In the NBN blame game, the government must bear the burden

IN THE NBN blame game, one expert says it’s not really your telco and or the NBN’s fault. There’s someone else you should blame.

AS THE blame game over Australia’s internet woes has reached fever pitch in recent weeks, the rollout of the National Broadband Network remains haunted by an old challenge, experts say.

The mandate for the NBN to become financially viable and pay back the money spent on the rollout to government coffers is at the heart of the controversial pricing structure that the NBN wholesaler charges to retailers — and seen by many as responsible for the issues experienced by end users who have moved onto the network.

NBN Co. says internet service providers aren’t buying enough bandwidth on the network for their customers, leading to congestion and slow speeds. Meanwhile ISPs like Telstra, Optus and TPG have been highly critical of the high costs levied against them.

While the NBN Co. and internet service providers point the finger at each other, ultimately the blame for the problems should be laid at the feet of government, says telecommunications consultant Paul Budde.

He believes there is a social value to the project that should be absorbed by the government, reducing the need for complex and expensive pricing models which he sees as “the core of the problem.”

“It is interesting but sad to see the blame game that is going on in the telecoms industry. As with so many of the NBN problems, at the core it is a problem created by politicians,” he wrote in a blog post Monday.

“This one goes back to the original NBN policy, as it was the Labor government who created the CVC monster.”

As a wholesaler the NBN charges ISPs a fee to access the network and another fee depending on how much bandwidth they want to purchase for their customers, known as the Connectivity Virtual Circuit (CVC) charge. The government is also planning on introducing a broadband tax to help pay for the regional portion of the rollout, slugging ISPs with a roughly $7.30 fee per end user, per month. As a result, Australians are facing some of the highest broadband prices in the world.

“The problem of course for the Labor government and the Coalition government was: how on earth can we finance this whole thing to actually get some money back in the kitty,” Mr Budde told news.com.au.

He helped organise industry consultation with Labor’s then Communication Minister Stephen Conroy in the early stages of the NBN project.

“I think a couple things from the very beginning went wrong and one of them is the CVC, that has basically created a situation that the more you use, the more you get charged ... and the bar was set very low” in terms of broadband speeds, he said.

“I’m not saying it’s an easy to solve issue but my argument from the very beginning — back in 2005 — has always been this is not just about internet access. This is also national infrastructure that can be used for education, healthcare, smart cities, smart buildings, you name it.

“So there is also a national interest value, a social value to the whole thing that doesn’t show up on the balance sheets of the NBN or the ISPs,” he said.

“This is a benefit that goes directly to the country ... And the government should actually calculate that into the business model.”

Basically, about half of the cost would be what the government likes to call good debt “to create digital infrastructure for the future” and the other half of the cost would retain the commercial model.

“Therefore you don’t need CVC and these complex price mechanisms and that’s the core of the whole problem,” Mr Budde said.

Broadband expert Paul Budde with his laptop on top of a mountain at Bucketty. Picture: Peter Clark

Whether we ultimately pay for it via taxes or higher prices from ISPs might seem like a moot point for some, but the difference could conceivably have meant fewer headaches for end users and possibly a better connection.

Mr Budde is also a proponent of the Labor-championed fibre-to-the-home, also known as fibre-to-the-premise. Although more expensive and more time consuming, he says it would have provided more opportunity to derive revenue from the network.

“A FttH model would have provided the NBN company with a range of other revenue options and the CVC would in that scenario not have become such a fundamental stumbling block as it is today,” he wrote in his post.

The company responsible for the rollout, NBN Co., has recently gone on a charm offensive to address customer confusion and complaints. Speaking to news.com.au last month, NBN boss Bill Morrow said a price war among ISPs vying for customers at lower speed packages was adding to the discontent among end-users.

“You’ve got this land grab mentality that’s producing a price war,” which is overshadowing concerns about quality and adding to the mismanagement of expectations over internet speeds, he told news.com.au last month.

But Mr Budde believes the price war isn’t the problem.

“Arguing that to make the failed government NBN policy work RSPs should simply increase the price to assist NBN earning more money from the higher priced services doesn’t make sense in a competitive market and simply will not work,” he wrote.

“The only solution for the government is to realise that their government-led roll out is not simply a commercial exercise.

“If it was based on commercial principles the roll out would first start in markets where they can charge a premium price. The government must realise that they can’t burden the NBN with an unrealistic return on investment.”