NBN faces grim future amid mounting financial pressures

Cross-posted from Independent Australia:

The future of the NBN looks grim with entrenched poor outcomes, increasing financial pressures and no solutions from the Morrison Government, writes Paul Budde.

OVER THE LAST WEEK, I had an interesting discussion on the NBN with several long-term colleagues. What triggered this discussion – we have had many more of them in the past – was the latest results from the Ookla fixed broadband speed rankings. The downward trend that we have seen now for the last decade continues. Australia is now positioned on the 67th place of these rankings.

We have seen NBN Co trying to interpret these figures differently in the past and while there is certainly room for discussion, the fact remains that Australia’s position keeps dropping. The defenders might argue about the exact position on that ranking list, but the trend keeps going down. Back in 2007, we were around position 25 on that list. The Rudd Government at the time argued that this was not good enough for a modern economy such as Australia, and announced it would aim to be in the top ten of that list.

According to Ookla, the current global average for fixed broadband speed is 73.6 Mb/s. So even if you forget about the individual country rankings, then Australia with 41.8 Mb/s is well below the global average.

The multi-technology mix

Some supporters of the current multi-technology mix (MTM) NBN claim that Australia could get a higher average if NBN Co would drop its prices so more people could afford the higher speeds. That is certainly true, the majority of the NBN users are on the fibre to the node network or on the wireless networks. The maximum average speeds of this mix of infrastructure will simply – for technical reasons – not be able to deliver a high enough level of speed to reach the global average.

We now even see supporters of the original multi-technology mix (MTM) infrastructure arguing that the Coalition Government should force NBN Co to lower the prices. In the original 2009 plan, it was envisaged that the company would over time lower the wholesale prices, which would open the way to also lower retail prices.

However with the enormous cost blow out of the MTM – $50 billion-plus instead of the $25 billion promised by the then Minister for Communication Malcolm Turnbull – it will be politically difficult for the Morrison Government to accept lower wholesale prices, This is because NBN Co could run into financial losses and this would than require a write-down of the NBN — paid for by the taxpayers, of course.

A study of broadband prices in 206 countries compiled by UK-based Cable.co.uk, has ranked Australia 113th — a drop from 74th position in 2018.

Even some of the original supporters are now suggesting stopping any further investment in the MTM, as that would only result in further losses in the future.

Apart from the cost blow out of the rollout, there are also the very high ongoing maintenance costs of the MTM.

High maintenance cost

To give you just one small example out of the thousands from around the country, my son moved into a new house in the inner-city suburb of Graceville in Brisbane. He had problems with his HFC NBN connection. It was dropping in and out in an irrational way. For the first two weeks after moving in, he had no problems. Then the issues started. Many hours without a problem, then a full drop out or a drop out that a few minutes later reconnected itself.

It looked like an NBN network problem, but he couldn’t contact NBN Co and had to contact his retail provider, Optus. After some initial tests, Optus agreed it was an NBN issue and logged a fault. NBN tested the line remotely and, low and behold, no dropout at that time, so they cancelled the technician.

Optus then required him to keep a log. After 24 hours and some 14 dropouts, NBN agreed it needed looking into. Two days later, technicians came and replaced the NBN box, convinced a storm two weeks earlier had caused the issue. Not less than 24 hours later, the dropouts began again. Optus came again and this time changed the modem. No change. So NBN Co had to come again and this time investigated the problem a bit further. It appeared one of their staff had installed the wrong attenuator in the outside NBN box; they replaced this. However, a few days later, the dropouts continued at roughly three a day. Optus is doing a terrific job monitoring the situation but NBN Co has so far been unable to fix the problem and a new call has been placed — and so the saga continues.

This has now been going on for more than a month. Forget for the moment the frustration of the customer concerned and think about the costs to NBN Co and to Optus of this saga.

Ongoing decline

The key reason for Australia’s position, of course, is that other countries are improving but with the current MTM infrastructure, this means that we will drop further for at least the next three to five years, possibly to somewhere around 75.

It will cost Australia billions of dollars extra to lift the broadband game in Australia and reverse the ongoing decline. I can’t see that in the political climate this is going to happen any time soon. Just being able to fund the ongoing increase in costs to maintain the current MTM at some sort of an acceptable level will be a massive exercise.

This political disease of lack of vision and strategy is not just affecting broadband, it also affects our response to climate change and the total absence of a long-term energy strategy — just to name a few of the key issues we are facing as a nation.

While 5G will not have a major effect on the NBN, the fact that perhaps as much of a quarter of the population will use the mobile services for their broadband requirements will certainly hurt the bottom line of the company. As a response, we are seeing a massive assault by NBN Co on the corporate market — a market in which they are not supposed to operate as that creates unfair competition to the other players in this market.

On the other side, it will also be difficult for NBN Co to operate in the 5G infrastructure market. This requires a deep penetration of fibre optic networks, while the company is stuck for a large part with the old copper network.

Coming back to my earlier article on a national telecommunications emergency plan, the MTM infrastructure we now have is less reliant, requires more maintenance and is much more prone to national disasters. So from that perspective, also not a good outcome.

In its annual Communications Market Report, the ACCC has indicated that it is worried about the future of the NBN. With the rollout completion later this year, it sees risks of entrenching inferior outcomes. According to the regulator, limited network-based competition means NBN Co still operates with little competitive constraint.

Furthermore, it stated that in the latter half of 2020, NBN Co will transition towards a business-as-usual mode of operation as it winds down the nationwide network rollout. This brings specific risks of locking in poor market or consumer outcomes, especially for premises that are hard to connect or have performance issues, which mainly concerns FTTN premises. This situation will only become worse as the company will continue to encounter increasing financial pressures.

Paul Budde is managing director of Paul Budde Consulting, an independent telecommunications research and consultancy organisation.

Comments

  1. kiwikarynMEMBER

    New Zealand is at #24 with a speed of 103 Mbps, which while respectable, is still almost half that of Singapore’s 200 Mbps, which sits top of the table.

    • NZ has a massive advantage, they don’t have IPA stooges and the Australian Liberal Party running it.

  2. Yep I got NBN now and download speed is less than it was before…thanks for forcing me to NBN.. If i get the “Premium” speed Telstra offering I get 85-90Mbps, With cable pre-NBN I was getting 130+ Mbps.
    Currently debating over providers but they are all pretty grim.

  3. The BystanderMEMBER

    >This has now been going on for more than a month. Forget for the moment the frustration of the customer concerned and think about the costs to NBN Co and to Optus of this saga.

    I had a similar nightmare with NBN Co, one that only got resolved when I moved house. Whichever bureaucrat had the idea of making it impossible to get NBN Co to do anything without first going through an RSP, while exempting them from any consumer complaints process, deserves to be put up against the wall.

    • I had similar issues and it was only through endless tenacity that NBN Co sent someone out several times that we got it sorted.

      Then, of course, while the neighbors were getting theirs fixed the managed to destroy our connection again, and despite me taking to the tech on the ground at the time and telling him we’d just lost all service, it took a couple of weeks to get back up and running again.

      ISP provided a new modem and refunded three months of bills for a problem that was never theirs to begin with. Utter BS.

      • Suffering the same issues now for months. Many many calls with RSP, new modem, NBN tech came out. They all “solve” the problem for about a day then the resets begin. Nightmare.

        • BankWatcherMEMBER

          Same, since I started an HFC service 8 months ago. Have given up as all the ‘techs’ have no idea what they are doing and storm through my home like they own the place. Have put myself on the Optus 5G list and will put up with the crap connection until then. Frequently just switch to my phone’s data which is so much more reliable and almost as fast on 4G.

    • The labor Party imposed the NBN on the people.
      I remember communications minister Stephen Conroy, motormouthing many times on Lateline, about this wondrous thing that would bring great benefit to Australia. sigh

      As far as I know most of the population don’t need high speed internet. It’s a privatise the profit, socialize the cost thing.
      I like the landline the way it was, now I have to have a nbn modem/thingy to run the phone and get power point put in to run it and it doesn’t work when power outage unless I get battery back up modem.

      • you’re obviously a luddite and don’t understand that Conroy’s plan was excellent. Would have cost us less than the dogs breakfast the MTM, much faster, more reliable, easier to maintain plus future capability of 100x the already-fast original speed. Try making the MTM NBN 100x faster LOL impossible

  4. We are currently running at between 2-35 bps on the nbn.
    Ran at average 15 before nbn.
    Our landline is kaput, and mobile reception is
    so bad that sometimes we are standing on the road out the front to talk to people.
    We live7 km from the centre of Melbourne.

  5. Do ookla just take the average of all measurements for an area? If so, then the NBN may be understated due to the choking of supply based on plans. I’ve got the el cheapo plan through my provider so everytime I use ookla it could be misrepresenting the true speed capable for my connection.
    The above isn’t an excuse for the many faults of the NBN, it’s just querying the methodology of the testing.

    • Thats true of every country, your choice of plan dictates your speed. In NZ we can get 1 Gbps plans, so if it was just based on what the network is capable of, and not what people are choosing to buy, or providers choosing to sell, then we’d be top of the table (along with all the other FTTP countries who offer 1 Gbps services now)

  6. Man i’d kill for 41.8. I get a steady 16 on the NBN between dropouts. Trialing a 4g model at the moment and getting between 1.2 and 40 on that depending on which direction the wind is in. Not sure which way to go.

  7. Mark HeydonMEMBER

    The concern around lack of competition seems pretty valid to me.
    I wouldn’t put it past the LNP government to reduce competition further, legislate some sort of escalation clause in place on the wholesale price and then sell it off to a mate.

  8. Fiber, copper, carrier pigeon, people who built networks exposed this scam of a project from the start & this budde fellow & others keeps quoting global surveys so the taxpayer can get screwed further….

    • Fiber, copper, carrier pigeon

      I know you are a Luddite, but there actually is a standard (an April Fools Day RFC – nerd humor) for running IP over Carrier Pigeon 🙂 https://en.wikipedia.org/wiki/IP_over_Avian_Carriers

      The original NBN design was not a scam – it would have provided future proofed essential infrastructure – much like building the power network before it. But LNP/IPA/Murdoch ideology/greed/mates hobbled Australia for personal gain (once again).

  9. Ronin8317MEMBER

    It is grim for the taxpayers, the customers, but not for the future buyer of NBN who will get the monopoly at a bargain placement price. Any competitors must pay and subsidize the NBN, and in a decade Australia will have the slowest and most expensive broadband in the world.

  10. The MTM network was always going to need to be overbuilt. Always.

    Malcolm and Tony should be in jail. History will write they have wasted the most staggering amount of taxpayers dollars.

    Country probably gets the broadband network it deserves though…

  11. Just go 4G already folks. I have the oldiers and myself on this setup:
    $40 Optus with 80gb x4 = 320GB for phones
    $15 Optus mobile broadband sim for a fixed wireless modem
    = $175/month for four phones with a 320gb data pool, unlimited calls and 4GB of international roaming.

    Speed at home is 40mbps reliably.

    • zThx. Been trying to consider the alternatives as our NBN (via iinet) mostly doesn’t even work. the black NBN box overheats even though they have replaced it several times (the installers told me its a general problem the original boxes had enough space to keep cool but subsequent boxes are far too small and overheat and they suspect due to cost cutting)

  12. James DaveyMEMBER

    If Turnball had of followed Abbotts instructions to ‘demolish the NBN’ then the Australian public wouldn’t be stuck with this albatross.