"The War Is Over" 90% Of Australia Getting Fiber Home After $10B Telstra Deal

Written by Dave Burstein Sunday, 20 June 2010 13:39
The first stage of Australia's NBN is about to go live in Tasmania. A price war has brought the price of 25 megabits (low cap) down to $26 (U.S.). Meanwhile, Telstra and Mike Quigley's NBN have cut a deal. For about $10B, NBN gets ducts, other facilities, and an agreement Telstra will move customers to NBN and ultimately shut down the copper network instead of competing. The price is a little high, but the government is paying to silence opposition.
NBN started because Telstra wanted so much government money for DSL/FTTN the government asked "Why not run fiber all the way home?" The logical next question was "If public money is paying for the network, why should we give it away to a private company?"
The NBN is a campaign issue across the front pages of the newspapers. The politicians will make some more noise, but without Telstra pulling the strings they are unlikely to stop the build. The last 10% will probably be wireless, a sensible compromise. Grahame Lynch at Commsday asked for some comments and I replied:

NBN deal a good thing but don’t overstate the benefits
Some perspective from the other side of the world in New York City. Ultimately, having a great Internet is a good thing for any country. The cost to Australia of this deal is high enough to create opposition today, but looking back after a decade I'm sure almost everyone will think it was the right move.
Experience from other countries points to issues ahead. Britain’s separation has worked marvelously on the retail level and brought British prices down 20-30% from where they likely would have been.
There are some great deals. If you’re already a SKY customer for TV, they will give you a low end DSL line for free and a pretty good connection for $10-20 - plus the eleven pound line charge to BT.
BT has a monopoly in wholesale across half the country and a weak cableco in the other half, giving them market power they take advantage of. Implicit in the NBN proposal is that it will have strong, perhaps monopoly control over the wholesale part of the network. NBN costs will have to be watched by an outside body very closely. NBN will be a quasi-governmental monopoly likely to become wasteful or bloated unless done right. Government bodies can be run well, but far too many aren't.
Both the economic and social benefits of broadband are wildly overstated almost everywhere. There’s a social return to better broadband, but it’s far, far lower then the hype suggests. Most of the numbers thrown around are from shills and zealots. Honest academics looking for the effects find only modest ones.
Tasmania getting faster net connections will not transform the local economy, although it’s likely to help a little. Kids will not do markedly better in school because their home Internet is ten times faster. Rather few net jobs are created by broadband. Some sectors do better, but others—newspapers, bookstores, local TV programming—do worse. If efficient distance learning takes off, it will displace some local teachers. Again, a mix of true believers and shills for the companies wanting government support have wildly exaggerated the likely benefits.
It is absolutely essential not to try to do too much, too fast. Operating procedures and billing turn out to be much harder to get right than anyone expects and take time. Literally thousands of crews will need to be trained, which takes 6-18 months. Untrained crews take twice as long to do an install (literally) and drive up costs. We learned this during the DSL Hell years at the turn of the century. Five years later, AT&T re-learned that lesson. They pushed too hard and U-Verse came in two years late and billions over budget. Verizon FiOS on the other hand went very slowly by plan the first three years. It consistently met the schedule and budget.
Ultimately, a better Internet is of important value, but there are many lessons learned the heard way of what can go wrong.
Written by Dave Burstein Sunday, 20 June 2010 13:39


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