The NBN is coming down the line

The National Broadband Network is finally ramping up its connections.

25/01/2016. Noel Penfold of Murray Darling Fisheries commenting on how the NBN rollout has benefitted his business and it's dealing with overseas customers. PIC: Kiley Blatch for The Australian.

Murray cod farmer Noel Penfold used to live in a broadband blackspot. But since hooking up to the National Broadband Network, he has more than tripled his exports of native fish to China.

“The internet was very poor before that,” he tells The Australian from his fish farm outside the NSW Riverina town of Wagga Wagga. “I was doing virtually all the business on the phone. Most of the business now comes through the internet, I can sit down and look at it night.”

Having a reliable connection allows Penfold to communicate with buyers in China.

“There’s a lot of opportunities in China,” he says. “It’s a little bit down at the moment because their economy is down a bit. But once their economy fires again, the internet will be amazing.”

Penfold’s story is one of the successes of the NBN. Such a success, in fact, that he is cited by NBN boss Bill Morrow and Liberal MP Paul Fletcher, the former parliamentary secretary for communications, to proof that the network makes a difference in rural areas.

But ahead of an election where Labor wants to again make the NBN a battleground, just as in 2010 and 2013, the government-owned NBN and the Coalition are about to come under pressure. They need to roll out more success stories such as that of Penfold.

Malcolm Turnbull’s promise of a “faster, cheaper” NBN is about to confront major tests on multiple fronts. NBN Co has promised to ramp up the rollout dramatically so that it doubles the footprint every year. That means the NBN will have to be rolled out to more homes and businesses in this financial year than it has in the entire period since NBN Co was set up by Labor in 2009.

In another test, the deployment of the nascent “multi-technology mix” will scale up. This controversial model is at the heart of the Coalition’s NBN model and relies on Telstra’s 100-year-old copper network and pay-television cables rolled out in the 1990s, instead of Labor’s all-fibre plan.

NBN’s chief executive Morrow says 2016 is crucial because Australia lags behind in the “globally driven digital revolution”.

“While NBN alone is not enough to close the gap, it plays a critical role by providing universal broadband access and a structure that fosters retail competition,” Morrow says. “As a result, 2016 becomes crucial for NBN to scale the deployment and take up rate. By mid-2016, one in four homes will be able to order an NBN service.

“This will grow to three out of four by 2018. (This year) is also a game-changer for remote Australia particularly, as we will start connecting remote homes and business to Australia’s own dedicated broadband satellite.”

Labor maintains that the rollout plan is about making Turnbull look good at the election.

RMIT University’s Mark Gregory — who has previously called the Coalition’s NBN policy a “lemon” — agrees the rollout and connection targets have been “artificially lowered” for 2016 and ramped up for 2017-19. “Expect a lot of ho-ha about meeting these targets and going beyond,” he says.

An industry insider who declines to be named voices similar sentiments. “All of the work to date is a continuation of the technology put in place earlier on, just with lower targets. The real test will be what is actually delivered this year,” the executive says.

To be sure, there has been more rollout progress than under Labor.

According to the most recent statics, as at January 21, more than 1.6 million homes and businesses were passed or covered by the NBN (1.7 million when satellite is included). More than 700,000 are connected to the network via providers. Last month, 10,000 homes were connected each week, compared with a rate of 4000 in December 2014.

At the 2013 election, 300,189 premises were “passed” by the NBN (excluding satellite). In December 2013, a strategic review confirmed delays, cost blowouts and a culture that was “widely seen to be a major problem”.

However, the project continues to be dogged by some of the same problems. The review forced Turnbull, then communications minister, to break an election promise of giving all Australians access to 25 megabits per second speeds by 2016, though it also showed that Labor’s NBN could not be done on time or budget.

The most recent corporate plan last August showed a staggering cost blowout of up to $15 billion due to far greater construction costs than first expected.

One executive who deals with NBN staff says that “some of the same old cultural dynamics still exist, a bit in that it’s an organisation of engineers and specialists and, to some degree, ­believers. They love their dreams, and they love to gold-plate the infrastructure, and they are always keen for a bit of capex (capital expenditure).”

But Morrow points to the NBN’s recent track record on deployment. Here, it has met operational targets. At the end of the 2015 financial year, there were 1.2 million premises “ready for service”, meeting a target set in 2014.

Morrow says he is confident the future targets will also be met. Yet he admits a rapid ramp-up presents its own issues. “There are naturally challenges of a project of this scale and complexity, and it’s worth remembering Australia is unique in offering a broadband upgrade to every single home and business,” he says.

“We have to ensure we have great relationships with the construction industry building the network, the service providers selling the service and, ultimately, the end users who are experiencing the product. We also have to ensure our processes are built for the ramp-up in numbers, and demand and our technology can demonstrate the ability to scale fast.”

Geoff Horth, the chief executive of Australia’s fourth-largest telco, M2, believes the NBN is better equipped to meet targets. “We do have some confidence in the rollout schedules now,” he says.

Another industry figure agrees. “It’s got a little bit easier for this management team because there’s probably a lower chance for a change of government, so they’ve got all their contractors pretty much in for the long haul.”

While much of the political focus is on if the project hits targets, John de Ridder, a former Telstra chief economist, fears this misses the point. “I just think this macho thing about doing it quicker and cheaper, which in one sense they are fixated on, is kind of missing the point, which is: is it going to be affordable and useful when we have it?

“And there is very little attention being given to that, and that’s what scares me.”

Communications Minister Mitch Fifield responds that one of the NBN’s five strategic imperatives is to build affordable products. Many internet providers offer NBN services, “which is driving competition and creating value for consumers and businesses”, he says.

The usefulness of the project will become more apparent as a raft of towns “go live” and gain greater access. These towns include NSW’s Dubbo, Victoria’s Ballarat, Queensland’s Mackay, Western Australia’s Mandurah and the Northern Territory’s Tennant Creek and Alice Springs, creating a multitude of regional media photo opportunities.

At Roxby Downs, a mining town in northwest South Australia, construction of the NBN starts later in the year. Roxby Downs council administrator Bill Boehm doesn’t think people “are waiting with bated breath” as communications there are “pretty good”, a legacy of mining investment. But he says the community will be able to “compete and have better communications generally” when the NBN is rolled out. “It will be advantageous for the local community … it will just make it more efficient and effective in that it will be a lot quicker,” he says.

Others are frustrated by the long wait for ultra-fast internet.

Luke Anear, a former private investigator on workers’ compensation claims, founded a successful start-up in Townsville, SafetyCulture, that develops safety apps. NASDAQ-listed Atlassian has tipped money into it.

Anear says the NBN’s early rollout to Townsville is a boon. “The difference between having the NBN or even fibre internet versus ADSL is night and day.”

But for his 21 staff in Sydney’s inner-city Surry Hills — where there is no NBN — it is “very, very difficult”.

“Start-ups have people in multiple places. We’ve got staff in Townsville, Sydney, Kansas, Canada and The Philippines, and soon to be San Francisco and the UK. Video is the next best thing to being there. But you can’t run video conferencing very well across ADSL. It just doesn’t support the bandwidth anymore,” Anear sighs.

“We’ve got engineering teams trying to discuss how we are building products for our customers and you’ve got every third word dropping out and coming and going, and people repeating themselves. You can’t run a business like that these days. We end up going back to a phone.”

Even though the start-up has two ADSL2+ lines and three wireless 4G modems in its Sydney office, it paid a telco to install non-NBN fibre.

Before the contractors turned up, Anear says “we had staff who were getting ready to work from home because of the frustrations with the array of modems and networks that we have”. While he won’t be paying the setup cost, he will pay $1099 monthly on a 24-month agreement for the connection. It’s money “which could be going towards someone’s wage”.

As enthusiasts wait for the project to reach their area, de Ridder says the NBN risks becoming “rapidly sidelined” as consumers use their portable devices to get broadband.

“People vote with their hip pockets and we can all see that mobiles are the flavour of the month. Everybody loves mobiles, including for broadband.” He says the longer the rollout takes, the more keenly that will be felt.

Fifield counters that the NBN has considered the issue of mobile broadband as part of its planning. He points to the most recent corporate plan, which found that despite the developments on 4G, mobile traffic was steady at seven per cent of internet traffic.

There are still areas of unresolved policy. The NBN is consulting with industry on a controversial usage charge that reaps revenue as services such as Netflix consume vast amounts of bandwidth. That is expected to be announced before the election and could lead to a fall in the cost internet providers incur in delivering services. The government is consulting on how to fund the losses from NBN building satellite and fixed wireless services in the bush by imposing a levy on competing operators of fixed-line ultra-fast broadband networks.

Ahead of the election, Labor plans to target the Coalition’s NBN as “second rate” because of its use of copper laid in the early 20th century.

However, the Coalition has largely neutralised the project; it has fallen away from the headlines outside the business pages and is rarely raised in question time.

By June 30, about 500,000 homes and businesses will be able to opt for a service using the fibre-to-the-node technology relying on Telstra’s copper, with 1.34 million able to get the Rolls-Royce fibre-to-the-premises.

Jason Clare, Labor’s communications spokesman, acknowledges the party cannot promise to “pull out every node or stop all the work that NBN are doing right now without potentially causing more problems or wasting a lot of sunk investment”.

“I’ve made it clear that if you vote for Labor at the next election, you will be voting for more fibre. I can’t just click my fingers and go back to an all-fibre model.”

Fifield counters that there are “obvious” differences between the way the parties have approached the NBN, as it “will be completed years sooner — and will be far less expensive — than Labor’s proposition”.

Amid the political debate, Gary McLaren, chief technology officer at NBN Co until 2014, says Australia is a broadband laggard. He ­laments the lack of bipartisan policy on the project.

“What Australia lacks is a clear decisive political view about whether fibre investment is going to be private sector competition led, with competing companies who have incentive to invest to grow and maintain market share like most developed countries, or … a public sector led model like New Zealand and Singapore where the government and taxpayer dollars are put in to build a future-proof network for fibre investment,” McLaren says.

For his part, Turnbull has previously said that if private companies “did the job” and taxpayers subsidised the rollout in areas such as the bush, “the upgrade to high-speed broadband would probably already be complete, and certainly would have cost a lot less”.