paths, the one that should have been done in 2009 as a follow-up to the heavily redacted advice of the expert panel and the back-of-the-napkin plane trip. The study that the government itself demands of all other major infrastructure projects. That the Productivity Commission wants. That the Opposition wants. And that NBN Co itself has recently canvassed.

That is what is really required. And the bloggers and NBN fanbois/naysayers who argue their case 24/7 could actually then become participants in the digital economy rather than combatants in it.

And on a final note, Steve, this might seem trivial but when you’re fact checking someone and spending thousands of words doing so, please spell the name of the person you are attacking correctly. It might seem petty but it’s a little sign of seriousness!

Grahame Lynch

Mobile operators are the happiest they have been in years following Mobile World Congress. I have now had conversations with several mobile executives since the world’s premier mobile industry event wrapped in Barcelona and the consensus was an extremely positive one for them: the handset market is becoming more competitive with the hold that the Apple ecosystem has over the sector likely to diminish.

While Apple may hold only a 20% share of actual handset sales overall it wields disproportionate influence over operators, mainly because of the popularity of the iPhone among their highest yielding customers and the advanced state of an Apple ecosystem which leaves little in the way of crumbs for operators.

Indeed, about 10% of the users generate 80% of the total data demand on mobile networks, and the operators don’t believe they are the ones extracting the monetisation benefits here. Indeed, data and apps revenue still only represents a minority proportion of the revenue mix at most operators.

The handset vendors versus operators “frenemy” phenomenon has been a feature of the industry for a decade now, but Apple’s success and sheer dominance in terms of its share of overall sectoral profits has raised fears among operators that many of the also-ran handset vendors might simply give up and pull out of the market. After all it has been estimated that Apple and Samsung collectively account for nearly all industry profits.

Handset maker consolidation would be bad news for operators who already feel hostage to the growing pull of over-the-top applications in siphoning off their revenues and continuing reliance on the product cycles of marquee handset releases to drive plan and carrier churn.
 
Mobile World Congress has helped assuage those fears. Not only did Samsung demonstrate that its momentum was real and continuing, but carrier executives also report that Sony, HTC, Huawei and Nokia were back in the game with strong handsets and industry initiatives.

Of most interest was signs of renewed interest from vendors in growing the lower and middle priced segments of the market, best epitomised by Nokia’s new handset which features a battery life of over a month and sells for around $30 or so.

But there were also important signs of movement at the top end of the market: a handset from Huawei which can support peak 150Mbps speeds was also highly rated by observers. And Nokia also made waves with its announcement of a 40 megapixel mobile phone camera.

Mobile operators were also pleased to see signs of emerging competition in the mobile OS market, rapidly becoming an effective duopoly of Apple and Android.

The comments of Telefonica Digital CEO Matthew Key summed up the sentiments here, particularly in regards to the entry of Mozilla to the mobile OS space: “This is the first truly open mobile operating system built on HTML5 web standards. Firefox OS has gathered incredible cross-industry support and now 17 other operators have joined Telefónica in supporting it, alongside handset manufacturers such as Alcatel, Huawei LG, Sony, and ZTE.”

“There is a chance here to make this very real – as a credible alternative to main OS. The mobile web will only fulfil its potential if it is allowed to be truly open. Not only does it offer fantastic choice to consumers by unlocking them from the walled gardens of today’s mobile web, it lowers prices… making smart phones more accessible for consumers in emerging economies.”

China Mobile provides a role model for others to follow here, revealing at MWC that its in-house online store now retails some 1.5 million Chinese language applications.

Of course, the stakes are higher for operators now. Developed world penetrations are effectively saturated and it is unlikely that operators can command substantial premiums in the market place for 4G LTE services. Telecom Italia CEO Franco Bernabe made the point best when he said there would be hundreds of billions of euros worth of investment in 4G networks over the next four years, all in support of a market where overall revenues are flat.

Indeed, ARPUs in Europe have declined by about a fifth this decade alone. Operators regard it as imperative that they extract a greater share of the total industry financial cake.

Whether the outside world will pay heed is another question. Clearly the European parliament was less than sympathetic to the financial pleas of the mobile carriers, rather cheekily using the week of Mobile World Congress to pass a motion which paves the way for the regulation of mobile termination rates—one of the few remaining cash cows where mobile operators can return uncontested profit margins!

Grahame Lynch