NBN: to write down the debt or not?

Lately there has been a lot of calls for the next government to write a good portion of the loan that Federal Government has made to the company charged with building Australia’s national broadband network (NBN). I believe this is much too simplistic and short term.

These calls have come from a number of places including the large telcos who have seen their margins squeezed as the NBN rollout continues. It is easy to dismiss these calls as ultimately self serving by companies who just want a price cut. The Labor party has not ruled it out should they form government after the next election.

It is understandable that this is happening; the NBN, with it’s inferior copper based technologies, is not capable of supply the fast reliable speeds that people would be prepared to pay more money for. So currently Australian’s feel like they are paying over the odds for a dud internet connection.

So should the debt be written down? I think it is important to look at the wider issue here: we have a less than stellar network and this needs to be fixed. So the Federal Government can write down the loan, which would allow NBN to reduce its prices, but then how do we get the network upgraded? How is that going to paid for? Will it even be done?

I believe that if the debt is written down (essentially turning the loan into a gift – a budget expense, like roads and bridges or submarines) that should also come with a financial plan (possibly another loan for $25bn) that will pay for the upgrade.

At the end of the day we all know the end goal is FTTP. There is no other technology that comes even close to the same reliability, stability and performance. We can argue about whether we need it now, but we know that in 20 years time we will absolutely need it. When a commercial company (a telco) performs upgrades they do it slowly, using interim technologies such as FTTN, FTTC and HFC, to guard their cashflow (get enough revenue on the way), but it is not an efficient way to do it. Governments can instead take the long view, see the end goal and just map a direct course there. Governments can understand that their return on investment isn’t just the money, but also the societal and wider economy benefits.

FTTC (aka FTTdp if you’re from outside Australia) is touted by many as a good fix for the NBN. However I see many potential issues: Firstly, it is a very new and untried technology – Australia is the first country to roll it out in a big way, secondly it is unclear if there is an easy upgrade path from FTTN to FTTC (an FTTC service can interfere with your neighbours FTTN) and thirdly nobody knows how long those units in the street will last in the hostile environment of the street pit. Finally it is yet another interim technology that is just a distraction from the end goal – FTTP. Australia is a big country – we can’t keep rolling out new technology over and over again.

Unfortunately we have to accept that the move to MTM by the Liberal government in 2013/2014 was a colossal mistake, we have essentially thrown at least $25bn down the drain (though to be fair this money has entered our economy, no government spending in the local economy is ever wasted – people get employment for example). Had NBN stuck the course with FTTP we would have spent about the same amount of money and almost had the FTTP rollout finished by now (don’t believe that $96bn figure put out by the incoming Liberal government).

We cannot change the past, but let’s not make the same mistake again. Let’s stop thinking about how we can give everyone a price cut and instead think about how we get the network that Australia clearly needs.

Damian Ivereigh
CTO Launtel

Footnote: Why putting FTTC into an FTTN area is problematic

All copper technologies (ADSL, FTTN, FTTC etc) use very high frequencies to essentially ram a signal down copper telephone cables, that were never designed for it, in the hope that enough of the signal will make it to the other end and be able to be picked up by the modem. Unfortunately these high frequency signals will jump from one copper pair to the adjacent one due to a phenomenon called “cross-talk”. This then becomes noise in the adjacent pair and limits the performance of that connection.

FTTN gets around this problem by carefully measuring the induced cross-talk (in concert with the user’s modem that reports back) and then managing what frequencies are being used on each pair to minimise this. This is all done with very sophisticated technology in the node and relies on the node knowing exactly what’s going on in the copper side of the network.

An FTTC DPU (the unit that sits in the pit) that is placed downstream (towards the customer) is completely uncoordinated with existing node and essentially for the existing FTTN users just becomes uncontrolled noise in the network. This reduces everyone’s performance as the node scales back to get a reliable connection. For a single house it’s not a big issue because essentially the copper pair connected to the DPU is well separated (physically) from the other copper pairs being used for FTTN.

However where you have a small block of units, which is very common in the city suburbs if one customer in the block is switched over to FTTC, the others in the block can expect their services to be disrupted until they too switch to FTTC. This presents a changeover issue for NBN. They could switch the whole apartment block at once, but this has to be coordinated with the customers and their RSPs (“switchover day”). We could have an additional co-existence period, where the power and performance is reduced but this will mean that people on FTTC will get a significantly reduced service and they will wonder whether it is all worth it (more bad press for NBN).