The top 10 NBN myths debunked

26 September, 2010

The “Top 10 Myths” list below relates to the original Fibre To The Premises (FTTP) NBN, proposed and commenced by the Labor Government in 2009. It will not be changed to reflect the 2013 Coalition Government’s downgrade of the NBN to Fibre To The Node technology.

For a generic assessment of FTTN, please visit the “Why Not FTTN?” page, and to follow the promises and progress of the Coalition’s NBN policy, visit the “Fraudband watch” page.

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Top 10 Myths of the NBN

List content last revised March 2013

1. The NBN will cost taxpayers 50/70/90/100 billion dollars. We can’t afford it and it’s uncosted

False

The total capital cost of the NBN is budgeted at $37.4 billion dollars. Of that, the government investment is set at $30.4 billion. The remainder will come from revenue and NBN Co’s private debt. Unlike most Government expendiature though, the NBN is forecast to return all of the Government funds, plus interest, by 2034. It is forecast to begin repaying the Government funds in 2020.[1]

The $50 billion figure often quoted by Malcolm Turnbull is deceptive. It’s a “rounded up” number achieved by adding the NBN capital cost ($37.4bn), together with the payments to be made over time to Telstra for the leasing of their pit, pole and exchange network ($11bn). However, these payments to Telstra are operating expenses, which are paid from the revenue of the NBN. They take place gradually over its lifetime and do not add anything to the Government or debt funding required to build the NBN. Claiming they should be included in the cost of building the network would be akin to adding the cost of electricity to run the Opera House for 30 years to its build cost.

The project has been fully studied and costed by NBN Co and respected independent firms. The 2010 KPMG-McKinsey NBN Implementation Study found that the network could be built for $42.8bn (this was prior to the Telstra deal), would not have any net cost to the Government and would have an estimated net value of $40bn in 2025, earning a return on investment (ROI) of 6-7%, which is more than enough to repay the debt and equity used to build the project.[2] The NBN Corporate Plan has also been independently analysed by respected global corporate advisor Greenhill-Caliburn, which found the revenue and cost projections in the business case were reasonable.[3]

More detailed information about funding the NBN here


2. If it were viable, the private sector would build it

False

a. The private sector could not afford it. ~$37bn is a huge investment for any company, and well beyond any telco operating in Australia.

b. The private sector demand a ROI of at least 15%, because they need to earn a profit for their shareholders. The NBN has a projected 7% ROI[1]. While this is well below commercial rates, it’s quite acceptable for a Government, which is not seeking to earn a profit.

It has been demonstrated that the private sector only builds the most profitable infrastructure. You only need look at the HFC networks built by Telstra and Optus in the 1990s. They only cover the most densely populated sections of a few capital cities. A network built under such a basis would not achieve the Government’s desired aims of universal broadband access across the country.

It has also been demonstrated that when the private sector does build super-fast fibre broadband networks, the monthly costs are far higher than those provided under the NBN. In South Brisbane, where Telstra was forced to replace their copper with fibre due to a need to move the telephone exchange, the wholesale pricing is about double that of the NBN for slower speeds.[4]

3. We will never need that much speed or data

False

This claim ignores the massive growth in average internet speeds that have occurred over the relatively short lifetime of the internet. As speeds continue to grow, new applications are quickly developed to take advantage of those new speeds. MP3 files and iPods, YouTube, Skype, HD video, Cloud storage. None of these applications were possible until sufficient bandwidth became available. The Cloud is probably the next Big Thing, but with current broadband speeds in Australia, we will be unable to take advantage of the opportunities it presents.

Check out this graph showing the increase in the  speed of internet access in Australia. Due to the limitations of wireless and copper systems, the only way we can maintain this increase is to move to a fibre-based system.

Historic and future internet speeds

4. Noone else in the world is installing such a system

False

Fibre-To-The-Premises or Home (FTTP/H) is currently being rolled out in over fifty countries around the World, including New Zealand, Canada, the UK, Germany, Norway, France, Sweden, Kenya, Qatar, Japan,  Singapore, Malaysia, Hong Kong and China.[5] Google have announced they are building a trial network to cover up to 500,000 homes in the USA,[6] which complements the Verison FiOS network already covering over 12 million premises.[7] South Korea have announced that they are now spending US$26 billion on upgrading their old 100Mbps FTTB network to full FTTP in order to deliver speeds of 1Gbps, the same as the Australian NBN.[8] This is happening even though they already have a 4G wireless network.

The OECD actually recommends that Governments build FTTP networks.[9]

5. Our internet speed is good enough

False

Australia has amongst the slowest available broadband speeds in the developed world. This is a huge impost to new technologies for business and education. Where FTTP is available, the cost is so high that only the largest businesses can afford it.

Australia’s average speed of just 1.7Mbps is less than 1/30th of the average speed available in Japan, and about 1/3 of the average speed in the USA.[10] Even the Slovak Republic and Turkey have faster average internet access than Australia! What a disgrace.

As FTTH networks are rolled out around the world, we are moving further and further behind.

The dismal position of Australian internet speeds

6. A Wireless (eg 4G, LTE, WiMax) or DSL (ADSL2+/VDSL/HDSL) network can provide the same speed for a fraction of the price

False

More detailed information about wireless here and here

Much is claimed (usually by those with a vested interest) about the potential of wireless networks, with speeds such as 300Mbps being quoted. But this is highly deceptive, because those are peak speeds per cell site (ie per tower), not realistically achievable speeds for individuals. For example if the “300Mb” tower has just two users active, then speed is halved to 150Mbps. A trial of “4G/LTE” in 2009 showed that with just 20 people using any one tower, speed plummeted to just 7Mbps.[11] Distance, topography, buildings and weather also degrade available speeds. To put this in perspective, if only 2% of Australians wanted to be able to access even the slow 7Mbps speed at any one time, we would need to double the number of mobile phone towers across the country. For wireless to be an effective alternative to fibre, we would quite literally need a tower on every street corner.

LTE speed falloff for distance and congestion

DSL (Digital Subscriber Line) is a technology most familiar to us as ADSL, which uses a normal copper phone line to deliver data. While it’s true that variations of this technology can achieve about 300Mbps, this is reliant on extremely short distances along with a technique called bonding, which uses two pairs of copper phone lines. So to achieve these speeds you’d need to run a second phone line into your house, thereby eliminating the supposed cost advantage of DSL over fibre, despite delivering speeds that are a fraction of fibre’s capabilities. The other massive problem with any DSL technology is distance. At just 3km from a phone exchange, DSL speeds fall to around 10Mbps.[12] This makes it unsuitable for many areas outside dense metropolitan areas.

So why are these alternatives being pushed? Because many of the people doing so either own companies who distribute 4G wireless technology and/or they own small CBD-based FTTP networks. If you owned a FTTP network and could charge thousands of dollars a month for access, how would you feel if the NBN arrived offering the same speeds for a tenth of that price?

ADSL and VDSL speed comparisons

DSL speed falloff over distance

7. People don’t want fixed internet, they only want mobile

False

There is no doubt that people want some data on the move, and wireless connections are the fastest growing (in number) of all data connections. However wireless is a low volume convenience solution that can never physically replace a fixed connection for large amounts of information. The growth in this market is predominantly smartphones and handheld devices such as iPads. Mobile broadband is not making any inroads to high-volume home or business internet connections. Wireless’ high latency (lag) makes it unsuitable for gaming, video conferencing and VOIP just for a start. Average costs per MB are over 10 times higher than for fixed connections but only offer around ¼ of the speed, making them impractical and uneconomical for high-volume use.[13]

The NBN will not preclude the ongoing development of wireless internet, and companies will continue to upgrade their wireless systems in the future. But these will always supplement fixed internet, not replace it.

The NBN will also allow for a huge expansion in affordable and fast wifi hotspot locations (like McDonalds and Starbucks), which will add to the mobile data options available to the public.

The Australian Bureau of Statistics has found that while the number of 3G/Wimax mobile broadband subscribers is rapidly increasing, the amount of data they are downloading is actually falling, while fixed broadband downloads continue to increase rapidly (50% per year), and the number of fixed broadband connections continues to grow. The data downloaded over ADSL and Cable networks is growing 16x faster than data over mobile broadband. These figures support the view that mobile broadband is for low volume, convenience use, while fixed broadband is high-volume.[14,15]

Fixed v mobile download volume in Australia December 2009 to December 2012

Fixed v mobile download volume in Australia December 2009 to December 2012

8. It will be too expensive to have an NBN connection

False

Skymesh have released NBN broadband pricing starting at $29.95 per month.[16] and iiNet subsidiary Pennytel, have released NBN broadband+phone bundle pricing starting at $60 per month, including unlimited data at 25Mbps and unlimited national phone calls. [16a]

Telstra’s 25Mbps NBN pricing is exactly the same as their ADSL2+ and cable broadband pricing. [17]

9. It will cost thousands of dollars to install it into my house

False

NBN Co will install fibre into your home during the build for no cost, providing you with 4 data ports and 2 phone ports.[18] Simply plug your current wireless router and cordless phone into that socket, and you’ll get your internet and phone anywhere in the house, just like you do now. There is no need to rewire your house unless you want hard-wired access in other places of your home.

10. Fibre optics only last a maximum of 15 or 20 Years.

False

Manufacturers now quote an average lifetime of 60 years for fibre-optic cables,[19] which is about 10 years more than the typical underground copper cabling we have now. Fibre-optics are also unaffected by water penetration, unlike copper cables. Maintenance costs are much lower for fibre than copper.[20]

Nortel Networks report that they are running over 100Gbps over 15-year-old fibre networks without a problem, saying “The age of the fibre has nothing to do with it any more, thanks to the dispersion compensation techniques we use.”[21]

References:

[1] NBN Co 2012 Corporate Plan

http://www.nbnco.com.au/assets/documents/nbn-co-corporate-plan-6-aug-2012.pdf

[2] KPMG-McKinsey National Broadband Network Implementation Study

http://www.dbcde.gov.au/broadband/national_broadband_network/national_broadband_network_implementation_study

[3] Greenhill-Caliburn review of NBN Corporate Plan

http://www.dbcde.gov.au/__data/assets/pdf_file/0015/132711/Review_of_NBN_Co_Limiteds_Corporate_Plan-Executive_Summary.pdf

[4] Why we can’t trust Telstra with FTTP

http://www.zdnet.com.au/why-we-cant-trust-telstra-with-fttp-339318902.htm

[5] Fibre To The Premises by country

http://en.wikipedia.org/wiki/Fiber_to_the_premises_by_country

[6] Google announces experimental FTTH network plans

http://www.lightwaveonline.com/fttx/news/Google-announces-experimental-FTTH-network-plans-84040427.html

[7] Verison FiOS

http://www.lightwaveonline.com/fttx/news/Google-announces-experimental-FTTH-network-plans-84040427.html

[8] South Korea spending US$26bn upgrading their NBN

http://gigaom.com/2009/02/01/by-2012-koreans-will-get-a-gigabit-per-second-broadband-connection/

[9] OECD finds public sector savings support FTTH roll-out

http://www.telecompaper.com/news/article.aspx?cid=708649

[10] https://nbnmyths.files.wordpress.com/2010/09/speed-and-penetration.png

[11] https://nbnmyths.files.wordpress.com/2010/09/lte-speeds.jpg

[12] Broadband Forum VDSL comparison

https://nbnmyths.files.wordpress.com/2010/09/dsl-speed-comparisons.jpg

[13] http://www.broadbandbuddy.com.au

[14] ABS: Wireless broadband continues to boom, but downloads drop

http://www.arnnet.com.au/article/361411/abs_wireless_broadband_continues_boom_downloads_drop/

[15] Australian Bureau of Statistics: Internet Activity, Australia, Dec 2010

http://www.abs.gov.au/ausstats/abs@.nsf/mf/8153.0/

[16] Skymesh NBN retail pricing

https://www.skymesh.net.au/services/nbn/fibre/plans.php

[16a] Pennytel NBN bundle pricing

https://www.pennytel.com.au/penny-broadband/nbn-deals

[17] Telstra Bigpond bundle pricing

http://go.bigpond.com/bundles/?cid=ZBP_access_1_bp_bundle_280411_title

[18] NBN Co Frequently Asked Questions

http://www.nbnco.com.au/wps/wcm/connect/main/site-base/resources/about-nbn-co/faqs

[19] Optical Fiber Lifetime Calculation

http://www.sterlitetechnologies.com/pdf/KnowledgeCenter/AN0001%20-%20Optical%20Fiber%20Lifetime.pdf

[20] http://www.arcelect.com/fibercable.htm

[21] http://www.itwire.com/business-it-news/technology/26656-current-backhaul-networks-wont-support-the-nbn-says-nortel


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