Interview: Dave Berstein on the NBN, construction and VDSL

xDSL, fibre, construction and gigabits

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The Register: By the way … from the Australian point of view, the citations – the names that are dropped on us are Verizon, Comcast … Chattanooga Electric and so on. It was jaw-dropping to see a survey saying “three hundred and fifty fibre owners”. Where's the rest of that market?

Dave Berstein: There's a historical accident, that makes the US different from almost everywhere else. In most of the world, the government built the phone network, one phone network per country. In the US, back around 1913, there was a political deal under anti-trust, that AT&T could be where it was, but that it would have to let other companies set up elsewhere … so there are literally three or four thousand small rural phone companies, ten fairly big ones, but literally thousands with ten or five thousand customers, local people that developed half a century ago when they finally brought phones to the rural areas.

And we've had a subsidy program for the rural areas for political reasons that was so rich that these guys were always making fortunes.

So they're still with us – lots of little telcos in the US that … the current regime is trying to cut back the subsidy, but they're struggling. The rich little rural telcos … have more money than some of the biggest companies on Earth to spend per user, and they brought fibre to hundreds of small towns across the US.

I'm working with one doing 22,000 lines of fibre homes, at a gigabit, called Vermont Telephone, with nice subsidies.

The Register: So part of Australians don't understand about America is that it's a Balkanized market of many, many local monopolies.

Dave Berstein: Actually, the US has a big advantage over Australia – we have local duopolies. Cable to over 96 percent of the country. That makes a total difference, because cable is offering better than the old DSL.

Which is why the folks in rural areas, who had to compete with cable, and who had lots of government subsidy, were among the first in the world to go to fibre. And that – the US has 18 million lines of fibre, or something like that. Sixteen million are Verizon. A million of them are 2,000 here, 5,000 there, 10,000 there – we have all these examples, they tend to be rural areas, small companies, and not very good examples to tell you what's going to happen if a big thing like Australia's NBN jumps in.

The Register: Their example, in other words – the rural US example – only provides any kind of information for a rural Australia rollout. Where disruption is likely to be less, and the cost of construction is likely to be less.

Dave Bernstein: Well, I'm actually working on a rural rollout, Vermont. We do have the advantage that most of it's poles, we don't have to do as much digging. It does help – it's not the only factor. But even with poles it's coming in at three or four thousand dollars per home, for the rural deployment.

But Verizon is coming at $600 per home in a mostly suburban deployment. When you do the numbers on this, try to cost things out, you have to break it down into cohorts.

And you just have to be aware of this, and work it when you do your numbers.

That's why people like Turnbull can't give you a good number. He's saying “I'm going to do my cost benefit analysis” and the Australian press said “Where is it? Where is it?”

You can do pretty good cost analysis. Benefit analysis is all off-the-wall.

A cost analysis you can do – but it takes four engineers, working for a month, with an awful lot of raw data that the Opposition doesn't have, to do an honest cost thing. So I can come up with a general [guide], but if you want honest numbers on this – it's not going to come from an economist working for two days.

It's engineers working for months.

The Register: Which also illustrates what is the great risk with a fibre rollout in Australia – that being that the original budget was not crafted by engineers working for months.

Dave Berstein: The original budget was crafted under the directions of a politician who said “these are the numbers we have to meet. You guys figure out how we're going to say we're going to do it. It doesn't have to be real.”

And obviously it wasn't.

On the other hand, the fact that for the first year of the actual building, they didn't come close to their own numbers and targets – that says something went wrong operationally.

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