NBN Waste

NBN Waste

Paul Fletcher MP

Labor has wasted billions on its bloated and rorted school halls and pink batts programs – but there is even greater waste and extravagance in the more than $50 billion being poured into the National Broadband Network (NBN).

Let me highlight just three of the many instances of waste and mismanagement in this program.

Trashing the HFC networks

Currently, both Telstra and Optus have HFC (hybrid fibre coaxial, or cable) networks which are capable of delivering fixed telephony, high speed broadband and also pay TV services.  This infrastructure was rolled out in the mid 1990s at a combined cost of about $8 billion.

The speeds available on the HFC (cable) broadband exceed 30Mpbs. Telstra offers a service in parts of Melbourne with speeds up to 100Mbps – comparable with speeds that will be offered by the NBN.

Perversely, under Labor’s NBN, Telstra and Optus will cease offering all cable services, except pay TV, and transfer them to NBN Co.  In turn NBN Co is using taxpayers’ money to pay Optus and Telstra for these customers.

As I wrote in my blog of 6 July, Optus quarterly results indicates the company has about 500,000 telephony customers on the HFC network. Optus is being paid $800 million to cease supplying these customers with services, and to transfer them to NBN Co – suggesting that NBN Co is paying Optus around $1600 per customer.

Telstra’s December 2010 financial results reveal that Telstra has around 7.3 million retail services in operation.  When you take the $4 billion that Telstra says it will be paid in exchange for disconnecting these services so they can transition to NBN Co, it produces a per customer figure of around $550.

NBN Co has refused to explain why it is paying Optus three times as much per customer as it is paying Telstra.  NBN CEO Mike Quigley refused to answer direct questions from me on this point at a recent hearing of the Parliamentary Joint Committee on the NBN.

The waste – in trashing existing high speed networks, built in the last fifteen years – is extraordinary.  The refusal of NBN Co to explain its rationale for paying so much is equally troubling.

 

Insistence on fibre

NBN is using an extremely expensive network design – fibre to the premises to 93 per cent of all premises (over 10 million premises.)   There are significantly cheaper network designs, for example using ‘fibre to the node’ which involves building optical fibre to ‘nodes’ serving say 200 premises, and then using the existing copper wires to run the last few hundred metres to each home.  This would save many, many billions – and yet could readily deliver speeds of 40 or 50 Mbps.  So Australia could receive a very sharp increase in broadband speeds to millions of people – for much, much less than NBN is spending.   The savings to the public purse could easily be ten billion dollars or more.

Coughing up $120 million for spectrum

NBN Co recently paid $120 million to acquire radiofrequency spectrum which it needs to deliver wireless services in rural and remote areas.  It bought the spectrum from pay television company Austar.  The very same company had agreed to sell the very same spectrum to a company called OPEL in 2008 – and it would have been used to build a similar rural wireless broadband network to the one which NBN plans.  (This was under a Howard government broadband program which Labor abruptly cancelled for political reasons.)  The interesting comparison is this: the price in 2008 was $65 million.  In other words, NBN paid almost twice as much as the established market price for this spectrum.

 As Malcolm Maiden wrote in The Australian on 17th February 2011, My conclusion? The NBN is huge, so are the cheques the NBN Co is writing, and there’s not enough in the public domain so far to know whether taxpayers are getting value for money.

Six months have flowed under the bridge since Malcolm Maiden’s comment, along with bucket loads of cash, and we – the taxpayers – are being kept in the dark.

Do you have your own story of Labor's waste, inefficiency and mismanagement of taxpayer's money? Hold them to account and tell us on the Tip-Off page.

About Paul Fletcher MP

Paul Fletcher is the Federal Member for Bradfield. From 2000 to 2007, Paul was Director, Corporate and Regulatory Affairs for Optus. Paul was first elected to the House of Representatives for Bradfield, New South Wales in 2009. Other posts by

  • http://twitter.com/NBNconcerns NBN Concerns

    No surprise that Paul’s written another swath of NBN-related misinformation. 

    Starting at the top:The Government investment in the NBN is $27 billion, not “more than $50 billion”. I know $50 billion sounds scarier, but you’re really not doing your credibility any good by lying about it.

    The HFC speeds you are quoting are dubious at best. As a former Optus exec, you’d be well aware that optus say that the only speed “guarantee” they make for cable is that “76% of cable customers can access speeds over 8Mbps”. In other words, a quarter of Optus cable customers cannot even manage a paltry 8Mbps. That a long way shy of your claimed 30Mbps (which is, by the weay, the maximum theoretical speed available on Optus cable for most of Australia). Telstra’s 100Mbps HFC in Melbourne cannot in reality deliver that speed, because the 100Mbps is shared by all users on that node of the network. 2 users = 50Mbps each. 4 users = 25Mbps each. etc etc. And therein lies the difference between HFC and fibre. The NBN is actually capable of delivering 100Mbps to each user, because that’s the committed bandwidth. The maximum is even higher than that though, at 1Gbps, rising to 10Gbps within about 5 years.

    The speeds you are quoting for FTTN are even more ridiculous than for HFC. There is no way on earth that FTTN nodes serving 200 homes could deliver 40 or 50Mbps. More like 8 or 10. To deliver 50Mbps, bonded VDSL2 (the fastest form of FTTN) requires a maximum copper length of 200 metres. Apartment buildings aside, how many areas of Australia do you think have 200 premises within 200 metres of each other? On top of that, the 50Mbps requires 2 pairs of copper (bonding). According to Telstra only 20% of premises have 2 pairs of viable copper installed, meaning the “last mile” of copper would need to be replaced anyway in 80% of cases to achieve your fantasy 40-50Mbps FTTN.

    NZ have just rolled out an FTTN system, and they have found that the average speed it provides is just 13Mbps. Having wasted billions on that, they have now decided to upgrade it to fibre to the premises, the same as the NBN. Germany have also come to the same conclusion. FTTN is an obsolete technology, being abandoned by those countries that have already rolled it out.

    As you well know, the Austar spectrum was sold to Optus for OPEL at a discounted price, because the deal included various other commercial deals between Optus and Austar. The $65 million they paid was most certainly not the “established market value”. I note that your nice cherry-picked quote from Malcolm Maiden’s article ignored several of his other statements, such as this: “Unwired, a member of Kerry Stokes’s Seven Group, received $10 million from Energy Australia in March last year for a smaller piece of the same spectrum. That suggests NBN Co should have paid Austar $140 million for its larger spectrum acquisition.” Perhaps more telling is the title: “Turnbull’s criticism of Austar deal a blinkered view”

    • Camot_91

      Well, just remember, how often does Labor stick to their word?
      More importantly, how often do they say theyl spend ‘x amount’, and then later we get reports of massive spending blowouts? typical labor. Theres no way in hell wel return to surplus….EVER. then again when was the last time Labor managed that?