Is an NBN compromise still possible?

The bipartisan agreement on the renewable energy target demonstrates how an industry body can work for an outcome that finds the middle ground. The Clean Energy Council has led the way and demonstrated that the Communications Alliance should be pushing for a bipartisan solution for the National Broadband Network. In Business Spectator the question is asked as to whether Communications Alliance can step up and publically put a middle ground position that policitians can accept so that the nation can finally work towards a next generation access network.

Read the full article below

The bipartisan deal on the renewable energy target has brought forth the spirit of compromise in the halls of Canberra and the telecommunications industry should take this once in blue moon opportunity to put to politicians of every ilk a compromise approach on the National Broadband Network (NBN) rollout.

The telecommunications association peak body Communications Alliance (CA) should follow the lead of the Clean Energy Council (CEC) and present a NBN model that provides stability and certainty for the telcos and also an opportunity to implement new and innovative solutions.

The CA has been largely missing from the NBN debate and reticent to use its industry clout to promote a compromise position. The question now is whether CA chief executive John Stanton can follow the lead of the CEC’s CEO Kane Thornton and find a way forward that is in the best interest of the telcos, consumers and the nation.

So what would a compromise NBN look like and is it possible to put in place a rollout approach that satisfies both sides of the debate?

There is a solution to this conundrum but first let’s consider why it is important to achieve a bipartisan outcome.

The benefits

Access to ubiquitous high-speed broadband is a fundamental requirement for Australia to be an active participant in the global digital economy and a 2012 report by IBISWorld Chairman Phil Ruthven that was commissioned by IBM “predicts that 46 per cent of Australia’s current industry revenue will substantially benefit from the new utility: 23 per cent of the nation’s revenue, will not function without this new utility, and a further 23 per cent of industry revenue will use it to drive step-changes in their business. 15 industry classes are likely to demise if they do not reinvent themselves to embrace the digital future; and some may simply be unable to do so.”

“The report finds by 2050, this new utility [high-speed broadband] will generate around $1 trillion in revenue for Australia – almost eight times the $131 billion it generates today. Also, Australia will no longer be known for its dependency on the export of natural resources over the next half century. It will become known as much an exporter of services such as tourism, business services, health and education services. The export of tourism alone could match the 2012 mineral exports totalling around $175 billion by 2030.”

Communications Minister Malcolm Turnbull states that “No telecommunications company in the world has identified avoided copper maintenance costs as a compelling reason for deploying FTTP”.

However, there’s ample evidence to question that assumption as US telco Verizon’s senior vice president of transformation, Sowmyanarayan Sampath, recently pointed out at Genband Perspectives 2015.

Sampath highlighted the benefits of rebuilding Verizon’s central offices to fibre as a 60-80 per cent reduction in real estate, 70-90 per cent improvement in reliability depending on topology and a 60 per cent saving in energy costs.

"When you do these business cases, almost 60 per cent [of savings] come from new revenue as folks without fibre before get fibre," he said. "We see a fair amount of folks who use this opportunity to get better services. We've proven time and again this pays for itself. It is sustained pay back."

A compromise NBN rollout

Bipartisan support for the NBN satellite and fixed wireless rollouts exists in principal but the Coalition has balked at supporting the NBN cross-subsidy to pay for regional and remote services and prefers an industry levy to subsidise connection charges to the two new Ka band satellites and regional fixed wireless. The Coalition approach would be similar to the existing Universal Service levy for telephony and facilitates the extension of the Universal Service to include broadband.

The government’s proposed review of the Universal Service to be carried out later this year is likely to recommend that broadband be included and for a competitive framework for the provision of the Universal Service be adopted.

How this will work in practice is yet to be determined but the outcome is likely to gain support across the board, though there will be a requirement to renegotiate the $2 billion twenty year Universal Service contract awarded to Telstra in 2012.

The inclusion of Telstra’s HFC network, with remediation commencing this year, and a strong indication that DOCSIS 3.1 would be adopted later this decade, provides a ten year lifetime for the HFC network before a fibre lead-in becomes necessary. What this means is the 3.5 million premises passed by HFC can be connected to the NBN within a couple of years. For the HFC integration to be successful NBN will need to focus on the HFC blackspots and the 20-30 per cent of the HFC network that will need remediation and additional nodes to reduce congestion.

A key aspect of a compromise approach to the NBN rollout comes with the adoption of Fibre to the Distribution Point (FTTdp), G.Fast and self-install fibre. By rolling fibre past premises a broader range of technical options for the lead-in to premises becomes available and Australia would not be saddled with VDSL2/vectoring technology.

FTTdp is a term that means fibre ports are placed within 40-80 metres of premises, typically within the pits found along suburban streets. Connecting from the pit to premises can be done over copper using G.Fast, which was found to provide connection speeds of up to 696 Mbps download and 200 Mbps upload over 66 metres of copper, or over fibre using GPON, which would effectively mean there was a FTTP connection.

The rollout cost of FTTdp would be about $400-$600 more expensive for each of the 12 million premises and this would add about $6 billion to the NBN rollout cost. However, the operating cost of FTTN/VDSL2/vectoring is about $800 million to $1 billion more per annum so within six years the additional rollout costs would be balanced with opex savings and from this point forward there would be a considerable ongoing opex saving.

The savings come with the building owner or customer being responsible for the pit to premises connection cost which is about $400-$600 excluding the cost of the NBN terminating devices that should be provided for free when the customer connection becomes active. What this means is that service providers will offer a low budget G.Fast connection or a premium fibre connection and will incorporate the fibre installation cost into the plan.

An option exists for building owners or occupiers to self-install fibre from the pit to premises and we should expect that 40-60 per cent of Australians would opt for fibre connections using either the self-install option or for the fibre installation to be done by the service provider.

And remember that FTTN/VDSL2/vectoring is now at end of life with major telcos around the world stating that they will commence G.Fast or FTTP rollouts this year.

By adopting FTTdp the fibre in the street would have a 50-80 year lifetime and over time the G.Fast connections would be replaced with fibre connections that can provide gigabit and 10 Gbps today or 40 Gbps within a few years.

Looking beyond infrastructure

A bipartisan approach will also help the telecommunications industry move beyond the current paralysis also give NBN the certainty that it needs to know that it can complete the rollout without major changes occurring at the next change in government.

NBN’s product pricing currently uses a legacy approach that is in need of a revamp, especially to ensure that service providers can offer plans and products that meet customer expectations and foster innovation.

With some certainty surrounding the NBN the opportunity arises to tackle broadband inclusion in the Universal Service, Australia’s incredibly high backhaul and international link charges and reducing regulation “red-tape”.

Netflix entry into the Australian market demonstrates how quickly change can occur. In the last ten years the relative size of telcos, handset manufacturers and media companies has seen the telcos dwindle by comparison. Coming together to promote a compromise bipartisan deal on the NBN not only ensures a better outcome for the nation but also protects the industry’s self-interests.

The CA can take the lead on this, there’s still time.

Mark Gregory is a senior lecturer in the School of Electrical and Computer Engineering at RMIT University.

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