Where are we? Where should we head?

The shameful state of Australia's telecommunications network
Last update: 13 July 2017
How did it come to this?
A little history.
The mobile network
Downsides of competition.
Whither optical fibre?
How Fibre to the Premises came to be.
We'll all be rooned
The irrational terror of Conservatives.
Where do we need to head?
What should our direction be?
What do we need to do?
How to get where we need to go.
Learn from the past
Avoid repeating its mistakes.
Remedy past mistakes
Reverse some of the monumental blunders that led to our current predicament.
Build into the future
Honour our forebears with courage and foresight.
Wrecking the foundations
A fundamental and evidently bloody-minded change.
Pricing model
A thought experiment on an alternative way to fund the infrastructure.
I've begun asking politicians about their plans. Results will be listed below.

Liberal Party

National Party

Labor Party

The Greens

The state of Australia's National Broadband Network (NBN) is a shame. Literally. The culpable should be ashamed.

Should we even need a project to build the NBN? I'm old enough to remember overhead 'phone lines in the Southern Highlands of NSW. A party line that rang in Morse code, to signal which subscriber should pick up. Real, flesh & blood telephone operators at the exchange. In the decades that followed, our telecommunications system advanced rapidly. Underground cables replaced overhead wires, party lines gave way to individual numbers and exchanges were automated. I reckon we'd have optical fibre to most premises by now, if it weren't for some pretty spectacular blunders. If we'd continued as we were, then the 'phone system would already be what we now refer to as The NBN (or getting there).

How did it come to this?

From my perspective, things went well enough until the late 1980s. In 1989, the Australian Telecommunications Commission was restructured into a corporation. The Australian Telecommunications Corporation didn't last long enough to make much of an impression, but it seemed to perform comparatively poorly. None of its successors has done any better. I conclude that corporate structures don't work as well as statutory Commissions in providing essential infrastructure. Why that might be, I'll leave as an exercise for the reader. ;)

In December of 1993, our government called for the establishment of the Broadband Services Expert Group (BSEG). If the telecommunications network had kept pace with the nation's needs, would any such enquiry have been needed? Less than half a decade after the corporatisation of our infrastructure provider, the cracks were showing.

The final report of the BSEG (Networking Australia's Future) was presented a year later. In March of 1995, speaking at the launch of that report, Prime Minister Paul Keating said:
We have to decide, as from now, that access to the national information infrastructure will be no less a general right than access to water, or public transport or electricity.

Paradoxically, funds for the Networking the Nation program came from the partial privatisation of Telstra, which accelerated the general decline in Australia's telecommunications infrastructure. In completing the privatisation of Telstra, while leaving the network under Telstra's ownership, John Howard gifted essential natural-monopoly infrastructure to the private sector.

The outcome was predictable. Private corporations are judged by their profits. Maintenance is a cost. Neglect maximises short-term profit. Sadly, that which is not adequately maintained tends to fall apart.

Paul Keating saw that we have a race to run. John Howard shot us in the feet. Kevin Rudd began tending to the injuries. Malcolm Turnbull stomped on the wounds.

For a good overview of Australia's broadband history, see Reckoner. It should come as no surprise that there's been a great deal of talk and very little effective action.

The mobile network

There was a time when Telstra (or was it Telecom?) advertised how lucky Australia was to have a single, coordinated mobile 'phone network. If you had a mobile, then it just worked - or not. We didn't suffer the inefficiencies of multiple competing networks. Somewhere along the line, we stuffed that up.

As Kenneth Davidson wrote in 2002:
“Optus has spent $14 billion duplicating the Telstra network ... There are four mobile phone networks, each with their own towers, billing systems and shrill advertisements.

As a result, Australia's relative efficiency in telephony has declined.
...

Competition means black spots in the country and a “choice" between four mobile phone networks in the city.

The mobile network, it seems, is no less a natural monopoly than land lines.

Whither optical fibre?

The plan that Labor took to the 2007 election was largely Fibre to the Node (FTTN). The National Party's Fiona Nash coined the term “fraudband” in response. Comically, the Coalition was later moved to protest vigorously when that term was used as a Twitter hastag for their own plan. The confusion is summed up in a 2013 passage from Delimiter:
“... Why does the LNP now see FTTN as the panacea of the catastrophe that rural broadband is? Who knows, all we can do is look at what the Liberal Party said in 2007 & what they are saying now about FTTN to see gross misrepresentations of technology that, even back in 2007, they saw as a furphy in rural areas. The amusing thing is, the Nationals were pushing for FTTN in regional areas, but just 24hrs later, Nash posted her blog post in opposition to FTTN.

For connecting to premises, FTTN uses existing copper wires. Those wires belonged to Telstra. At the time, the CEO of Telstra was Sol Trujillo. Sol wouldn't cooperate. To get around the obstruction, Prime Minister Kevin Rudd adopted a plan to build over Telstra's infrastructure. Most of the cost of any such project is not in materiel; it's in planning, labour, machinery and transport. Building over Telstra's copper with more copper would not have been cost-effective. The plan for a Fibre to the Premises (FTTP) NBN was born.

The saddest part is that the government now (2016) sees FTTN as a panacea for the vast majority of connections. Premises have been transferred to less capable technologies. Urban individuals and entire rural communities that would have been served by FTTP under the plan that Labor took to the 2013 election have even been relegated to satellite, adding further loads to the satellites' limited capacity. The plan originally was to dedicate the satellites to serve rural, regional and remote premises. Short-sighted, parsimonious load-shifting has made the situation for those premises far worse.

We'll all be rooned

In opposition and in government, the Coalition has objected that FTTP will be ruinously expensive. How true is that?

Gigabit per second/kilometre (for a given capacity over a given distance), optical fibre is a fraction of the cost of copper. An optical fibre network requires less maintenance and consumes less power than a comparable copper network. Optical fibre is more robust than copper (for example, not affected by moisture or electromagnetic pulses from lightning ground strikes). Experience shows that the performance of copper generally degrades markedly after about three decades; optical fibre that has been in service for about four decades in the United States is reportedly showing no signs of deterioration.

In 2010, NBNCo CEO Mike Quigley testified to the  Senate Estimates Commitrtee:
We speak to the manufacturers of fibre. They simply do not know how long the fibre will last because they can see no mechanism by which it would degrade-unlike copper ...

We know that the effective life of copper is about three decades (much of the copper in service in Australia is older than that - and it shows). We know that optical fibre lasts far longer. Nobody really knows the ultimate service life of fibre but, for the sake of argument, many commentators go with a century. In all probability the limits lie, not in the glass fibre, but the coatings, ductwork and other ancillaries.

Inexpensive and durable. I'd be very surprised if we can't implement fibre for less than a dollar per week, on average for each premises on the mainland, over that long service life. For a whole dollar per week, I reckon we could probably implement fibre to every premises on the mainland, Tasmania and a good many smaller islands as well. Hardly cause for panic.

Where do we need to head?

ABS data show demand (the blue line) rising exponentially:
Number of internet subscribers and the volume of data downloaded for the reporting periods between December 2007 and December 2016.
At that rate of increase, no technology (available or probable) except optical fibre will meet foreseeable demand. I don't know how far we can push optical fibre in the century or so that it should serve. Our duty is to find out. The cost is not as terrifying as some timid souls would have us fear. Given its undeniable value, the network will more than pay for itself, though it should not be run for profit. In the short term, the cost will be a function of how quickly we want the benefits. In the longer term, the net cost (price minus value) will be less than nothing. The greatest costs lie in delay.

It will take a bit of effort, but we stand upon the shoulders of giants. Our story can be traced back to a single iron wire across the continent. That project began with picks, shovels and horses. Our task is nowhere near as onerous. We'll be following well-worn paths, not venturing into untracked lands. We have equipment and technologies that make the job relatively easy. Will we disgrace our forebears?

To quote Kenneth Davidson again:
Are we so stupid that we can't learn the lessons of the past decade or so? Are we so degenerate that in the 2000s we can't match the performance and commitment of Australia's early generation of nation builders?
That was 2002. It's now 2016. Sadly, the answer so far seems to be in the affirmative on both counts.

What do we need to do?

Learn from the past

Avoid repeating the mistakes that got us into this mess. For one; whatever comes of the NBN, retain it in public ownership.

Remedy past mistakes

Return infrastructure to public ownership.

Separate Telstra into retail and wholesale/infrastructure arms. The best mechanism I've been able to come up with takes the form of a de-merger. Telstra is split into two companies, with  shareholders given shares in each proportional to their current Telstra shareholding. Government then acquires all shares in the wholesale/infrastructure company, at value.

Return radio frequency spectrum to public control. The easiest way would probably be to not renew spectrum licences as they expire. Associated assets of providers other than Telstra could be acquired at value, where economically and operationally rational.

Establish a statutory Commission to provide telecommunications infrastructure and wholesale services. Vest in the Commission all infrastructure and wholesale assets formerly held by Telstra and nbn™.

[Edit 10 May 2016]
When John Howard completed the privatisation of Telstra, while leaving the network under Telstra's ownership, he created a monster. The optimum for effective retail-sector competition is not to have the majority of the infrastructure owned by the dominant retailer. That beast must be neutered.

The broader issue is conflict of interest arising from association of a retailer of services with a wholesaler of such services and/or an owner of relevant infrastructure. One obvious remedy is legislation against such associations.

The effect of separating wholesalers and infrastructure owners from their retail arms would be to open up the retail sector. Deprived of in-house retailers, wholesalers and infrastructure providers would have little option but to provide product to any retailer. Sadly, history has shown that it would probably be necessary to legislate that this be done on fair & equitable terms. It would also open avenues for resuming public ownership of infrastructure assets.
[Edit ends]

Build into the future

Optical fibre will evidently serve for at least a century. We therefore need to plan on that time-scale. Clearly, the Telecommunications Commission will need statutory protections from the short-term opportunism characteristic of Australian politics in the 21st Century.

Our forebears were not afraid of the future. For the telecommunications network, they lay copper with no end in sight. The rational limit was the length of cable that could be replaced within the service life of copper. That limit increased as muscle gave way to internal combustion and pen & paper to computer processing, accelerating the speed at which lines could be replaced. As we've seen, the service life of optical fibre is several times that of copper. I believe that, with so much time to work in, we could feasibly implement fibre to every premises on the mainland, Tasmania and many other islands.

It won't happen overnight; stop-gaps will be needed. Satellite is the ultimate stop-gap; there's not much of the face of the Earth that's out of view of a satellite. Sadly, as the draconian “fair use policy” attests, ill-advised penny-pinching such as relegating entire communities to satellite has overloaded currently-provisioned capacity, but rapid deployment of terrestrial infrastructure might mitigate the need for more. Fixed wireless is of limited capacity, has a relatively short service life and is costly to run so the less we rely on it the better, but it is useful in the short term. I doubt there are any premises that are within range of fixed wireless that can't eventually be reached by fibre. Long-term, the role of fixed wireless is little to none.

The resources of government are not infinite. Much can be accomplished, but it takes time. Members of communities such as BIRRR have repeatedly shown a willingness to do it themselves. As one of those involved in England's B4RN commented, basic skills for working with optical fibre are not difficult to master. The Commission should encourage and facilitate. It should not unnecessarily obstruct those who seek to help themselves, but instead assist in any way possible.

What of mobiles? The mobile system relies on the fixed-line network to connect to the rest of the world. As fixed-line infrastructure advances, so can the mobile network. With a sufficiently comprehensive fixed-line network, there's no reason why the mobile network couldn't cover well over 95% of Australia's landmass. If, however, the job of providing mobile coverage is left to the private sector, experience shows that the most profitable areas will be served to excess, while others are under-served or not served at all. The private sector cherry-picks profitable markets, then demands public sector subsidies to cover the rest. Paying for the unprofitable with revenue from the more lucrative would be far less indecent.

The network should not be run for profit. All income generated must be dedicated to maintenance & expansion of the network and associated research & development. The Commission must have statutory protections from becoming a cash-cow for general revenue. Government will benefit enough from increased productivity and well-being flowing from enhanced communications.

[Edit 27 January 2017]

Wrecking the foundations

At the 2016 Annual General Meeting of the Internet Association of Australia, Dr Mark Gregory gave a talk in which he pointed out that, among changes wrought by the Abbott/Turnbull government was a fundamental change to the architecture of the NBN. Originally, the network was to be based around a ring topology. That has been changed to a star or hub-and-spoke architecture. A 2015 blog post by Kenneth Tsang gives some details. A ring topology provides at least two paths between any two points in the network. The  star arrangement has multiple single-points-of-failure. It's far less robust and reliable, not substantially cheaper and no quicker to implement.

Cost-saving was the excuse for this change, but any saving is unlikely to cover the cost of implementing the change. The only reason for the change appears to be that it's different to what was originally planned.

Fixing the consequences will probably cost far more than doing it well in the first place. Costs to the nation will continue to accrue until the damage is repaired.
[Edit ends]

[Edit 19 March 2017]

Pricing model

I've been assuming that our telecommunications infrastructure must pay for itself directly. That may well be the only politically-viable model, but is it the way to optimise the value of our investment? Would we net more value if the cost was paid indirectly; if access & usage were effectively free to the user?

In an interview broadcast on ABC radio Brisbane in February 2017, entrepreneur Steve Baxter compared monopoly telecommunications infrastructure to the road network, describing it as a public good. He went on to point out that the cost to operate the network at 100% of its capacity is no greater than operating at 1%. If nobody uses the network, he said, it will cost the same as if everyone uses it to capacity.

Imagine if every household in Australia could connect to every other household &/or business in Australia at maximum speed with no incremental cost. As Steve Baxter said: “People will find a use for that and it won't be only downloading 4k Netflix. It will be for things that you and I can't fathom.” “People would find uses for that bandwidth”. I think the term he was looking for is “innovation”.

Baxter asks: “What's the least possible cost we can charge the end user?” At the nbn™ half-yearly results announcement earlier that month, chief executive Bill Morrow reportedly raised the prospect of providing wholesale services “for free”. That strikes me as a very clever suggestion.

As I've pointed out before, the cost of implementing optical fibre to every premises would be trivial. We could easily afford to write it off entirely over the network's service life. Of course, we'd still have to pay for the network, but the financial load would be insignificant.

What of operating costs? Whatever the network costs to run, the source of funding will be the same: the people of Australia. Either as customers or as taxpayers, we will pay for it. It's in our interests, therefore, to minimise the cost of running the network and optimise its value.

In a user-pays system, much of the cost lies in administration; measuring what each user uses, accounting for it, billing each user and managing payments from each user. If the user doesn't pay directly, then those costs are eliminated. Baxter said that Australia has the most expensive Internet access charges in the world. I don't know how true that is, but can we try for the least expensive? All we need to do is think like a nation.

If the network earns enough to pay for itself, then it doesn't show up in the budget, so our politicians like to pretend. A well-built and well-run telecommunications network could easily pay for itself. Sadly, neither is true of the NBN in its current mutilated form, nor of the tragically-neglected legacy network. Parts of the latter are quite lucrative; Telstra has left the rest to decay. According to Baxter, the NBN as currently envisioned is not commercially viable in the long term. One way or another, we're going to pay. Privatising the NBN might allow the politicians to keep pretending, but it won't reduce the costs to the users (quite the opposite, in fact). As Baxter commented, it would take courage to relegate the expense to the budget bottom line (retain the infrastructure in public ownership, which is likely to reduce net costs, but those costs would show up as government expenditure). Is there an Australian politician with the cojones?

Providing the infrastructure at no cost to the user would be a trivial expense. Providing free access & usage would be more costly, but the payers are the same whichever way the cost is paid: we, the people. Against those costs must be set the benefits:
What is the value of lives saved?
What is the value of lives enhanced?
What is the value of business facilitated?
What is the value of innovations generated?

All that stands in the way is politics. Funding from general revenue would put the infrastructure at the mercy of politicians. Our politicians have shown quite comprehensively that they're not to be trusted. There's always someone ready to degrade and destroy, if only because they're too fearful to be fit for government. If we rule out user-pays and general revenue, then what? By what mechanism could the infrastructure be funded, on an ongoing basis, that can be made invulnerable to politicians?

Conclusion

As a pricing model, user-pays is unlikely to optimise the value of our investment in telecommunications infrastructure. As as funding model, none other can be as well protected from the depredations of politicians.
[Edit ends]

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