Monday, September 20, 2010

We're spending a fortune on new wires. In case you don't want them, we'll disconnect the ones you have


Great business model, eh? Although probably not great enough when you are pouring in $43 billion.

The overwhelminq question is why? Why spend a fortune replacing wires most people probably don't want replaced. And why not properly examine the idea first in a cost-benefit study?


We've already got wires that keep doing more than we ever imagined (20 years ago no-one could have imagined what ADSL could do, even years ago no-one could have imagined the speeds it will do now  - and they are still increasing) and much of the urban population was actually offered shiny new sets of coaxial cable wires in the 1990s (they were strung up through entire suburbs) and said no. The new NBN cables will be strung next to them.

So why? Why spend a huge sum forcing on us what most of us would scarcely pay a cent extra for of our own volition?

The responses to this post and others provide some clues:

One is the view, satirised by The Onion, that Tax Dollars Only Be Wasted On Stuff That's Awesome.

I will say this once - clearly. Being awesome isn't an argument. I know the speed of light is the fastest there is. It's awesome. Get over it. The question is whether it is worth spending billions connecting 90 per cent of the country to it.

Oh, and there's build it and they will come. Stilgherrian says:

"Of course these speeds are adequate for current interactive services. If they weren't, these services wouldn't yet exist. New services will only emerge when the speeds exist to support them."

Build it and they will come! Except they didn't come for coaxial cable, didn't come for satellite, didn't come for HD TV. Not every bet on a new technology pays off. If it costs so much wouldn't it be wise to look before leaping?

There's the related march of progress argument. Kymbos says...

"When electricity became an option to people it was largely used for lighting... After a time, electricity became a common use for powering most things in the home or business, to the point that nowadays it seems ridiculous that it would even be questioned. I see broadband in that context. I think (although of course I do not know) that over the next 10-20 years it will become so ubiquitous to our lives that we will wonder why it was ever debated that we make investments of the magnitude of the NBN."

But the truth is broadband will become ubiquitous over the next 10-20 years regardless of whether we have the NBN. Progress has a way of happening. If you doubt this, check out the screamingly funny Accenture study from 2001 arguing for tax credits in order to get broadband penetration past 10 per cent.  Gee, how did it happen without those tax credits Accenture thought were essential.

There's the argument that value for money doesn't matter because it is free money. Grogs says it isn't right to think of 'opportunity cost' - money forgone.

"This is also a favoured tactic of those who dislike the NBN – ie every billion spent on the NBN is another hospital that could be built. It is a pretty weak argument. People know another hospital isn’t going to be built instead of the NBN. The argument may sound logical, but its much like smokers who quit knowing they are never actually going to go on the round the world holiday with all the money they will save."

Sorry Grogs. Fewer hospitals and the like will be built if the NBN goes ahead. The opportunity cost is real, regardless of what "people know."

There's the copper is on its last legs argument. Possum says:

"It is a decrepit, broken thing attempting to provide something it was never designed for, whose performance has already peaked and which will become increasingly degraded and prohibitively expensive to maintain over time. The net you get over copper today is as good as it will ever be."

Fighting words, which would have seemed true 20 years ago, would have seemed true 10 years ago, would have seemed true 5 years ago. And people like Possum accuse people like me of lacking imagination. All the while we have kept coming up with new and better ways to use copper. It is indeed doing things it was never designed for, over and over again. It's an unexpectedly versatile material. It'll do even faster speeds soon, and it is already laid. Sure it costs money to maintain, but how much?  Surely we wouldn't be planning to chuck it out without knowing how much?

And anyway Possum says we don't need a cost benefit study because the answer is unknowable.

Possum, that doesn't mean we don't need a cost benefit study. Governments do cost-benefit studies about things such as this all the time.  The range of likely outcomes would tell us a lot and the process would tell us a lot. We would gather information (the real state of the copper network, which suburbs and houses would well served by what they had) and explicitly lay out assumptions. It would be worth it - essential in my view -  given the scale of the project.

In evidence to the Senate Committee examining this question Dr Mark Harrison said

"The great thing about cost-benefit analysis is that it makes the methodology and the assumptions all clear and explicit and then you can argue about them."

And in any event, the people promoting the NBN undermine your argument by acting as if a cost-benefit analysis has been done!

Here's Treasurer Wayne Swan from Wednesday night:

"Access Economics forecasts that smart technologies like the National Broadband Network will add 1.5 per cent to the level of our GDP within a few years. It’s truly remarkable technology, and a truly important reform, and we can’t afford not to do it."

Err Wayne, "can't afford not to do it"? I thought the benefits were unquantifiable. And that Access Study you quoted. Have you read it? It's here. Access says there is "insufficient data to accurately quantify the full economic benefits of high speed broadband at this time," but in its view the benefits would be large. In other words it doesn't have a clue. Why on earth did you make it sound as if Access had come up with something?

And then there's Mike Quigley, the CEO of the NBN Co. You say he "is one of the most experienced and widely respected telecommunications professionals in the business, having most recently worked as Chief Operating Officer of Alcatel Lucent – one of the biggest telcos in the world".

Good. I would have more confidence in him if he didn't say stuff like:

"Recent studies have noted the substantial annual benefits that flow from broadband in terms of GDP. One such study of a fibre access network estimated a US$160 billion economic benefit over 4 years. This same study estimated an annual increase in jobs of more than 210,000."

He would have read the study he's referring to, right? It's by Navigant Economics. Much of the "benefit" it refers to is actually the cost. Its an analysis that would make the Ord River Scheme look good. The rest of the benefit comes from an "increase the number of U.S. broadband subscribers by between 216,000 and 6.0 million". That's right - an increase in the number of broadband subscribers is the important thing according to Navigant Economics, not speed for its own sake. The study was funded by the US Fibre to the Home Council.

Rather than quote fake or crappy studies, why not conduct a good one?

Otherwise, why not as one economist suggested "fund $43 billion artificial intelligence project on basis that we think robots might end up doing all the work for us?"

If there's really still something objectionable about the sort of studies that are commonplace where there are public costs and social benefits (not all of them quantifiable), why not implement Christopher Joye's alternative idea -- a randomised trial in one city to determine benefits after say 5 or 10 years. What would we have to lose? If one city (say Adelaide or Hobart) raced ahead because of the NBN we could take the idea nationwide. The rest of us would have 5 to 10 years of technology advance and the Adelaide or Hobart experience to advise us how to jump, or whether to.

Below are extras from a great column by Stephen Bartholomeusz in Business Spectator (subscription) and one from Joshua Gans who says he actually suggested a trial in Tasmania but that the government was "not interested in evidence based assessments".

So sad.


Testing Turnbull's NBN mettle

Stephen Bartholomeusz, 16 Sep 2010

"The government has committed to spending up to $43 billion of taxpayer funds, or whatever lesser or greater amount the NBN ultimately costs, without any meaningful analysis of its costs and benefits.

"The 546-page implementation study produced by McKinsey and KPMG earlier this year wasn’t a cost-benefit analysis – the firms explicitly said so in the introduction to their study. That study was a reverse-engineering exercise for a decision that had already been taken, and a rather unconvincing and rubbery one at that, built on ridiculously optimistic assessments of penetration and demand rates.

"Whatever the merits and nation-building potential of a ubiquitous fibre-to-the-premises network, the fact that a government has embarked on the single most expensive project in the nation’s history without undertaking an exhaustive analysis – indeed any, meaningful analysis – of its costs and benefits represents appalling governance. At least there was some obvious and urgent economic justification for the pink batts program.

"As Turnbull says, a case could be made that there are social and economic benefits beyond the financial value created or destroyed by the NBN, but that case hasn’t been made and, it appears, unless he can force a change of stance, won’t be made...

"If, as Kohler said in his response to Turnbull’s response to his column, the politics of the NBN were really about creating a new regional subsidy to replace the existing universal service obligation, why are we spending $43 billion, or whatever it ends up costing?

"Just give the bush subsidised high-speed broadband, whether fibre, satellite or wireless – at a cost of perhaps $5 billion or $6 billion – and save a few tens of billions of dollars to spend on health, education, transport infrastructure and other more obviously and more urgently vital services...

"In fact it would seem the politics are more complicated than simply supplying broadband to the bush. There is a large element of the urban population which just likes the idea of very high speed broadband. They may not have any idea of what they will do with it when they have access to it, but that’s part of its appeal.

"The US author and columnist, Michael Lewis, at the height of the dot-com bubble, wrote about the "state of pure possibility" in relation to the inflated value of the dot-com stocks. In a bubble (when emotion generally overwhelms commonsense) he argued a company had to be "ever so slightly unknowable" to be desirable. There an elements of that in much of the enthusiasm for the NBN."


NBN: A Little Summary

Joshua Gans, September 16, 2010

In the four years that I have been researching and debating broadband policy there is one thing I have learned, it is hard to take a position other than a straight “yes” or “no.” The Government and Opposition know this and have taken sides. Neither are entirely right or entirely wrong. Neither are really serious about gathering proper evidence. Anyhow, let me summarise what we know about the value of the NBN and what we still need to find out.

The NBN will be unlikely to earn a commercial return. The Cost-Benefit Analysis on this has been done but not by the Government but by Telstra and many other telecommunications companies. Telstra told us for years it was not viable. I’d be willing to bet they are right about that but they are silent now because they want it to go ahead. Given that, the Opposition’s call for a Cost-Benefit Analysis to be produced again is surely political grandstanding and a waste of time. But the Government’s continual claims without evidence that it will be commercially viable is a worse affront.

The NBN may earn a social return. This is a Cost-Benefit Analysis that might be done but the problem is that a social return depends on Government policies yet to be enacted or thought about. While the debate is off on the commercial side, the social side has been left for dead. As Peter Martin has reminded us, there is precious little evidence that there is a social return on things like eEducation, eHealth or what have you. But that does not mean the evidence can’t be gathered. The problem is there is no pressure to do so.

The largest immediate social benefit from the NBN is competition in telecommunications. As I wrote way back in 2008 when I first proposed all this, we have failed in telecommunications competition in this country. We have a monopolist and no real way of regulating it. The NBN is a way of doing so; the first real option proposed. It is expensive, to be sure, but it will do the job unless…

The biggest risk to the NBN is a bad deal with Telstra. The NBN will achieve competition by duplicating telecommunications infrastructure. Stop duplicating to save some money and you may kill the benefits from competition. That seems to be what the Government wants to do. Here is Minister Conroy from today: “And the deal we have with Telstra and the McKinsey report was based on no deal with Telstra. The debate about take-up has become completely irrelevant; the deal that we have with Telstra is that they are decommissioning, closing down the copper network. To have a fixed line in what we call the 93 per cent footprint, the only way at the end of this process you’ll have a fixed line is on the NBN’s fibre network.” This is outrageous and I hope the ACCC applies s45 properly and stops it. But the Opposition should get its act together and hold the Government to account here.

The NBN is superior to other alternatives like FTTN or some regional option but is currently being implemented in a manner that is way too costly to the taxpayer. There is no buts about it. As it stands the NBN is a massive subsidy to the rich and will likely cost the poorer half of Australia more than they get in benefits. This very fact should be an affront to any true believing Labor follower. It is to me. We can implement the NBN more cheaply if we put in a solution whereby in areas where it is commercially viable, it receives no subsidy. That is, we need an Austan Goolsbee like scheme here.

We should recognise that at the moment the Government and Opposition are just scoring political points and not really getting to the heart of the issue.


Related Posts

. The NBN is a slowly unfolding disaster

. What passes as cost-benefit analysis of the NBN

. There's only one really important concept in economics [Warning: Broadband post]


84 comments:

Anonymous said...

If we sold all the copper in the network the return would be between 9-14 billion

stick that in your pipe

:)

Andos said...

You've used a lot of weasel-words and unsourced statements to make your points here, Peter.

"...most people probably don't want replaced."

"...and [speeds over copper] are still increasing"

"Progress has a way of happening."

"Fewer hospitals and the like will be built if the NBN goes ahead."

"[copper will] do even faster speeds soon"

I accept that not all statements from the other side are well sourced either.

Would a randomised trial in one city show us anything like the benefits of the whole network? By its very nature a one city only network will have a fraction of the utility of the whole national network. (I am definitely in favour of randomised trials for government policies, in general, but it seems unlikely to give a meaningful result here.)

We've talked about what you call the "free money" issue before, and you've acknowledged that the Government isn't constrained in its spending. So, if we're worried that the Government won't be spending enough on building "hospitals and the like" over the next 8 years then we should be arguing about that. Because in reality there is no practical reason for the Government to forgo other spending in order to invest in building the NBN, and that is a critical issue to the well-being of our nation.

It's obvious that this is a highly emotive (and polarising) issue. I imagine that most people in favour of building the NBN would also be in favour of some kind of analysis being undertaken into the costs and benefits. But, it seems that we're all talking in circles here with one side talking up the possibilities and the other side talking them down. The serious issues don't seem to make it through the noise.

Peter Martin said...

Dear A1, We would need to dig it out an pull it down. Hey, we could do it at the same time!

Peter Martin said...

Dear Andos,

"...most people probably don't want replaced" is quite reasonable given the behaviour of most people who were offered a replacement last time. Did you sign up for the Optus Vision or Foxtel cable? If you did you would have found the speeds fantastic because they would not have been slowed by too many other users in your street (coaxial cable is slowed by use).

And the speed of copper is climbing. What were you getting on copper five years ago? They are trialling even faster speeds in the lab now.

Lets just have a study, okay.

Strewth! It is what the Productivity Commission is for.

Anonymous said...

As is the price of copper- of note of course is that fibre optic cable is getting cheaper.I would have thought an economists dream scenario.

Andos said...

I had ADSL 2+ in 2005. I have ADSL 2+ now. No increase in speed there.

I'm happy to believe that there are laboratory studies currently underway to improve the speed of ADSL over copper. But I imagine that the marginal cost of those improvements will increase rapidly.

What are the chances that a CBA would show that, over the next 50 years, we would be able to achieve the same outcomes with our current copper network over a new fibre network?

I'm not against an analysis of the costs and benefits of this project. I just think that a lot of the arguments against the NBN being presented recently aren't good reasons for not rolling out a fibre optic network to 93% of Australians.

I'm sure that a thorough analysis of the assumptions and processes behind the project could provide improvements to the way it is being implemented.

I'm perfectly happy for the Government to stop pretending that this is a commercial prospect. Why should it have to be? It's national infrastructure that will be an indispensable part of everyday life for the vast majority of Australians.

MikeM said...

Cross posting my comment at economics.com:

aura Tingle in the Fin on Friday:

QUOTE

Tony Windsor, the independent MP whose crucial vote locked Labor into minority government, has one way of looking at it.

"One of the arguments against the NBN is its $43 billion price tag," he noted last week.

"Well, apparently the actual government investment is closer to $27 billion. But I'd just note that over $40 billion has been spent on tax cuts since the last election."

He's right, of course.

It's funny how no one ever asks for a cost benefit analysis to be done on personal tax cuts.

For that matter, until Labor came to office in 2007, governments rarely asked for any cost-benefit analysis on infrastructure projects.

END QUOTE

Tingle cites the $12 billion Auslink and $10 billion Murray-Darling plans as well as the Darwin to Alice Springs railway as having escaped cost-benefit analysis. Then again, although Tingle does not mention it, the Sydney cross-city tunnel had a cost-benefit story that saw the private sector enthusiastically competing to fund it, with eventual very red faces after it went into receivership 16 months after it opened.

Tingle's criticism is not at odds with the program Joshua lays out above, but it emphasises that arguments about cost-benefit analysis miss more fundamental issues.

Peter Martin said...

Andos, You would have been one the very early adopters in 2005. No surprise there.

Anonymous said...

You write as though all copper is the same. It simply isn't. Signal degrades down a copper telephone line - no amount of technology will fix that. In a similar vein, many people are on pair gain telephone lines and cannot get ADSL. Telstra themselves have stated that it would cost $2.2 Billion to bring their copper network up to scratch. Add that to the amount the sale of copper would get, and you might find that the NBN isn't actually that much more expensive for a far superior service.

Wolf Cocklin said...

All the doubters say the NBN is going to be too fast… tell me what you did 10 years ago on the net and tell me what you do now… then think about just what the Digital Camera has done in 10 years.

Photography as an example of why we need the #NBN

Peter Martin said...

Agree with you that people are on pair gain are in real trouble. And not only them. In some new suburbs Telstra has made its cabinets too small to allow more than a small proportion of customers to get ADSL.

It's a scandal. It needs fixing. And it should have a higher priority than re-providing high-speed broadband to the suburbs that already get it.

Colin said...

pair gain isn't the only problem - so is distance from the exchange. TPG have a google map mash which helps you see what's likely from your location (assuming they're in your local exchange): http://tpg.com.au/maps/

Colin

Grog said...

Peter, I certainly wasn't suggesting it was "free money". My point was the opportunity cost arguments being put out there were disingenuous at best.

Yes the money on the NBN would be spent elsewhere, but I think those people anti-NBN are as rose-glassed about the things that would be spent on if the NBN was canned as those who think the NB will be the making of the country.

"Now that we have no NBN, why here's a new hospital,and there's a new school, hey why not make it 2! Want a new highway? Let's make it double laned - what you want triple lanes? Why not, we have oodles of money now! And guess what, we've also now solved the entire homeless problem!"

Gee that was easy, if only we had planed to not have an NBN years ago.

Much like the comments by Robb during the election that the weekly interest payments on the debt could be a new hospital, I am largley unimpressed by opportunity cost arguments that make it seem all the nation's economic and social prolbems will be solved by ending the NBN.

Anonymous said...

Peter's increasingly shrill arguments that the NBN should not be built because it will never be needed because the ancient copper infrastructure is in great shape and will continue to handle ever increasing traffic for ever or at least long enough for private enterprise to step in and replace it with something at least as good and cost effective for everybody free of charge to the public are growing tiresome.

He is simply re-hashing the same old tired arguments that have been shown to be wrong.

Not wanted? I didn't want to replace my 82' model Hilux either but when I placed an increased load on it, it showed me that it was simply no longer up to the task.

Peter has now placed all his professional credibility on the issue firmly with the NO! camp. It is impossible for him to admit to any possiblity of being wrong and as such we should not expect much in the way of reasonable argument from him. Plus it gives him an endless stream of writing material to churn out.

I suggest everyone who is in favour of this particular piece of progress simply ignore what Peter has to say about it rather than pointlessly engaging with him.

Leave him alone in his playpen.

Peter Martin said...

Good point Grog.

My point is not that we will get more spending on hospitals and the like if we don't spend on the NBN (hate double negatives) it is that if we do spend on the NBN we will get less spent on hospitals and the like.

The money will have to come from somewhere. That's how budget constraints work.

Peter Martin said...

Dear A, I am not in the "no camp".

I am in the "this looks like a disaster, so lets' first stop and examine the costs and benefits" camp.

Okay?

What would be wrong with that?

MarkW said...

Govt usually wants a cost-benefit analysis with everything from a case of in-grown toenails up. Funny how when it's $43 Billion (borrowed from China) we don't seem to need one! Gotta make you wonder!

Grog said...

True Peter, but the opportunity cost also involves what other things could be cut - eg ongoing expenditure in terms of all that nice middle-class welfare.

Anonymous said...

Further on the opportunity cost argument, the NBN will be borrowed money with an opportunity cost of the interest payments should we not borrow the money. If the NBN doesn't go ahead, the borrowed money will not be spent on hospitals or anything else. It will simply not be borrowed.

ps - you're quoting me? I'm blushing.

Kymbos.

Anonymous said...

As a long suffering IT consultant in regional WA, I can assure you the NBN is badly needed by business. This also applies to social services such as medical. ADSL doesnt cut it, at any speed, and it never will because it is asynchronous. Slow upload, even when Annex-M is available. Anyone who says the NBN wont be adopted widely by business is simply wrong.

And by the way, where is the cost/benefit analysis for the Coalition's alternative?

Possum Comitatus said...

Pete - Sending a signal over copper has two issues, technology (the one we can control) and distance (the one we cant).

ADSL2+ pushed us right up against the distance issue, so technological improvements only now really apply in a practical sense to people living within about a mile of the exchange. THe ACCC reckoned that was about half the population, though some others like Access seemed to get a lower estimate still.

To give an example, lets take two households - one living 100m from the exchange and the other living 3.5km from the exchange - and lets trace their performance over 3 generations of DSL technology.

First, we have to imagine the copper network was in perfect condition (!!) for second.

The first bloke under ADSL1 would have had 1.5MBps, ADSL2+ would have given him around 20MBps and VDSL2 would provide him with around 100MBps

The second bloke under ADSL1 would have had 1.5MBps, ADSL2+ would have given him around 5MBps and VDSL2 would provide him with around 5MBps as well.

The big step for those living more than about a mile from the exchange was ADSL2+. VDSL2=ADSL2+ on the download side after about a mile from the exchange.

This is the problem we'll face with further DSL technology - attenuation.

Distance matters.

And that's with perfect copper. The more frequency you use to push a signal through copper (the only real technology growth path for DSL), the more attenuation becomes an issue - so any imperfection in the copper network (let alone interference) starts to see speeds reduce dramatically. Much more so with new technology like VDSL2 than with ADSL2+ simply because of the frequencies involved.

That then makes distance *combined* with copper quality matter.

Unless we are going to move our houses closer to the exchange, or build a whole lot more exchanges near our houses, and completely revamp the copper network into the bargain - DSL is clapped out for a majority of the population.

That brings us to HFC - less than a third of the country is able to access it, and of those that can, a majority of them live within close proximity to an exchange anyway.

So we have the situation where the existing high speed alternative (HFC) is mostly available to those that don't need it (those living within a mile of the exchange), while the majority of the population are left having no viable upgrade path over their current poor DSL connections.

There's this great big elephant in the room with this debate that too many people arent getting their heads around properly - physics.

Too many of the alleged alternatives for broadband improvement for Australia in this debate seem to have a first step of going back to the Big Bang and rewiring the physical laws of the universe.

We see it with arguments over DSL, we see it with arguments over wireless, we see it for just about every so called alternative to fibre.

And it's really, really silly.

Peter Martin said...

Good points well stated Poss.

When I lived in inner Sydney near an exchange I had a choice of two coaxial cables and very high speed ADSL (well before much of the rest of the country).

By all means lets extend broadband to places where it is not, by satellite subsidy if necessary.

KitchenSlut said...

This entire debate is astounding as everywhere I look at every forum I see the same pattern of attack on any query of the NBN? I haven't seen this psychology since the tech bubble where recalcitrant inhabitants of trading forums were shouted down for daring to challenge the orthodoxy that 'tech was the future' and that any price could be justified by belief!?

Peter Martin said...

Brilliantly said KS

Nick said...

(I see this point has already been covered, but nonetheless...)

"And the speed of copper is climbing."

http://www.eftelcorporate.com.au/Home/products/VDSL2.cms

If you're 1.5kms from the exchange, you're back in ADSL2 land. If you're 3kms from the exchange, you're back in ADSL land.

That's with the very latest gen DSL technology unavailable in Australia, and it shouldn't take you more than 20 seconds looking at that graph to figure out why it wouldn't be (and hasn't been, and never will be) worth rolling out across the country...

I live in Fairfield - an inner suburb of Melbourne - about 2.5kms from the exchange in Northcote.

My speeds at home are more or less identical to what they were 5 years ago – ie. they're only a fraction of the theoretical maximum speeds of ADSL2+ technology displayed on that graph for that distance.

However, I'm writing this from my office in Northcote, where I'm literally 80m from the exchange. I just ran a speed test, and right now I'm getting a grand total of 1Mb per second. That's on an ADSL2+ plus business plan. You tell me why the copper telephone network is so slow today - and every other day - in an inner suburb of Melbourne?

And no - I've enquired with both Telstra and Optus and can't get coaxial cable connected to my home or my business.

But, gee, it's relieving to know "they're trialling even faster speeds in the lab now"...

stinhambo said...

The ability to not have to relocate to a major city to get a decent connection will mean more productive businesses, less congestion, less accidents, less money needed for roadworks, more time spent with families, less pollution, business innovation, international investment, expertise export.

I don't suppose you can calculate a lot of this with an analysis?

I am based in Cairns and there are a few places that can't get ADSL including new estates. This restricts us from those areas and restricts them from new services.

For me, ubiquity, price uniformity (level competition) and a platform for innovation are the major pluses for me.

Don't even go down the wireless route as this is not Star Trek and ubiquitous wireless is not a reality for large towns or cities, espesially for 21st Century broadband applications.

Colin said...

I wonder if the debate is less like 'tech bubble' and more like 'climate change' - i.e. around what kind of evidence is needed, what would the evidence prove, should we just wait and see what happens?

Nick said...

Some Twitter replies copied here:

Next Gen ADSL? Sure if we were still in 2001! http://www.google.com.au/search?&q=next+generation+adsl #NBN @TurnbullMalcolm @1petermartin

Try transferring ANY 21st century rich digital media on 500kbps or even 3Mbps upload. #NBN @TurnbullMalcolm @1petermartin http://j.mp/c3YHKz

1.5km from exchange, my copper promises 15Mbps, but can't do 7Mbps. USO is a joke! #NBN @TurnbullMalcolm @1petermartin http://j.mp/c3YHKz

Today's copper wires don't even *realise* the speeds ADSL2+ *imagines* now! By FAR. #NBN @TurnbullMalcolm @1petermartin http://j.mp/c3YHKz

Peter Martin said...

Colin, in this case I reckon there's not much damage done by waiting.

When it comes to climate change however...

John said...

"But the truth is broadband will become ubiquitous over the next 10-20 years regardless of whether we have the NBN."

I have to disagree with you there. It might be alright for city folk to make comments like that, but the reality is everyone outside of the major cities are stuck on seriously sub-par broadband.

In 2005 we had 256kbps internet, in 2010 we have 1.5Mbps. And thats as fast as we can get (unless we move back to Telstra - which is besides my point).

Now if Telstra was wholesale only, it might be a different story, but the problem is Telstra has a monopoly over the cooper and is unfair to the other ISP's that want to compete out there.

The reality is that rural areas are struggling for even semi-decent broadband and no amount of cooper (or wireless internet for that matter) is going to change that. Fibre however, will change it. It will bring us up to the same standard enjoyed by the major cities in Australia and provide potentially unlimited possibilities.

No one knows what the NBN can do for us. It might see more people working from home in regional areas. It might allow more cross talk between universities and schools- but the only way we will ever find out is it we built it

Chade said...

Peter, with regards to your response to KitchenSlut's comment: seriously, zzz.

A couple of unquantifiable remarks on the response you get on the internet - where, surprise surprise, there's a hell of a lot of people that *know* the tech-based arguments opponents are making are complete tosh, and you're saying that's "brilliant"? It is only, and can be only because it supports your economics-based view. I'm not sure how you think you're going to be able to argue, using the internet of all mediums, that an upgrade to the physical network is not necessary *without* a hell of a lot of disagreement.

Also, repeating $43 billion like you did when government investment is far less... zzz, again. :/

Finally, "not much damage done by waiting"? Waiting for what? Developments in quantum mechanics to enable near-instantaneous transmission?

Peter Martin said...

John,

"in 2010 we have 1.5Mbps. And thats as fast as we can get"

You do not have my sympathy.

Almost every web service you use based in the US is limited to 2Mbps because of the undersea cable.

Here's a test: http://goo.gl/1h6P

Get over it. You are not that much worse off than city folk.

Some are. You are not.

JP said...

Peter, Access economics put the GDP increase attributable to high-speed broadband at at least 1.5% Sure they don't know how much higher it might be, but 1.5% is their conservative best calculation. 1.5% extra GDP is around $16b p.a. Tax revenue is around 25% of GDP so we're looking at indirect benefits in the order of $4b p.a. Which is higher than the cost of borrowing $26b, or even $43b. In other words the money doesn't need to come from anywhere because the NBN is self-funding, even before you add in the income from access fees, and savings on maintenance of the old copper network.

Peter Martin said...

JP,Re-read the Access Report.

The 1.5% extra GDP figure is not for high-speed broadband.

As Wayne Swan acknowledged, it is for "smart technologies like the National Broadband Network", among them electronic health records.

Mate, we could have electronic health records right now, without the NBN.

Peter Martin said...

Chade,

Yes. I have an "economics-based view".

Appropriate for dealing with expenditure.

And yes, such a view can and does encompass social benefits and costs.

What's so wrong with a cost-benefit study anyway?

JP said...

If the Libs are so hung up on doing a cost-benefit analysis, then here's a thought: why don't they do one?

They could publish their assumptions and their findings and we could examine it and see if it was credible. If it was credible, and showed the NBN was non-viable, then the NBN would be sunk.

Why don't they want to do one themselves? And why, more tellingly, have they committed themselves to destroying the NBN project before one is done?

Peter Martin said...

Mate, It is the government that is proposing the spending. The government should do the analysis.

If it was me doing the spending, you would expect me to do the analysis, right?

Besides which, the Coalition isn't good at costings. ;-)

John said...

I get it now, you're nothing more than a garden variety troll.

What about home grown content? If you build the network, people will come. And by people, I mean businesses hosting content in Australia for Australians.

If you bothered to read your own comments, the second one provided a link to Pipe, who manage international backbones and plan one that can attain a speed of 1.92Tb/s.

Chade said...

I'm not saying that an economics-based view isn't appropriate, to some point. It's not appropriate, however, when you start prevaricating and trying to make your argument based on the technology - no, HFC and wireless won't be enough, and no, as Possum as posted, the copper won't be enough due to said issues.

You say in the main post that no-one turned up for the coax, satellite and HD TV (HD's not really an apt comparison) parties - well, they're different types of party, and the accessibility is very different - for technological reasons, too.

There is not another *reasonable* technology that we can turn to, and there won't be one for 30+ years - which is the projected life of this network (and it'll last longer than that).

You can't expect to make these points and views on the medium it will positively affect, one that's full of technologically-fixated people, without having them robustly challenged (do have to say, I don't particularly like this phrase, though).

Marek said...

Almost every web service you use based in the US is limited to 2Mbps because of the undersea cable.

Not true, I get closer to 6, now imagine what proper competition in the sector could achieve!

http://www.speedtest.net/result/960268072.png

JP said...

Peter, if you wanted to spend money on something, I wouldn't give a rats whether you do any analysis.

Abbott has nailed his colours to the mast (well Turnbull's anyway!) - he claims the NBN is overpriced and non-viable. Unless he's prepared to show his calculations as to how he came to that conclusion, why on earth should we believe him?

As I posted above, conservative estimates of a 1% GDP boost lead to the NBN paying for itself many times over out of increased tax revenue, which is far from the only benefit of the NBN. The economic multipliers make it such a lay-down misere that to oppose it you really need to have a solid basis for doing so.

You say that if you wanted to make an investment I should expect you to do the analysis. But if you've decided to buy a new Commodore because you think it will meet your needs, and I came up and demanded that you must not do so until you'd hired a motoring consultant to write you a CBA, you'd tell me to get knotted, wouldn't you?

Anonymous said...

I get 11.1Mbps down and 10.3Mbps up

http://www.speedtest.net/result/960286553.png

Nick said...

John:

"in 2010 we have 1.5Mbps. And thats as fast as we can get"

Peter:

"You do not have my sympathy.

Almost every web service you use based in the US is limited to 2Mbps because of the undersea cable."

Source, please? Honestly, how much of this are you just parroting...

But let's say it were only 2Mb/s to the US (which it is not). Your regional/rural user experiences that *in addition* to the slowness they already experience domestically. Each network hop along the way has to confirm back and forth that each packet of data has been received correctly. The latency between every hop adds up.

Not to mention, intercontinental bandwidth will continue to double, and latency continue to halve, every 2-3 years, as it has done for the last 10-15.

Anonymous said...

Peter Martin went:

Almost every web service you use based in the US is limited to 2Mbps because of the undersea cable.

From NBN 101: Floating the submarine cable question (Computer World 23 August, 2010)

So do we have a capacity bottleneck to access this data? Not even close.

As far back as early last year Robin Russell, CEO of the Australia-Japan Cable, wrote in an article that international networks are nowhere near being considered a capacity constraint.

“That proposition can be despatched immediately,” he wrote. “Each of the four networks that will be providing the bulk of international connections for Australia is capable of carrying at least a terabit per second of data. The total international capacity in use for the Australian market in 2009 is estimated to be around 300 gigabits per second. Accordingly, total capacity usage could double, then double again, then double again, and then double yet again before the capabilities of those networks was exhausted. It would therefore be difficult to say that international networks are a capacity bottleneck in the Australian market.”

Anonymous said...

Good on you Peter for making this an issue. I know that the NBN sounds good and it should be given significant consideration.

However, you can't justify spending over 40 billion dollars of taxpayers funding without having full and rigorous analysis of the project. Let's have all the appropriate analysis and then make evidence based decisions.

Anonymous said...

Peter, you are exposing yourself as someone who has zero experience at the pointy end of achieving business grade services in regional areas. The NBN is only partly about home connections. It's also about business. In fact, it's mostly _all about_ business, whether that be B2B, or providing services to homes connected to the NBN. And business needs synchronous speeds - ADSL just doesnt cut it, even with Annex-M. Wireless is woefully inadequate in regional areas.

Comparing to slower than expect take up of cable is a furphy. Needs have changed since those days, as have the services than can be delivered via broadband.

Pointing to irrelevant overseas metrics is also a mistake. The need is for full bandwidth synchronous B2B _within Australia.

Finally, referring to satellite is simply ridiculous. Ever tried using satellite for B2B video conferencing?

You need to speak with some regional businesses mate, see what they think.

Peter Martin said...

JP. I repeat. Reread the Access report. Its projected 1% plus GDP boost does not derive from the NBN.

Peter Martin said...

Dear A, You say it is "only partly about home connections," but most of the connections will be home connections.

If you suggesting we save billions and limit fibre to business that's a whole other proposition (and not the NBN).

By the way, in the cities many businesses are already connected by fibre.

Anonymous said...

It cant be limited to businesses. That's not how national infrastructure works, given that many businesses now run from homes or industrial areas or semi rural properties or wherever they may be located. Have you ever contemplated moving to a regional area and continuing your work from there? Ever work from home? Or ever contemplated moving to a metro suburb where ADSL or wireless isnt working well? (and there are plenty of poor connectivity nodes in metro areas)

Yes, many businesses in CBDs have fibre. My head office has fibre in fact, but that doesnt help our regional branches. Why should metro CBD have fibre, but non-CBD businesses cannot? And if it can be extended to business sectors regionally, why not give it to everyone? B2B is a key reason, but you need to realise that many businesses (and health, education depts etc) will also provide services via NBN to consumers in the regional areas. Additionally, many business employees work from home. They need bandwidth. It's all about reliable bandwidth.

As I keep saying, you need to personally experience the pointy end of regional connectivity before you draw conclusions based purely on dry economic rationalisation.

The NBN isnt _just_ a business tool anyway, even though that is certainly fundamental IMO. It's also about providing a future-proof structure to deliver social benefits. Business and govt will deliver those social services, consumers will be the beneficiaries. To obtain those benefits, the fibre needs to go to the home. Now, how exactly do you propose to measure those social dividends over time from a cost/benefit perspective?
Let me pose another question: what cost/benefit analysis is applied to defence spending?

It's not always just about the money.

Peter Martin said...

Mate I do work from home from time to time.

The internet is probably slower at home, but (as for most workers) it scarcely matters for the work I do.

I am not sure that we should provide ultra high speed broadband to 90 per cent of the premises in Australia on the off-chance that some of them will really need it.

If a business really needs it, it has options now, including moving.

But hey, let's examine the whole question.

Better people than I can tell you "how exactly" a cost-benefit analysis is conducted, but social dividends can be accounted for, or at least the guesses about social benefits made explicit.

You say that "it is not always just about the money".

It is, in this case - tens of billions.

Anonymous said...

I give up!

Anonymous said...

Thanks for addressing the Copper asset value. NOT. The inconvenient truth is that it will pay for at least a third of the total cost. Big fail for an economist

Gusface

Anonymous said...

outlook. Copper for December delivery HGZ0 on the COMEX metals division
of the New York Mercantile Exchange rose 2.85 cents to settle at
$3.5220 per lb, after ranging fro $3.4860 to $3.5525, which marked
the highest level for the fourth position contract since April 26.

http://af.reuters.com/article/metalsNews/idAFLDE68G0SH20100917

Do you know much it would take to bet to $9 billion?

Gusface

Jane said...

Peter, your arguments would be more convincing to me if you were happily using 20 year old technology yourself.

I'm not and I don't want to be doing so in the future.

KitchenSlut said...

Telstra is the biggest copper miner in Australia?

Short NBN Co!!! Buy Telstra!!!

Buy! Buy! Buy!

Peter Martin said...

Jane, I am glad you are not using 20-year old technology. I am sure you won't in the future - with or without an NBN.

JP said...

Peter, Access does indeed not say we need the NBN to get the GSP boost, but it does quantify a large boost from FTTN, the tax receipts on which, over the life of the NBN together with access charges would make the NBN completely self-funding.

Access also say, rightly, that the additional expenditure of doing FTTH over FTTN would yield additional GDP increases, but these are too hard to calculate.

So:
Increase of tax revenues from FTTH > Increase of tax revenues from FTTN > Funding cost of NBN investment.

Access say that the benefits of FTTN would "far outweigh" a $12.6b pricetag, and that the benefits of FTTH would be higher even than that.

Face it: Access's view is that the NBN would make us more money than we spend on it, so all arguments about missing out on hospitals are just vacuous crap.

The NBN *will* deliver soft, intangible social benefits, but it will also deliver cold hard cash from access fees, increased tax receipts flowing from higher GDP.

Just one more time for the slow: FTTN delivers enough tangible benefits to fund the NBN, and FTTH benefits are higher than FTTN benefits. Which bit of that do you not understand?

Peter Martin said...

JP

One of us has twice misinterpreted the Access Report.

Please don't talk about being slow.

I read the report as indicating the GDP benefit from building the NBN would be line-ball (bearing in mind the NBN would cost 3 times the $12.6b FTTN price tag).

The tax benefits would be only a portion of that.

JP said...

Peter, please tell me that because Access reported their GDP benefits in the form "$Xb over ten years" that you haven't assumed a project life for the NBN of exactly ten years, with GDP benefits falling to zero starting from year 11. Because that would be pretty embarrassing, wouldn't it?

Anonymous said...

1. Build NBN

2. ????

3. Profit !!

You missed the other justification, it's from South Park's satire of the Dot Com Boom, the Underpants Gnomes and has been a running joke ever since: http://en.wikipedia.org/wiki/Gnomes_%28South_Park%29

Peter you are absolutely correct with your assessment.

But like any foolish idea during the dot com boom these things are really hard to talk people out of.

Anyone who worked in IT and remembers the boom knew what it was like. I walked into shops and was offered jobs on the spot ( in the US ) after we'd chatted about what I did. It was insane.

I know engineers with decades of experience who are contemplating becoming fibre splicers because the NBN is going to raise demand for that so much. The cost of removing these people from normally productive jobs is probably not factored in.

But in the face of the madness of a crowd what can you do?

Anonymous said...

Peter said: "Mate I do work from home from time to time.The internet is probably slower at home, but (as for most workers) it scarcely matters for the work I do."

Try telling that to remote office workers or regional offices who connect to head office via terminal server or Citrix - no flash in browsers, no video, no sound. No video conferencing, no video training. Miserably slow upload speeds.

Once again, you seem to have no idea of the real world connectivity and bandwidth issues in regional areas. But not only regional areas - there are many metro areas with poor connectivity.

Provision of computer services is moving strongly towards virtualisation. (I administer 20 virtual servers and know of what I speak). VDI is making huge strides - this technology allows entire PC's to be served up over the web from hypervisor infrastructure. Major cost savings to business, because it essentially means desktop PCs (hardware) dont have to be replaced or upgraded. The desktop PC is just a way to login to the vitualised PC via VDI: http://blogs.technet.com/b/mkleef/archive/2010/03/10/brian-madden-shootout-we-re-there-and-talking-about-vdi-and-rds.aspx

This will be possible on a grand scale with the NBN and will likely may see the emergence of completely new businesses providing pre-cooked, latest technology high-end virtualised workstation PCs to people with old, modest PC's in their office or home. How will those very real possibilities be factored into cost/benefit analysis done today?

And, ignoring the fact that costing projections have actually been done for the NBN, exactly how many billion dollar (or even multi-million dollar) national government projects were/are always preceded by the type of cost/benefit analysis you and the Coalition are loudly demanding? Lets see what the Coalition fully cost/benefitted while in power.....oh, sorry, they didnt fully cost/benefit anything. Best not to mention that I guess...

Peter Martin said...

JP, The formulation is increase in the net present value of GDP over 10 years. Chart 4.9 shows that in the out years the increase in net present value of GDP collapses to $1.5 billion per year under the most generous of assumptions. It would collapse to even less under the less-generous assumption.

JP said...

Peter, your furious spinning has got me bored. I'll leave you with a quote from the Access report:

"Chart 4.9 is likely to significantly understate the potential longer-term benefits."

If you looked at Chart 4.9 you would have seen that sentence as it directly precedes the chart.

So $1.5b is hardly "the most generous of assumptions" unless you think that's somehow consistent with the quote above.

And that $1.5b p.a. (or another $30b NPV for years 11-30) is also the GDP boost for FTTN, remember? What does Access say about the GDP effect of FTTH? That it's higher than for FTTN, but tricky to say by how much. Again, using an estimate of GDP increase from an inferior technological solution is not "the most generous assumption" - it's pathologically conservative.

So I tell you what - I concede the point. Increased tax receipts alone may not fund the NBN entirely. To arrive at that, though, you need to assume that: FTTH benefits are no higher than FTTN, a point directly contradicted by Access themselves; and that the longer term benefits to GDP that Access left out because they are hard to calculate with any accuracy turn out to be $0 or close to it, despite the fact that Access said that they were likely to be "significant"; and that every estimate of benefit comes in at the low end of the range, not the high end.

And after all those worst-possible assumptions all you come up with is that the NBN is not quite 100% funded out of increased tax revenues. Add in access charge revenue, and it's self-funding again. And that's still without counting any of the other benefits in Access's report that the NBN would enable, or any savings made in maintaining the copper network, or any sale proceeds of thousands of tonnes of copper, or savings made by not needing to implement inferior band-aid schemes such as the $6b non-income-producing plan proposed by the Liberals, many of which would be needed over the lifespan of the NBN.

I'm serious: if you or anyone else thinks it's even vaguely likely that we won't get our $27b back, then construct a case that shows that, and see if its assumptions stand up as credible. I don't think you can. But I believe that you may well continue to insinuate that you could if only you didn't need to spend the time it would take shampooing the cat, or some such.

Anonymous said...

Thanks KS and Peter

Good to see you have the bit between the teeth,make sure that whip dont crack too hard

Ps you still havent acknoledged the VALUE of the COPPER WIRING

I suggest a refersher at Primary school in basic addition and subtraction


then a playlunch you can burn the 'spinning jenny"

Luddites

Anonymous said...

You still going on about this. It helped Labor win the last election because people want it. If Labor don't go weak knee the next nail in the coffin marked newspaper will be almost driven home by the next and it will help them win the next election.

Peter Martin said...

Dear CopperAnnon,

Yes, Copper has value. Extracting it from the thin wires going into each house might be difficult. It is routinely extracted from Telstra's underground ducts as they replace it with fibre, and yes , it is sold.

Dear JP, Access says it believes the chart is likely to significantly significantly understate the potential longer-term benefits for two reasons: It believes there are benefits it has not quantified, and it believes that net present value by its nature understates longer term benefits. Right?

It only graphs one of its four assumptions about the state of the labour market and discount rates - the most generous one.

Your suggestion that $1.5b p.a. starting net present value equates to $30b net present value over 20 years is laughable and sad. Net present value degrades with time.

Marek said...

Won't the copper belong to telstra and not the NBN anyway?

Not sure if you saw this article Peter

http://www.theaustralian.com.au/australian-it/telecommunications/telstra-move-to-close-exchange-worries-rivals/story-fn4iyzsr-1225913520295

would you agree that there is value to Australians in getting rid of these sorts of issues?

Peter Martin said...

Marek, You would be right about the copper belonging to Telstra, although at the moment other parties have rights to get access to it.

The behaviour reported in the Australian is a disgrace. Telstra uses every trick it can to deny competitors access. In the new northern suburbs of the ACT it erected cabinets it said were too small to take competitors ADSL equipment and turned out to be also too small to service enough Telstra customers).

Telstra should be split into separate wholesale and retail companies.

The NBN proposal is one (extremely expensive) way of doing it.

Marek said...

Are there any other cheaper proposals to split telstra out there?

Now that the miners have set a benchmark on what private companies can get the govt to do, I would think the compo telstra would be after would be huge

Sanchez said...

"By all means lets extend broadband to places where it is not, by satellite subsidy if necessary."

How do you propose to do that exactly? As many posters here have pointed out, the current speeds achieved over copper for the majority of users *cannot* be increased without completely redesigning the existing network. The NBN MkI was intended to do exactly that, and the proposal failed because it could not be done without compulsorily acquiring Telstra's network.

If you think that the speeds all Australians currently experience are sufficient, then no, we do not need and NBN. However, the current network *is* at its limit, and it will not be improved in the current environment. If you can suggest a better plan that will be able to meet our ever-growing data requirements, then I am all ears.

Peter Martin said...

"the current speeds achieved over copper for the majority of users *cannot* be increased without completely redesigning the existing network"

Heard that one before.

Heard it before ISDN,

Heard it before ADSL,

Heard it before ADSL2...

Good thing we persisted with copper in any case.

Maybe you're right this time.

Such a question would certainly form part of a proper cost benefit study.

I assume you agree we need one?

Sanchez said...

As others have noted, ADSL/VDSL/BDSL or whatever all achieve higher bandwidth by utilising ever higher frequencies to transmit data. High frequencies degrade rapidly with distance. Incredible speeds have been achieved in a laboratory environment, over distances of less than 300m. But even the most cutting edge copper technologies (or wireless for that matter) cannot ignore physics, and we *are* at the current physical limit of the network in most cases.

I'm not sure what you expect a CBA to achieve at this point, but I can provide a simple enough equation - the "cost" of building a FTTN network (that is, more 'exchanges' to get the absolute most of the existing copper network) was rejected through NBN MkI. The government could not agree with Telstra on suitable terms for Telstra to do it, and any other party needed to acquire Telstra's network, for which a figure of $20 billion was estimated as the necessary compensation. Plus of course the cost of the upgrade. And after all that you'd have a network that was slightly better than what you started with, but unable to be further upgraded without going to full fibre.

Alternately, for the sum of around $26 billion in direct expenditure, we can create an entirely new network, using proven, scalable, and effectively future-proof technology right now. In my mind this is far and away the most 'value for money' option that has been suggested to date.

Any honest cost-benefit analysis would have to be done in comparison to some alternate solution, of which none exist. $6 billion in private subsidies for wireless is not a solution, nor is $20 billion for a FTTN.

So again I ask, how do you alternately propose to 'extend broadband coverage' that does not involve an NBN?

Peter Martin said...

So again I ask, how do you alternately propose to 'extend broadband coverage' that does not involve an NBN?

Most of the NBN would not extend broadband coverage at all. It would _ at great cost - increase speed for households who already had coverage.

Extending coverage (and that's where the productivity benefits lie according the studies so far) could be done in a mix of ways.

And would be, even under the NBN

Sanchez said...

I think that's picking at technicalities. 'Broadband' is technically anything faster than 500Kbps. By that measure, yes, lots of people have access to 'broadband'. But I think increasing speeds and extending coverage are functionally the same thing.

Most people are stuck around 1Mbps due to poor lines, RIMs, or sheer distance to the exchange. Technically this is broadband, but I don't think it is sufficient. Even those who have access to ADSL2+, more than half get connections of 10Mbps or less.

With a lot of work, we could extend that 10Mbps DSL to a fair whack of the population, but that's about it for copper. For a lot of work we could extend a 0.5-3Mbps wireless network to more people ("bursting" to 12Mbps) but that's only technically viable in low-density areas.

If you want to do any better than that, fibre is your only option.

JM said...

Peter, about the "last legs" argument.

Your standpoint is technological cargo-cultism.

The fact is that there are laws of physics - Maxwell's Laws - that cannot be violated, and according to those copper IS on its last legs. Data rates at the required distance can't get much higher. They are maxed out.

To get higher data rates you either have to increase the frequency or increase the number of phases your signal is using.

Both options however reduce the distance over which the signal is effective. Copper has been at that point for about the last 5 years.

(The interesting, and key point, is that fibre is not bandwidth limited in the same way as copper. There is no distance limit for fibre.)

Yes, there are lab experiments that show huge data rates, but they are over very short distances - like 10 meters - not the 1.5km that is the minimum for economic deployment of copper to the premises. And critically those lab experiments use different wire from what is in the ground. They rely on 8 core CAT6/7 type stuff.

If you're going to the expense of laying new cable make it as high capacity as possible. Make it fibre.


Secondly, a lot of that copper has been in the ground for a long time and is starting to break. I have 3 lines running into my house (don't ask why), and one of them broke about 10 years ago and I didn't bother having it replaced. This will happen more often in the future.

So we're in a situation where we have to start laying replacement infrastructure. * Now we could do that slowly and use fibre instead of copper in an incremental fashion.

(see footnote ***)

That would work BUT no-one would be able to see any benefit until the penetration was high enough to allow new, higher speed services to be deployed generally.** I could have my broken line replaced with fibre for example, but since none of my neighbours had fibre no-one would offer me a higher speed service.

AND then the telco would have to bear the cost of terminating the fibre at the exchange just for little-ol-me. That is not cheap. The fibre equivalent of a DSLAM (ie. the ADSL modem rack at the exchange) is no cheaper, and requires just as much investment. How would they recover the cost? Unless they have fibre in the ground?

Basically they would charge me the full whack (ie. huge. I could probably put a deposit on a house instead) and so I wouldn't do it in the first place. It would be too expensive and so the telco would be forced to fallback to installing obsolete infrastructure - copper. We'd get nowhere.

There is such a thing as the network effect, and this is a network we're talking about. There's only one way to do it.

Build it out as fast and as extensively as possible.


* Also note that the prime cost of laying cable is physical and completely unrelated to the nature of the cable. Last time I checked the cost per meter of fibre was not a great deal higher than the cost per meter of copper. If you're going to lay cable these days, only buggy whip makers would lay copper.

** This is actually an extremely important point. Terminating ADSL and terminating fibre both involve expensive equipment. While the prime cost and initial investment is in the cable rollout, utilizing it is a different story. Unless the telco can get enough customers to justify the termination at the exchange they just won't do it. So incremental rollout is simply a fools response. It will never happen.

JM said...

Another point (which is footnote *** to the above)

*** Another thing I would say at this point is that the anti-NBN crowd behave as if the network infrastructure was built in the days of Alexander Graham Bell as is some sort of sancrosant ancient relic that is too expensive to replace.

Rot. Telstra rewired the country around the time of their corporatization in the 1970's. Back in the 1950's and 1960's you had two strand, fabric coated cable to the premises. But have a look at where the wire enters your house.

You see that white plastic coated stuff? It's 4-core and dates from only 40 years ago. We rolled out a new fixed line network 40 years ago and we can do it again.

JM said...

Peter

I'm sorry to harp on this but:

> Heard that one before.

is untrue.

Every one of those technologies - ISDN, ADSL, etc - were promoted as state of the art and fastest available at the time. Not one of them was promoted as "this is as good as it gets, and you will never get any better".

Except for V90 modems (56k). They were maxed out and the major manufacturer (US Robotics) made it clear at the time of the technologies introduction that it would be the last. They then tried to transition out of the modem market as they knew it was finished.

The other technology for which this has been said is ADSL2+

The statement is equally true.

Once you get beyond current speeds on copper you have to start talking about "wave guides" - which as Poss pointed out, the existing copper can't act as. It's got too many kinks, flaws and all the rest in it.

So you have to replace the copper. With. A. Wave. Guide.

What's the best, highest capacity, lowest cost wave guide material we know?

Fibre.

Get over it. The laws of physics always win in the end.

Then, with any new technology you have to terminate it at the exchange, and there is no way ADSL is going to get any cheaper.

Unless of course, Australia attempts to depart from mainstream technological development and create its own unique infrastructure that is unsaleable in the rest of the world (and probably second rate).

We'd become a backwater.

Quite honestly I get very frustrated on this sometimes as it seems many economic commentators think their knowledge trumps physical reality.

It doesn't. Nature cannot be fooled. Copper is dead. And it's time we buried it.

Peter Martin said...

Good posts JM, but copper dead and buried?

Most the of the world is persisting with it.

Maybe one day it will be dead and buried. But for now for most users of broadband it works well enough. By that I mean works well enough not to change. When given the opportunity to upgrade most people pass. (as many pervayers of faster alternatives know to their cost.)

Given that most users are happy the question is -- is it worth spending tens of billions upgrading?

It might be cheaper to fix wires as they break, where that's a problem. Just saying.

I would like a cost-benefit analysis for the wholesale upgrade before committing my money. Reasonable?

(Yes I know fibre would be that much faster. That would form part of the analysis.)

Just because something is really really awesome doesn't mean it's worth the money. That's why we don't have the very best possible roads and the like, and nor should we.

Re cargo-cultism...

I am probably the last person in the Blogosphere you could accuse of technological cargo cultism.

Accuse those who want to spend a fortune upgrading broadband because they are certain unspecified benefits * will * come.

Accuse those who want to spend billions without first establishing that there's a case.

But don't accuse me.

JM said...

Peter I appreciate your response and thank you for being so thoughtful.

But I think you missed the substance of what I'm saying.

1. Providers who are the ones who install cable. None of them in their right mind would install copper these days - unless the economic structure of the market is such that they have no choice. Such is the structure of the current market. Go and ask Telstra - today - for fibre. The price tag is huge and the householder can't afford it.

The NBN changes that equation. It makes the economics of operating a Telco different.

2. The cargo-cultism comment was based on your previous comments that somehow, somewhere us techies will come up with a solution.

Two points:-

a.) we already have, it's called fibre

b.) we cannot do it with copper

As Pos said earlier, there are laws of physics involved here.

The arguments that run "but technology changes so fast, we could be making a mistake" and "copper gets faster every year" and "something else will turn up" are bogus.

People who make those arguments remind me of the Knights Who Say Ni.

They ask for something better, they get presented with fibre and then say "No I want a shrubbery".

Sorry fibre is it. It's all we got, and it will last for at least a century.

JM said...

Sorry, just a follow up.

> It might be cheaper to fix wires as they break, where that's a problem. Just saying.


I thought I addressed this already upthread.

1. What do you replace it with? If copper you have no new benefit. You're stuck with buggy whips. This is the current situation.

2. If fibre you get the benefits, but this is a completely uneconomic proposition. To install fibre you have to terminate it at the exchange which requires expensive new equipment and you need a cost recovery model that goes beyond the current incremental approach - otherwise only large corporates can afford it. This is the current situation.

You can get fibre if you realio-trulio want it but it is hugely expensive.

That is not a model for rapid development of a new market.


* BTW - all those who argue that ADSL "can only get better" are ignoring basic physics - which indicates that it just flaming well can't - but also the way in which it was rolled out.

It was done as a large scale network build with new equipment in exchanges etc, etc, etc. And replacement of ADSL with any "new generation ADSL" (which doesn't even exist because it's pretty much physically impossible) would require a similar network rebuild with new termination equipment in the exchange (if not actual replacement of existing copper with higher grade stuff)

Exactly the same process in other words.

It's weird. It's like a form of bigotry. Copper good, glass bad.

Peter Martin said...

It's more -

Glass perfect, copper not as good but perhaps good enough.

It comes down to whether it is worth spending a horrifying amount on almost every household in the country (and destroying what they already have) in order to get perfection.

Monty Python would have had something to say about that as well.

I don't know the answer. I would like an examination of the (social and financial) value of Australia's biggest-ever infrastructure project before charging ahead.

By the way, here is the ACT TransAct * is * laying down optic fibre cable to the home in new suburbs - right now - as a market-based solution.

Worthwhile things happen all the time piecemeal without the need for massive government subsidies.

Look at the broadband we've got. A few year's back experts were saying we would never get it without massive government subsidies. They were wrong.

I not sure their successors are right this time.

JM said...

Peter, there's too much dodging and weaving between physical, technological and economic arguments in this. A lot of people - and I include yourself in this - are very fond of mixing all these up.

Some of the facts are simple. Physics doesn't allow faster copper. Sorry, just not possible. As indicated by the complete lack of any technology that will do it.

And the fact is that copper is no longer fast enough. 10 years ago The Age website made about 10 connections to load it's front page. Now it makes around 200. Amazon has shown similar growth, and even an apparently simple page like Google has shown similar growth in complexity (albeit via background connections established via Javascript and so not so visible in browser messages)

The fact is that if we can't get more bandwidth to the household we will increasingly be shut out of the world wide web. We have no control over what site owners do, especially those in other countries.

Fibre is faster, and is the only realistic alternative. And it's available as a commercial, engineered solution.

Then you come to the "do we roll it out fast or slow?" question.

Well, we have been rolling it out slowly over the last 10 years or so and it still doesn't have the scale to be commercial at the household without some sort of big-bang deployment.

Whether or not that involves subsidies and whether those subsidies are in the national interest are completely different questions.

But I really wish the opponents of the NBN would stop using bogus objections based on fallacious technological, physical and so-called business reasons.

None of them hold water, and are simply a distraction.

Peter Martin said...

When I hear people proposing a "big bang" I get very worried.

Especially when when the proposal has not been subject to a cost-benefit analysis.

Sorry mate. Cost and benefit matter. Especially when scale of the project is massive.

Regarding the technology...

The US will continue to access Amazon, and the like via copper.

Maybe the world's biggest economy is stupid.

Hang on, maybe it is. You're right, we can't discount that possibility.

Nevertheless I'd still like to run the ruler over it first. Reasonable?

JM said...

Of course it's reasonable.

I guess I'm just saying that you should

a.) fully understand the constraints on the half-baked, poorly understood or non-existant alternatives which generally have poor or next to no benefits and will so need replacement a few years after deployment

b.) fully understand that some seemingly plausible alternatives - like incremental rollout - are unworkable for all practical purposes

I guess I'm also echoing Poss's concern over at Crikey that a CBA might not be the right ruler. (I'm not an economist and I don't fully follow his argument but it seemed plausible.)

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