to your boundary. Theoretically unlimited download and upload speed. Unless
you live in what is described as a Rural or Remote area which means that there
are alternatives such as radio and satellite. These give lesser, but still very
adequate, speeds by today’s standards. The technology for this is well
known and the first satellite is in orbit.
With FTTH the only theoretical constraints on speed is all the back-end infrastructure
but currently the actual constraint is the products that the NBN chooses to
sell on to network retailers.
At the moment if you want broadband you have two alternatives – if you
ignore the NBN which is rolling out at a pace slower than . If you are reasonably
lucky and live where they installed the Hybrid Fibre Coax (HFC) network so you
could have PayTV you can have a pretty good high-speed data services. The more
people who are on your segment the slower it becomes but if it has been maintained
(which the Optus network hasn’t) it is quite good.
As a minor diversion I was on the tender evaluation team for the Telstra HFC,
looking at the IT infrastructure proposed by the various vendors. I thought
that it was a really important determinant in the process only to be told later
that the winner had the lowest cost of coaxial cable which was the largest part
of the cost. And therefore decided the winner.
By the way the best way to think of the NBN as a company is by saying it is
rather like Telecom Australia used to be – a network monopoly. Yes they
broke up the 300lb gorilla just so that they could have a new one 25 years later.
Which rather demonstrates that all the economic and competition theory in the
world usually falls flat in the face of reality and, dare I say it, common sense.
The barriers to entry to building a new fixed network to reach everybody are
very large and prohibitively expensive. Far better to cherry-pick the cities
and businesses which are highly concentrated domains; this naturally is what
happened and means that the CBDs of all the big cities are awash with fibre
optics ….but that is as far as it goes.
And if you want to know the biggest telecommunications capacity overbuild look
at the Sydney Melbourne route. In a process of blithe perversity everybody with
a road, powerline, or railway thought that it would be a no-brainer just to
run a bit of fibre between the two major capital centres so much so that much
of the fibre will never be lit as there is way too much capacity for any foreseeable
future. It’s amazing that anybody gets up the Hume without tripping over
all the glass. This is analogous to building a coal or iron ore mine because
of current demand and high prices on the assumption you are the only people
in the world with the same brilliant idea. Ten years later there is massive
over-capacity in iron ore and coal and the market collapses. Just like now.
Let nobody tell you that people in business are bright; they are as deluded
as anybody else, just better paid.
In the burbs where it’s all copper wire, and pits and pipes, nobody is
going to duplicate the existing copper network or even build a better one simply
because it you built a better one you would be required to wholesale it to your
competitors. And it is bloody expensive to build and maintain as well.
Telstra was compelled to wholesale access to its network at prices that were
determined by the ACCC, a process likened to somebody owning an airline but
being compelled to sell seats on its aircraft to its competitors at prices determined
by an accountant on the 30th floor of an office building in Turkistan. If you
want to know the basic principle underlying the ACCC network cost model it was
that the price was determined on the basis of a ‘best practice network’,
not the one that was actually there. Which in many places was, and is, just
a tad old and tired. Rather like building Aston Martins out of string, rivets,
wire and hand-formed aluminium using old-world craftsmen and having to sell
them at the price of a Hyundai.
But competition actually stopped innovation. Let me give an example. Exchanges
are terribly old-fashioned in their architecture. It may have fibre going to
the exchange but it is soon demodulated into electrical signals on bits of copper
heading in the general direction of your house. Manual connection of thousands
of copper wires strung through what is called Main Distribution Frames is the
order of the day; which means that if you want to change to another supplier
for either a telephone or ADSL service a man with a map goes in and manually
changes connections on something that looks like an enormous 19th Century loom.
With all the unintended errors and waste of time. Of course this could have
been done electronically years ago but that would have meant that Telstra, who
owned all the MDFs which were in its exchanges would be helping its competitors.
Let us just say that the old world of Telstra and its competitors was heavily
regulated and not very competitive because if it was competitive Telstra would
have annihilated its competitors. The only place where there was competition
was in the mobile market which was new and required a much lighter infrastructure
build. Just a lot of towers with microwave links to other towers if you wanted
to do the minimum. And still Telstra dominated the market simply because the
competition was rather average.
Now common sense would have said that if you wanted to build an FTTH network
why not get Telstra to do it. After all it owned the entire infrastructure,
the pits, pipes and exchanges. It wouldn’t require extensive duplication
of existing bits and bobs. And it was good at building stuff, it was a good
engineering company and it had the money. And Telstra had scores of internal
studies describing and costing all the options, not just theirs but what their
competitors might do. And it had lots of money.
Malcolm’s ‘cheap’ NBN called Fibre to the Node is one option
that Telstra proposed to the Labor Government over twenty years ago when the
NBN was first raised as a thought bubble – perhaps from one Mr Conroy.
The cost, from memory was $15.8 billion, and would have given a minimum 25Mbps
to pretty much everybody. This was a bit less than the $50 billion plus mooted
for the current option. Whatever that is. But it never happened because a FTTN
solution negated all Telstra’s competitors networks that were housed in
Telstra’s exchanges. Customers would have been happy and Telstra would
have been really happy. But of course it was non-competitive. And Telstra viewed
this as an interim solution as it knew that the only real way to do the job
properly was to go Fibre To The Home.
So what is Fibre to the Node?
Remember I said that copper wires wandered out of the exchanges up various ducts
and then to a pillar and thence to your home (unless you are on the HFC). That’s
how your broadband and phone arrive in your house no matter who you are with.
Now there is nothing particularly wrong with copper – it is actually quite
durable and a good electrical conductor - but in bundles of 200 cables or more
it rather does interfere with itself especially as ADSL speed go up and more
and more esoteric smarts are employed . ADSL broadband, which employs some very
complex algorithms, provides less and less speed the further you are from the
exchange. What FTTN does is bring the exchange closer to your house by putting
a whole lot of big boxes within a couple of kilometres of where you are. They
are not cheap being full of not only electronics but also 48 Volt batteries
so that your phone should you have one continues to work even if the power fails.
Yes, another regulatory requirement
It is only an interim solution and really no cheaper. And it is a lot uglier
Do the job once and do it properly.