Thursday, August 19, 2010

Australia: the importance of broadband infrastructure (and making sure it happens)


With regard to the questions I posed at the end of my previous post, one country which appears determined to provide a broadband architecture designed to keep ahead of demand and international competitors is Australia.

The National Broadband Network Company Limited (NBN Co) was established to On 7 April 2009 by the Australian Government to design, build and operate the wholesale-only National Broadband Network (NBN). NBN Co’s role is to realise the Australian Government’s vision for the development of a next generation NBN, which "will be the single largest nation building infrastructure project in Australian history". I've posted about the NBN before on this blog, see this example from last month.

In a speech earlier this week, NBN Co CEO Mike Quigley set out his views on why a next generation broadband infrastructure is so important to Australia's future, and why the National Broadband Network is the right vehicle. Quigley commenced by highlighting the historical context of public investment in broadband:
"I believe this is the right way to deliver a national broadband network for Australia...I would like to return to decisions made 140 years ago to build the Overland Telegraph...(this) cost £480,000, equivalent to just under a $1 billion in today’s terms. The total cost was met entirely by the tax-payers of South Australia and was equivalent to 60% of the state’s annual budget. This was the first of the three major investments that have been made in Australia’s fixed line telecommunications infrastructure. The second was made just after the end of WW2, when the PMG committed £42 million to rollout today’s copper Customer Access Network. In today’s dollars this was a commitment of around AU$10 billion. Even more extraordinary is the fact that in 1950 Australian Government public debt was at about 80% of GDP, more than 10 times the level of today’s public debt. The Overland Telegraph and the copper CAN, built using public funds, were great public investments that have paid for themselves many times over in social, economic and productivity benefits."
But the third major investment went rather differently:
"The third major fixed line investment was attempted by the private sector. I am referring of course to the investment in HFC technology by two private companies. We all know that the infrastructure was duplicated as the two companies chased each other up and down streets until they both called a halt to their rollouts. In terms of the utilisation of scarce capital, this multi-billion dollar duplication of access assets was not an ideal outcome...So, of the three fixed line infrastructure builds in Australia - two were great successes and were built by the public sector. This is why when it comes to telecoms infrastructure investment we should not accept the simplistic mantra of “private markets good, public investments bad”."
Quigley believes a combination of public and private investment is the way to go:
"I am a great believer in markets and the ability of competition to drive innovation. But that does not mean that I believe there is no place for public sector investment in telecommunications infrastructure. In some cases it is the only way to make the big investments that are critical to our future prosperity. No commercial entity will provide good telecommunications services to everyone across this vast nation of ours without Government intervention of one sort or another. No purely commercial company can take the long term view that is required to build the next fixed line platform that Australia now needs."
The reason? The true benefits of broadband infrastructure are realised in a much longer time frame than that required by investors and shareholders:
"The fibre infrastructure on which the NBN is based, and which the Australian public is now in a position to build, will last for the next 50 years. If you are an executive that has to face the pressures of quarterly earnings calls, it is simply not possible to put the long-term public good as your number one priority. You are paid to represent the shareholders interests. But a publicly funded Telco such as NBN Co can take a very different view. Our very “raison d’etre”, in NBN Co, is to execute the Government’s policy for broadbanding Australia in the most cost effective way possible – taking a long term view of the national interest."
And on why the access infrastructure should be maintained by a single, publicly-owned provider:
"The wholesale network should be a monopoly, because to build duplicate access networks makes little sense. To build a collection of disparate access networks would be almost as bad. So who should own the wholesale network? If it is in private hands, you would expect the management of the wholesale company to strive to maximise shareholders returns. We should not expect national interests, including the guarantee of good service to rural and remote communities, to be top of the priority list. My view after spending 36 years in the telecoms industry, and having observed at close quarters access models all around the world, is that an efficiently run, publicly owned, wholesale Telco whose objectives are to maximise the public interest, is a good solution. It is much easier to deliver nation-wide eHealth and remote education services on a standardised and ubiquitous network. On the contrary, it’s rather difficult to deliver these services on a patchwork of technologies - it’s been tried in other countries. The NBN will be a wholesale only network which will provide the underlying broadband capability to all players on equivalent terms...the NBN Co business case does not produce the commercial returns that a private investor would demand. That is why it is the Government that is funding this infrastructure build."
Quigley went on to stress the importance of not being "blinded" by the necessity of immediate returns on the public investment in the NBN, and point out that the NBN is "a much better option for the Australian public than giving billions of dollars of taxpayer funding to subsidise commercial companies to marginally improve today’s broadband networks." Doesn't take a lot of effort to guess this refers to FTTC deployments I think?

Some very important lessons for the UK here in my opinion. Recent NBN Co developments include the launch of a consultation on its its fibre, wireless and satellite products, and publication of the related technical specifications for its wholesale fibre access network. In addition, a paper by Dr Karl-Heinz Neumann on structural models for NBN deployment was presented at the recent Australian Competition and Consumer Commission (ACCC) Regulatory Conference. Neumann agreed with Quigley in that the network would not be rolled out to the same extent under private equity arrangements and that it could significantly improve Australia's international competitiveness, but also suggested that a more future-proof and open access friendly point-to-point fibre deployment would cost only 10% more than the passive optical network (PON) technology currently being used to roll out the NBN. Commentary from Computerworld Australia:
"A point-to-point network, as often deployed to business and key buildings, sees multiple fibres split from a backhaul trunk, with each premise receiving its own dedicated fibre. In contrast, PON networks use point-to-multipoint technology to connect to premises by delivering data over multiple wavelengths of light through a single optical fibre. NBN wholesaler, NBN Co, has signed contracts with Alcatel-Lucent to rollout the company’s GPON technology, which would see a single optical fibre serve 32 premises through multiple light waves. A spokesperson for the company told Computerworld Australia that the GPON technology would initially use a single colour of light to deliver 2.4 gigabits per second (Gbps) of bandwidth during the NBN rollout, but that it could foreseeably add different waves of light to meet additional capacity in the future."
An important consideration, but the NBN nevertheless seems light years ahead of the UK's aspirations, positive though recent developments have been. I'll keep watching developments down under with envious eyes.

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