## 2012/04/06

### The NBN we had to have, and the one we'll likely get.

Yesterday I read Robert Gottliebsen's, "Who wants a poor man's NBN?" and thought, "Am I the only person who remembers why we had to have the NBN?"

We got the NBN for a number of reasons, few of them necessary or good, in my opinion:

• At the end of 2008, Kevin Rudd implemented a three-part Economic plan to shore-up Australia in the face of the Global Financial Crisis (GFC).
• Phase 3 of Rudd's recovery plan was long-term infrastructure developments. Like ports and the NBN.
• It has to be remembered that:
• the Australian economy is still weak, becoming obviously "3 speed".
• Phase 3 of the Rudd/Swan plan was big investments to support the economy long after the impact of the first two phases had worn-off.
• Rudd and Conroy had issued a tender for "Fibre to the Node", expected to be ~$5B. • Telstra offered a 1-page response, although it had prepared an extensive response internally. • The Rudd Government realised that while it could build to the Node, it couldn't connect to the Premises. Telstra owned the copper reticulation network and had been aggressively adversarial for some time. • The only options for the Rudd Government to complete a FTN rollout were: • nationalise Telstra's reticulation network, at huge cost and the subject of many years of litigation from Telstra, shareholders and others, or • Side-step Telstra and build a new reticulation network of its own. So NBN Co was born. • Telstra, the obvious company to build a FTTP network of its own, had never done nor planned it: • Is judged as poorly managed by the Stock Market. Shares peaked at$8.50 (early 2000's), falling long before the "dot bust" and the GFC, and now hover around $3.00-$3.30. They provide good dividends, but burnt such a large number of first-time small investors, that the Howard Government felt compelled to soften the blow.
• could've added empty conduit to every piece of trench work done since their 1995 announcement of "Fibre to the Kerb" in the new ACT township of Gungahlin, at close to zero marginal cost.
• The cost to Telstra to install an NBN competitor-network, if they'd had empty conduit, would've been "small" (\$1-5B). With a fractured market, the NBN would've suffered the same fate as the Optus Cable TV network: economic ruin and oblivion.
• This would've snookered the Rudd Government and forced them to deal with Telstra on very favourable terms.
• Telstra "Doesn't play nice with others":
• Telstra has never entered into roaming agreements with other Mobile carriers. This sharing of network infrastructure is the norm in Europe and the USA. Forcing other carriers to needlessly duplicate whole networks multiple-times is economic insanity.
• Witness that it took a ruling by the ACCC for Telstra to open up the ADSL-1 network to other ISP's.
• How Telstra forced all competing ISP's to install their own, duplicate ADSL-2 networks, when they already had a perfect working model and were upgrading their own DSLAM's.
• How Telstra refused to activate ADSL-2 in exchanges where there was no competition.
•  witness the intentional duplication of Cable TV rollout in opposition to Optus/SingTel. Australia, the nation and consumers, got half a network when Telstra duplicated the Optus rollout, and each company was unable to achieve sufficient market penetration or consumer take-up to
• When the Howard Government floated the idea to sell Telstra, there was a massive outcry from the Telecoms profession, not against the sale, but selling the three parts together:
• long-haul and backbone network,
• customer reticulation network, and
• retail network and sales.
Australia is a very different Telecoms market. It is relatively small with concentrated pockets of population in the midst of vast tracts of effectively empty land.
• There is only room for one national Telecoms infrastructure player.
• This allows competitors to efficiently deliver services to nearly all the population and for the Government to implement "social equity" policies by funding uneconomic portions of the network.
• With one dominant, but hostile, ex-monopoly player, no new entrant and initiative can succeed economically now without Government support, and usually legislation.
• The shortcomings of this decision by the Howard Government was demonstrated by:
• the failure of a fully-privatised Telstra on the Stock Market, and
• the "Structural Separation" bill that the Gillard Government has had to enact to allow NBN Co to acquire enough of the Telstra reticulation network.
The Liberal party deliberately created the monster that became the fully-privatised vertically-integrated Telstra, when it had no need to and against united expert opinion.

As a nation and a collective of consumers, we've had to pay again and again for this decision in:
• more expensive standard services,
• less competition on standard services,
• massive structural economic inefficiencies, and
• considerably less innovation in products and services.
Yet not only the Liberal/National Coalition gotten away consequence-free with this massive stuff-up, but has been able to beat-up on the ALP for envisioning and attempting to implement the largest National Infrastructure Reform since the Snowy Mountains Hydro Scheme, sixty years ago.

Personally, I think this says more about the ability of current ALP leaders and strategists than anything else. I'm not sure Keating, Hawke and Whitlam would've been at such a loss.

Who wants a poor man's NBN?
Robert Gottliebsen
Published 7:50 AM, 5 Apr 2012

Let me start my Easter commentary with a strange message – Hobart and Launceston could be set to be boom cities. A lot of people, including me, may have lost value in their house this week, but few recognised it.

This is the backdrop to an intense house-to-house political debate, which is looming in the next 20 months or so leading up to the next election, as the NBN takes on the nature of an entitlement for important segments of the community.

In Australia we are actually going to have two community-wide debates before the next election. Both will play a big role in shaping the nation. The second debate will be about carbon, which I discussed
yesterday (The carbon revolt, April 4).

I will return to the reaction to my carbon commentary later.

To date the NBN debate has been about the cost; whether it was necessary and issues related to Telstra. Telstra is settled but the first two issues are still live. This week’s KGB interview with NBN Co chief Mike Quigley shows that now he is actually rolling out the broadband network, Quigley is going to be a formidable advocate of the project.

The internet has enabled people like me to avoid the drudgery of commuting to a city each morning. The NBN will extend that privilege to a much wider group of people because it enables video telephone as a matter of routine and can transfer much more data more quickly than
current connections.

[snip]