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Issue #1801      November 1, 2017

NBN under privatisation burden

The government-owned National Broadband Network Company (NBN Co) was intended to provide nationwide super-fast internet connections. But it’s now in crisis because of government decisions, especially the former Howard government’s decision to fully privatise Telstra, the nation’s publicly-owned telecommunications organisation.

The cost of installing the NBN cable infrastructure has rocketed far above the Rudd government’s original estimates, and there’s an enormous backlog of complaints from users about internet access and speed.

A recent ABC Four Corners program revealed that NBN customers are receiving internet speeds far lower than people in New Zealand, where a government-installed broadband network is now providing typical download speeds of 100 megabits per second.

The NBN Co CEO, Bill Morrow, has indicated that the company may have to request special funding to complete the project, or may ask the government to write off $29.5 billion from the debt.

The source of the problem

NBN’s economic burden originated in the privatisation of the nation’s telecommunications cable infrastructure. If Telstra had remained in public ownership the new fibre-optic NBN cables could have been installed with maximum efficiency, direct to each property, by Telstra’s highly-trained employees, threading the cables through the organisation’s vast network of subterranean tunnels and ducts. Instead, the NBN Co must now pay privately-owned Telstra about $1,000 for each property connected to the Broadband network.

In contrast, while the New Zealand government privatised the retail arm of its telecommunications organisation, the infrastructure remained under government control and a Broadband network is now being introduced with great efficiency, minimum cost and excellent results, using fibre to the premises (FTTP) connections.

After Telstra was privatised, its CEO Sol Trujillo wanted to install a fibre-to-the-node (FTTN) network serving only 50 percent of the population, and to have a regulatory-guaranteed monthly subscription rate of $95.

The Rudd government subsequently decided to introduce a national broadband network. Installation of the new fibre cables was to be managed by the profit-driven NBN Co. Access and data installation (CVC) charges would generate $5 billion per annum by 2020, and the NBN Co would be sold off five years after the 2018 anticipated completion date.

Private firms were not involved. They would have given preference to installation of the network in densely-populated urban areas, where profits are greater than in regional areas. The government did not prepare a cost-benefit analysis, just a preliminary implementation study. It assumed that the high costs of installing cables in regional areas would be offset by efficiencies in densely-populated urban areas, but costs began to soar immediately.

Bad decisions and corruption

When Labor lost the 2013 election, Communications Minister Malcolm Turnbull sacked the NBN Co board and attacked Labor for extravagance, announcing that as a cost-savings measure most of the fibre cables would terminate at “node” installations in the street, with existing copper phone cables making the final node-to-premises connection.

Rumours persist that this decision was made to placate media magnate Rupert Murdoch, who bitterly opposed the “fibre to the door” policy.

The decision had appalling consequences. Internet speed is inversely proportional to the length of the copper cable from node to premises. The longer the cable, the slower the operating speed, and the use of copper connections has resulted in thousands of complaints about unreliability and slow speeds. Virtually all the complaints concern copper connections or delays in installation.

Customers have no say as to whether they’ll receive copper or fibre connections. It’s a bizarre technological lottery. For example, all the houses on one side of a street in Dubbo in NSW have ended up with copper connections; those on the other side got fibre.

Many of the problems arise from competing commercial interests. The internet service providers manage the final connections to premises. To get the business, they must pay an access charge for broadband bandwidth.

Naturally, the NBN Co wants to maximise the charge, while the service providers want to pay as little as possible and load up their bandwidths with as many customers as they can get away with.

The result is internet congestion and long delays in peak hour internet connections. In the Four Corners program one NBN customer in Brisbane showed it was quicker to take a USB, copy of a file and transport it across a city to the recipient by car, rather than waiting for a broadband internet download.

Internet service providers allocate responsibility for the installation of NBN cables to subcontracting firms. However, there are long delays in completing work, and the qualifications of some subcontractors are highly questionable. The Four Corners team was told of one technician who tried to connect separate fibre strands with a copper cable.

Which way to go?

Minister for Communications Mitch Fifield says the current NBN project will become the envy of the world and most customers are happy to maintain FTTN connections rather than pay extra fees for fibre to the premises. Bill Morrow says 12.5 megabits per second is OK for most people. But few FTTN customers are getting value for money and most are seething over the deal.

The situation in not in the national interest. The private owners of Telstra have made a fortune from the organisation, and they’re now intent on screwing the taxpayer for the rent of fibre cable space in tunnels and ducts that should never have been privatised.

In order for Australia to gain a world class broadband system, the government will eventually have to eliminate the FTTN connections and provide full fibre connections to all premises.

The NBN Co is scheduled for sale in 2023. But Telstra should never have been privatised, nor should the national broadband network, which is crucial to the social and economic life of the nation.

Rather than paying a king’s ransom to the private sector every year, the government should nationalise the entire telecommunications system and ensure its development by taking full advantage of new technological innovations.

But, of course, it won’t. The self-appointed task of conservative governments is to serve the interests of the major corporations; that’s why Telstra was privatised in the first place. Taking on big capital will only be tackled by a progressive coalition of political forces, in which the Communist Party plays a major role. That’s the way to go.

Next article – Deliberate, callous, calculated

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