‘Absolute BS’: Malcolm Turnbull defends the National Broadband Network from criticism that it’s too slow

One of the chief architects of the NBN has bluntly rejected one of the most persistent criticisms of the network, labelling it “absolute BS”.

Former prime minister Malcolm Turnbull has launched an impassioned defence of the National Broadband Network, labelling a core criticism of it “absolute BS”.

Mr Turnbull was the keynote speaker at the StartCon conference at Royal Randwick Racecourse in Sydney this morning. The event has brought together global experts to discuss what it takes to start and grow technology driven businesses.

After a speech spruiking the benefits of innovation in business and government, Mr Turnbull sat down for a chat on stage with Matt Barrie, the CEO of freelancer.com.

The NBN was always bound to come up. Before becoming prime minister, Mr Turnbull served as communications minister in the Abbott government, with responsibility for the rollout of the network.

Mr Barrie asked him about the NBN’s relatively slow speeds by global standards, which have frustrated some customers – particularly those who never actually experience the maximum speed advertised under their plan.

RELATED: NBN speeds remain a disappointment for many customers

“Despite spending $50 billion in Australia’s biggest infrastructure project ever, today we’re ranked 62nd for global broadband speed, 40 per cent slower than the global average,” Mr Barrie said.

Mr Turnbull cut him off before he completed the question.

“Those statistics are absolute BS, Matt. Absolute BS. There is no comparable developed country which has as ubiquitous availability of high speed broadband as Australia. I mean, seriously,” Mr Turnbull said.

“What about the United States? There are places in the United States, yeah, where there’s gigabit speed broadband. But there are plenty of places in the United States where you’re flat out getting dial-up.

“I just want to say this in defence of the NBN. Ubiquitous broadband is a really good idea. The way Labor went about it was certifiably insane. What I had to do – I inherited a mess, and I had to make the best of it, and you know what, the project is nearly complete. And it will keep on getting upgraded forever.”

Mr Turnbull in conversation with Matt Marrie, the CEO of freelancer.com, at StartCon this morning. Picture: Dylan Robinson

When the Coalition won government in 2013, it shifted the NBN from a fibre to the premises (FTTP) model to fibre to the node (FTTN). That was done in an attempt to reduce the amount of time and money it would take to complete construction of the network.

It also limited the maximum speeds available to customers, because the slower, pre-existing copper network was used to bridge the gap between each node and the homes connected to it.

Mr Barrie identified another problem this morning. He claimed the imperative for NBN Co to deliver a financial return for the government was indirectly limiting speeds.

In short, his argument was that the need to generate a financial return was increasing the overall cost of running the network, and as a result, forcing the NBN to charge higher wholesale prices than it otherwise would.

“The problem is the actual cost to run the network is so expensive that when retail service providers go to buy access, they don’t buy enough. They get congestion,” said Mr Barrie.

“In a way, because it’s mandated to generate a financial return for the government, it’s too expensive.

“Should we try and find ways to make the network more efficient?”

“This is a vexed issue, is the wholesale cost of the NBN too expensive. People complain about that,” Mr Turnbull said in response.

The loudest of those people are obviously the telcos, who have repeatedly claimed NBN Co is setting the wholesale price too high and eating into their profit margins.

RELATED: Telstra chairman slams National Broadband Network

“If we could take the speed limiters off, from being forced to generate a financial return, half the country would be at 500 Mb/s today, with the network as is,” Mr Barrie said.

In response, Mr Turnbull said he was missing the point.

“But Matt, they may well be able to have the capacity to be at 500, technically, but I don’t believe (customers) would pay for it. That’s the point,” he said.

“Look, the thing that I learned about broadband, the economics of it, is that people will not pay a premium for data rates above that level which gives them the functionality they want.

“I learnt that actually studying the history of Korea. Korean telecoms at the time – this is going back to the early 2010s – they had two products. They had a hundred Mb/s product and a 50 Mb/s product. And the difference was 3000 won (Korea’s currency) a month, which is not very much at all.

“People were turning from 100 back to 50, because they figured out they could get whatever they wanted to do with 50 rather than 100.

“The problem is that people will not pay much, if anything, of a premium for higher speeds. This is most people. There are obviously people that have particular use cases. So the economics of it is challenging.”

Mr Turnbull on stage at StartCon. Picture: Dylan Robinson

To further bolster his point, Mr Turnbull recalled a discussion he once had with one of the big Japanese telcos.

“They had a two gig domestic residential broadband product. And I was talking to them and I said, ‘Two gig, that’s amazing. Why two gig?’ He looked at me as though I was a complete idiot, and he said, ‘Two gig, twice as big as one gig.’

“The reality is, for Mr and Mrs Watanabe, there is nothing they can do with two gigs that they can’t do with one gig. And in all probability, nothing they can do with a gig that they can’t do with 100 Mb/s.

“One of the great fallacies of broadband economics is the assumption that the amenity, that is to say the use or the utility to the customer, of broadband increases with the data rate in a linear fashion. It absolutely doesn’t. But that is the sort of assumption that a lot of people in the tech sector just sort of blithely assume. It simply isn’t right.”

In other words, Mr Turnbull believes the speed issue is overblown.

He also highlighted the rise of streaming services like Netflix in the years since the NBN was first announced, saying that shift had drastically altered the nature of the industry.

“The assumptions underneath broadband have changed. If you go back when Rudd announced the NBN, back in 2008, we were talking about how long it took you to download a file, download a movie. What we’ve now got is a world of concurrent streaming,” he said.

“So instead of people needing, intermittently, a very high data rate, you’ve got everybody wanting, needing, a substantial data rate – it might be with a number of devices, it might be 25, 30, 40 Mb/s, it might be 10.

“The bottom line is, that has put so much more demand on the network.

“You actually have a finite amount of bandwidth, and the demand – because of the streaming phenomenon – is increasing at a rate that had not been anticipated, other than by some very wise people, until recently.”

Mr Turnbull ended with a fulsome defence of the NBN’s performance – if not its PR strategy.

“We beat up the NBN, and I’ve got say, they’ve done a terrific job from an engineering point of view at building the network. They have been hopeless at PR,” he said.

“You’ve now got to a situation where there are well over 10 million premises that can get access to the NBN. That is a hell of an achievement. They are literally activating 30,000-40,000 premises, signing up new customers, a week. It’s a tremendous achievement.

“Given the state of the challenge, given how well they have done compared to many other countries, I think they’ve got a lot to be proud of.”