I was wrong on NBN: It’s a turkey

I was wrong on NBN: It’s a turkey, by Alan Kohler.

Unhappily, Australia’s national broadband network is a white elephant and, to mix metaphors, an albatross around the nation’s neck.

I say this by way of mea culpa: your correspondent was an enthusiastic supporter of it in the early days. I thought the fibre-to-the-home plan was a piece of courageous and visionary policymaking all too rare in Australia, and booed what I thought was the Coalition’s penny-pinching, politically motivated decision to cut it back to fibre-to-the-node.

It’s now clear that my colleague Stephen Bartholomeusz was right all along: the thing is a dud, a donkey, a pasty pachyderm, and it would have been much worse if the original FTTH plan had gone ahead.

Bevan Slattery, a serial builder of fibre networks (PIPE Networks, which he sold to TPG Telecom, and now Superloop) threw a metaphorical glass of water in my face recently, when he said the NBN was “like watching a car crash in slow motion”.

“It’s going to be to the most expensive and least utilised broadband network in the developed world.”

Well we weren’t blogging at the time, but we figured that spending $5,000 per household of tax-payer money to build a network that would otherwise happen by market forces under the usual $100 per month plans that most people have was just insane. Why bother? It’s not something people would spend their own money on. On top of that, government run projects are usually wasteful.

So it has turned out to be. I am writing this on a 100 Gb/sec connection, the nirvana promised by the NBN. But the NBN hasn’t arrived in our neighborhood yet; this connection is from a private provider. We have paid about $100 per month for years (which includes the house telephone), and gradually the speed increased — beating NBN without the government-mandated huge capital outlay, just natural market demand. We are told the NBN will arrive in 2018 where we are, maybe.

The numbers are simple, and inescapable. … The problem comes if, or rather when, the NBN has to earn a commercial return. To make a [return on equity] of 10 per cent, the NBN Co would need to charge $73 per month, or $US55.

A reseller margin of 40 per cent would take the Australian retail broadband price to [$101 or] $US77, which is more than Cuba’s $US72.50, but less than Bolivia’s $US81. And it’s an awful lot more than Britain’s $US25.95, where broadband network construction has been left to (the private) British Telecom. …

What’s to be done? Nothing. As an NBN insider told me with a rueful shrug this week: “We are where we are.”

Sorry about that.