So far from being a "white elephant" the NBN can provide an acceptable return for the Government. Taxpayers will get their $27 billion investment back with interest and they will get a network they can use for decades.
This is, I believe, 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.
So what are the risks for the public in financing the NBN?
The first thing I would note is that while the NBN has the same nation-building characteristics as the Harbour Bridge or the Snowy Mountains scheme it does not have the same risk of cost over-runs.
Unlike these projects, the NBN is a scalable network. It is composed of integrated pieces which work together but which also work in their own right. There are four major components:
- the satellite solution for three percent of premises which will provide much improved broadband for more than 200,000 premises;
- the fixed wireless solution which will serve four percent of premises;
- the FTTP solution that serves 93 percent of premises; and,
- the transit backhaul network which connects the three access technologies to the common Points of Interconnect.
The satellite and fixed wireless solutions are badly needed to dramatically improve the services that can be provided to rural and remote communities. The transit backhaul build is, I believe, supported by almost everyone in the industry as being a good investment for the country.
So the issue is around the FTTP build. One of the concerns I hear is that the costs will blow out.
We have come in on time and under budget on our first build in Tasmania and we have some excellent benchmarks for similar builds in overseas markets.
Remember this is a highly repeatable build of very similar modules as we rollout across the country. The scope for applying continuous improvement methodologies to drive down costs is huge.
The Heads of Agreement with Telstra also reduces uncertainty as we are able to use existing underground ducts. We also expect to dramatically reduce our revenue risk with the Telstra agreement to decommission the copper as our fibre network is rolled out.
The other concern I hear is that our revenues are at risk because it will be at that point that there will be a move to wireless on the assumption that wireless will provide everyone's broadband needs. Overseas data simply doesn't support this line of argument. You will recall I said earlier, that some of the biggest Telcos in the world are investing in FTTP.
So there are two questions:
- What is it that all these Telcos know about wireless that eludes some in Australia?
- Why is it that you can't buy anything close to a 50 Gbyte per month plan on a mobile network?
It's all related to the limitation of wireless as an access technology. So perhaps I should spend a few minutes on the realities of access technologies.
We have a few options to provide broadband services to the premise:
- Copper using sophisticated Digital Signal Processing techniques embodied in DSL technologies to get the last bit of performance out of the limited bandwidth on copper ,
- Wireless using various types of modulation and coding schemes to squeeze the most out of the available spectrum,
- Coaxial cable which has a much higher bandwidth than copper but is shared across multiple users
- Satellite technologies that use even more sophisticated coding and modulation schemes to overcome the issues of getting a satisfactory signal to and from a platform that is 36,000 km above the Earth, and
Each of these access technologies has its own characteristics with respect to bandwidth (speed), distance dependence, symmetry, latency and coverage.
The technology options in Charles Todd's day or even in the days when the copper CAN was first deployed were considerably simpler. The technology options available today make network design choices quite complex. It is a fact that communications is the field in which some of the most complex and sophisticated applications of modern physics, mathematics and statistics are used. That's what makes it so fascinating, but also so challenging.
What are the pros and cons of the various access technologies:
Copper: with copper-based DSL we have now reached about the limit of what can be done. It is now a trade-off between distance and speed. We should show our venerable copper plant a great deal of respect. It has served us well for decades and provided us with more than we had any right to expect. It is now time to allow it to gracefully retire.
Wireless: we have a lot to thank James Clerk Maxwell for. He unified the physics of electricity and magnetism and predicted the propagation of electromagnetic waves on which wireless systems are based. Mobile technologies will continue to improve and mobile applications and devices will continue to proliferate. However, we need to be realistic. Every cellular base station is fed by fibre - for a good reason. Spectrum is a very scarce resource which is why, as I said earlier, you cannot buy a mobile broadband plan that will provide a 50GByte/month download capacity. Wireless speeds also depend on distance and load.
Coaxial cable: a "souped up" version of copper. A much higher bandwidth capability but because of the design of HFC systems it has symmetry problems. While it can provide high speeds it is not so good at providing symmetrical broadband services that you need for, for example, two-way videoconferencing. It is also a shared medium so it is load dependent. Of course you can continue to node split, in which case you get closer to a fibre PON (Passive Optical Network) architecture.
Satellite: great for broadcast coverage but needs careful engineering to ensure a good broadband service can be supported. It suffers from latency issues since there is not much we can do about the speed of light.
Fibre: is almost the ideal transmission medium. The cable itself is cheap, very robust these days, has negligible latency issues and has an incredible bandwidth capability. The limitation in speed achievable in fibre-based systems are related to the rates at which the electronics on either end of the fibre can switch. The information carrying capacity of the fibre itself is almost unlimited.