A tale of two networks
When Paul Twomey is in Sydney, he has dinner a couple of times a week with his parents, who live in Brisbane.
Twomey is the former CEO of the Howard government’s National Office for the Information Economy who now lives in the US, where he is, effectively, the man who runs the internet.
He is president and CEO of the Internet Corporation for Assigned Names and Numbers (ICANN), which is the private non-profit company that coordinates the worldwide system of domain names and IP addresses.
Anyway, the way he has dinner with his parents is via a high-speed internet-based videoconference. They each have a large flat screen on the table during the meal and he says it’s like being in the same room with them; they forget it’s a videoconference.
Talking to Paul Twomey over lunch yesterday provided a glimpse into what life could be like with a fibre-to-the-home National Broadband Network (Long live the 'New NBN'?, April 7). He uses videoconferencing all the time; when he travels, which is a lot, he often just leaves it on, connected to his family in California, as they both go about their business, chatting as if they’re together.
Twomey is enthusiastic about high speed broadband, especially in healthcare, and about the internet in general. He sees growth from 1.5 billion users now to 3 billion by the end of 2010, almost entirely in the developing world.
But as he talked, I couldn’t help wondering whether everyone would want videoconferencing. In fact, he agrees that they won’t. Much of the growth in the internet from here, he says, will be in mobile handsets.
It seems to me that even if the NBN does not cost as much as $43 billion (which it won’t) retail access to it will still have to be quite expensive – possibly as much as $100 a month. To provide a commercial return on the investment, therefore, it would be better if there was no more $30 a month broadband internet available, as there is now.
But could a Labor government really impose an expensive fibre monopoly on us, with videoconferencing and streamed movies, whether we like it or not?
Of course not: there would be national outrage if the copper network and cheap ADSL broadband were not maintained and everyone was “taxed” to pay for Kevin Rudd’s NBN.
Very high speed fibre at $100 a month must be just an alternative, not an enforced replacement (unless you could buy capped access to the fibre for $30 a month).
Two questions then:
- Does the government-controlled NBN company own both the copper and the fibre networks?
- Do either of the networks make a commercial return, whoever owns them, if Australia’s meagre and widespread customer base is split between them?
The answer to the first depends a lot on whether Telstra is part of the NBN or not.
If it is, then Telstra will bring its copper into the tent. Telstra would be structurally separated, effectively becoming a retail telco, and the separate wholesale network owner would be a monopoly that offered both copper and fibre.
Alternatively, the NBN company could close the copper network and do everything on fibre with a range of prices.
If Telstra did not come into the tent, then it would be outside the tent with ADSL competing against the NBN company’s fibre.
The new Telstra CEO, David Thodey, would now have a team crunching the numbers on these two scenarios, and it is entirely possible that they will find the second scenario more appealing than the first. It is impossible to guess at which it will be.
But Thodey and the board might decide that Telstra’s future lies in being an integrated, cheaper “everyman” alternative to the more expensive, 100-megabit per second fibre.
Which brings us to whether either of them makes a commercial return.
Big users such as state governments and corporations would probably switch to the NBN, and possibly become shareholders as well by vending in their own existing networks, both virtual and real.
But even so, network profit margins in Australia are about to be crunched. I don’t have the resources to work out whether a commercial return on investment will end up being made but the margins and returns will be less than they are now – although of course without a commercial there will be no network business at all.
We do know, however, that the NBN is definitely going to be built as fibre to the home, not fibre the node that uses copper for the last mile.
We will therefore have two national networks capable of providing broadband internet – one pretty fast and reasonably cheap (ADSL); another very fast, and more expensive (FTTH).
It’s possible that the fibre could do everything, and the copper closed down, but only if Telstra volunteers that. And it will probably only do that if it can see a fibre network monopoly at the end of the road, even if it’s structurally separated.
But here’s the stunning punch line for this shaggy fibre story: Paul Twomey’s videoconferencing link in Sydney, with which he has dinner with his parents in Brisbane, is 2 megabits per second ADSL, not 100 over fibre.
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