Australia 'should not be scared' of NBN cost
Broadband to account for AUD$1trillion of activity by 2050
Australia should not be afraid of the NBN's price tag, but should be scared enough to build the network, according to Phil Ruthven, founder and chairman of research company IBISWworld.
Speaking at the launch of a study commissioned by IBM, A Snaphsot of Australia's Digital Future to 2050, Ruthven predicted the nation's gross domestic product will surge thanks to ubiquitous connectivity. He even labelled data networks a “new utility” and predicted they will generate AUD$1trillion of annual revenue by 2050, rather more than the $131bn data networks generate today.
“Other nations are already into gigabit speed broadband and we are not there yet,” Ruthven told the launch. “High speed broadband is not a delete option for Australia.”
Ruthven's remarks were preceded by Andrew Stevens, IBM's managing director for Australia and New Zealand, who said the company's leadership is “a little frustrated by ... debate and discussion and the lack of vision” and therefore decided to prove, or disprove, broadband's economic potential.
“The report proves our confidence,” Stevens said. “The findings are astonishing: the big surprise is how significant and deep the broadband impact will be.” Stevens then said he hopes the report encourages the community to look beyond the electoral cycle and consider the transformative power of broadband and its potential to “in a very positive sense transform living standards positively in Australia.”
“We we want to say there is a gap in terms of vision,” he said, adding that the NBN “fits very well with our view of the economy.”
Ruthven then said that debate over the cost of the NBN is unproductive, as “you can use numbers to scare the dog off a chain.”
Ruthven's own numbers suggest that the sunk cost of Australia's telecoms infrastructure are AUD$70billion, and that the annual depreciation rate of that kit almost exactly matches the yearly spend envisaged by NBNco's current rollout plan. The NBN is therefore sustaining the level of investment in Australia's comms infrastructure, although Ruthven said “nobody knows if the NBN formula is the best.”
But Ruthven did say that, from his perspective, the cost of the NBN “is not a lot of money and we should not be scared of it,” he said, adding that his own business cannot launch new products for lack of NBN-grade connectivity.
While he thinks fear of the NBN's cost is not valid, Ruthven does feel fear is a necessary motivator to increase Australia's competitiveness.
“You've got to scare people into doing things,” he said, and offers the following as things worth fearing:
- Australian university degrees being three times the price of Asian degrees, which means the nation could lose its education export industries and become a net importer of education;
- Mining is among Australia's least productive industries – costs are up but volumes have been static - and is ripe for technological transformation;
- Mining will revert to around three or four per cent of the economy by 2020, at which point Australia will be more reliant on services industries;
- Australia's growth may be better than Europe's, but Asia's growth rate is seven percent, ahead of even Australia's 4.3 per cent.
Australia therefore needs to “catch up”, Ruthven said, and ubiquitous fast data networks are an essential tool to make the chase possible. Strong leadership will also help, Ruthven said, and that sentiment was endorsed by Stevens and Ovum's Australian head David Kennedy, who also attended the launch. ®
Lots of PEOPLE are getting wireless, but the DATA they use OVER that wireless makes up....7% of the total data downloaded. And it's getting lower, slowly:
Fixed line downloads are increasing at 26% a year, while wireless downloads are increasing at 20% a year. So they're both growing, but fixed line is rowing faster AND makes up 93% already of the data downloaded.....unless you're suggesting 4G can handle this amount of data flowing through it?....you aren't are you? Cause that would be quite ridiculous.
Also, the failure of the old FTTN design? It was not about Telstra FIBRE, but Telstra COPPER. FTTN requires that you cut into the copper, as you have to put the cabinet closer to the permises to get ANY gain of speed using FTTN. Telstra admitted that while the cost to the government for construction of the network was around $5 Billion, they would NOT accept less than $10-15 BILLION for their copper network, which would now be useless as a standalone copper network. That put the total to close to $20 Billion....and it was only going to cover about 60% of Australia...
ALSO and perhaps most disturbingly, one of the good things about the NBN is the wholesale uniform pricing. ALL RSP's can access it, anywhere, for the same cost. Under a FTTN, the ULL (Unbundled Local Loop) system which has allowed competitors to use their own DSLAM's to compete over Testra's copper, WON'T EXIST. The architecture of an FTTN system is INHERENTLY monopolistic, with no way for more than one provider to access a premises. Also meaning only ONE company can provide actual access....imagine if it was Testra....hmmm, no wonder they wanted the Howard government to build the FTTN. It would essentially remove competition....so THAT's why the ACCC knocked it back!
Absolute fail indeed....
Return of a monoplist
Technically the NBN plan is world class, but the implementation has some serious issues.For decades telecommunications has been held back by Telstra acting as in inefficient monopoly. We only saw real change when rivals were able to install their own DSLAMs in exchanges, resulting in faster speeds and cheaper prices. Unfortunately the NBN is the re-introduction of a monopoly.
NBNCo reached an agreement to not raise prices by more that 5% with the ACCC. This is laughable when you consider that demand for speed and data is continually rising and the price of providing it is falling. Think back to what speeds and quotas were available 5, 10, 20 years ago. To suggest that NBNCo might need to raise actual prices hints they are worried about failure. However NBNCo are planning to significantly increase ARPU by not reducing prices as quickly as demand rises. This will impact on high end users.
A fixed return of 7% has been mandated by the government. This might sound good, but bureaucracies exist to perpetuate themselves and managers increase their status by having more staff and larger budgets. When the only impact of cutting costs is that wholesale prices in the next year are cut, there will be little incentive unless there are cost overruns.
Due to a decision of the ACCC, the NBN is effectively 121 separate networks that Retail (Internet) Service Providers (RSP) need to connect to. A better approach would be to call for tenders to run each of the networks, in a similar way to private companies running bus and train services. In some areas, tenders would pay for the privilege while in other areas (e.g rural) the government would pay a subsidy. Uniform wholesale price caps would provide consistent pricing across the country. Bonuses could be offered for increasing take-up, while penalties could be applied for failing to meet service level agreements. Such competition is likely to be more efficient than a single government monopoly.
To compound the problem, the government intend to privatise NBNCo when the network build is completed returning us to the same monopolist controlled mess we are in now.
Here are a couple of reasons why we need the NBN to be rolled out to all:
Example 1 - a person buying a brand new house in a brand new development on Sydneys outskirts - They can not get any ADSL as the Tesltra exchange has no available ports and Telstra has no plans to expand the exchange. Telstras solution was to try and sell expensive Wireless broadband.
Example 2 - a person buying an established house in a Sydney suburb with existing infrastructure - They can not het ASDL 2+ because the phone system for the estate was wired (in 2003) as "Pair Gain", to allow Telstra to save a few bucks, when that technology had been obsolete for decades. Telstras solution - Pays us hundreds of dollars ane we will upgrade your phone connection to support ADSL 2+ but we can't guarantee there will be any ports available in the exchange and we can't say what speed you will get.
Neither of these suburbs have Foxtel or Optus cable.
Example 3 - Living in a unit in an Inner Sydney suburb for a number of years with both the Optus and Foxtel cables running past the front door - Unable to get Bigpond Cable as there was no Cable Server in the area and Foxtel/Bigpond had no plans to roll out any more cable servers to service the area. Also to get the Cable connected to the block every person in the block of units had to signup for Foxtel or Oputs cable TV (despite the fact that only a couple of units wanted highspeed internet and none wanted Cable TV) Fortunately in this situation ADSL and ADSL 2+ was available.
Fibre to the Node doesn't help in situatuions where "the last mile" doesn't support high speed ADSL.
As to the reasons for having high speed internet one that was completely overlooked by "The Ref" was "tele-commuting". With a decent connection speed I can work from home at least 3 days a week thereby reducing the load on the road and public transport networks.