Broadband

Matthew James, Science, Technology, Environment and Resources

Key issue
The election debate focused on differences between the major parties’ competing broadband deployment plans. However, it is also important to compare Australia’s access rates with the rest of the world.

National broadband plans

National broadband plans are not unique to Australia. The International Telecommunications Union 2013 report, Planning for Progress: Why National Broadband Plans Matter, notes that there has been recent strong growth in plans, with some 134 plans in place by mid-2013. There is a preference for national broadband plans in European countries. The plans take different forms, such as legislation, policy frameworks, strategy and/or regulations.

In Australia, a plan for a National Broadband Network (NBN) was announced in April 2009 by the then Labor Government. Besides addressing Australia’s performance in broadband availability and performance, the policy foundation for the NBN was the structural separation of Telstra to prevent it from providing retail services on a fixed line network it controls.

An article in the Parliamentary Library’s Budget Review 2013–14 provides background on each of the major party’s NBN policy commitments prior to the election. Both plans would deliver access for all premises using a mix of technologies. The Labor NBN plan was to connect optical fibre to 93% of premises and use a mixture of satellite and fixed wireless for the remaining 7% of premises.

The Coalition Government’s plan retains the same solution for the 7% but uses a mix of technologies for the other 93% of premises. These premises are to be connected with optic fibre. This mix has three main components:

fibre to the node (FTTN), which runs fibre to a powered cabinet in the street that then connects to the existing Telstra copper lines running to premises
fibre to the premises (FTTP) for new estates as in Labor’s plan and
hybrid fibre coaxial cable (HFC) that is used for pay TV, internet access and telephony. HFC cables already pass more than two million premises, mainly in more affluent metropolitan areas.

Structural separation

The NBN is being built and run by a government-owned enterprise, NBN Co. This is a wholesale-only network, which does not provide retail services directly to end-users. Its customers are retail service providers (RSPs). Under the NBN model, Telstra stands on the same footing as the many other RSPs in the market. As the fibre network is rolled out, Telstra will cease to provide retail services over the network it controls—the copper network—consistent with the legislative definition of structural separation.

For many premises, copper lines will continue to be maintained by Telstra under an agreement with the Australian Government in order that standard phone and payphone services can continue to operate pursuant to the universal service obligation.

The Coalition also supports structural separation of Telstra, but, as its technical solution requires the use of Telstra’s copper lines to the premises, it proposes to buy the copper lines from Telstra. The Coalition asserts that it will be able to acquire the copper lines from Telstra without further cost beyond those contemplated by agreements already in place with Telstra.

Australia’s broadband performance

According to a report from the Australian Bureau of Statistics, there were 12.2 million internet subscribers in Australia in 2012, with over 98% of internet connections being broadband. There were also six million wireless broadband connections. Advertised download rates that recorded the highest number of users—5.4 million subscribers—were in the 8 megabits per second (Mbps) to 24 Mbps range. In the 24 Mbps or greater range, there were over 1.6 million subscribers.

According to the authoritative Akamai report, The State of the Internet: 1st Quarter, 2013, the average global connection speed (or data transfer rate) is 3.1 Mbps. The global average peak speed (maximum measured speed) is 18.4 Mbps. South Korea had the highest average connection speed at 14.2 Mbps, while Hong Kong had the highest peak speeds (63.6 Mbps). Australia ranks in the middle range.

The OECD Communications Outlook 2013 report notes that advertised broadband speeds are based on download data rates. However, an exception to this approach is broadband plans where data capacity is limited by data-capped offers which seem to occur in only a few Organisation for Economic Co-operation and Development (OECD) countries.

Fixed and mobile access

The OECD report also notes that, in some countries, mobile broadband providers are increasingly advertising broadband capacity at levels much closer to those of fixed broadband offers. The OECD median capacity for September 2012 for broadband mobile at 12 Mbps is not far from the fixed broadband median rate in 2010 of 15.4 Mbps. This keeps alive a debate on fixed and mobile access.

Points of difference between plans

The Coalition promises a faster completion date and lower costs compared to the Labor plan. The fact that the Coalition’s plan has a target of 20% of premises getting fibre directly seems to suggest some recognition that FTTP is desirable. Speaking for the Coalition, Malcolm Turnbull stated there would be a strategic review of the time and costs to complete the NBN on the current specifications and the implications for consumers.

Funding

The Labor NBN involved peak government equity of $30.4 billion with NBN Co having peak debt funding of $13.7 billion. The forecast total was thus $44.1 billion in peak funding. The Coalition forecast total peak funding of $29.5 billion for its plan, all of which could be public funding if required.

NBN Co’s Corporate Plan 2012–2015 states that the rate of return on invested funds will be 7.1%, which means that the Government’s equity injections are not treated as outgoings in the Budget (they are thus ‘off-budget’). Similarly, the Coalition will require NBN Co to provide a positive after-inflation return on government equity invested after the election with the aim of allowing those contributions to be off-budget. In both cases, assumptions underpin the calculations.

NBN rollout

NBN Co has revised down its rollout targets from its first corporate plan for 2011–2013 which had forecast that the fibre network would pass 1,268,000 premises by 30 June 2013. The 2012–2015 corporate plan revised that forecast down to 341,000. On 4 July 2013, NBN Co stated that it had actually passed 207,500 fibre premises which fell within the revised target range it had set since the last corporate plan.

Key issues for the Coalition Government’s plan

A challenge for the Coalition Government will be the need to renegotiate aspects of the agreements that NBN Co has with Telstra, in order to to allow the use of Telstra’s copper lines which would otherwise be decommissioned under Labor’s FTTP plan. Related to this is the challenge of keeping the NBN investment ‘off-budget.’ Malcolm Turnbull, now Minister for Communications, has also already acted to change the NBN Board.