Why the NBN is a flawed plan and what needs to be done instead


Almost since first proposed by the Rudd Government, the NBN has been a political football and its development has taken several turns. We could go over the merits of the competing proposals, but that would be going over history on opposing arguments around cost and ability to deliver within the magical 2020 timeframe. And to what end? None of it could be resolved because alternative outcomes to what we have today are hypothetical.

What we can discuss with certainty is the NBN we have today and what Australia needs as we go forward into a data-heavy world.

Recap – the NBN today

The NBN can be defined as ‘last mile infrastructure’ in the sense that the NBN delivers the broadband from one of 121 ‘points of interconnect’ (POIs) around Australia. ‘Behind’ the points of interconnect, it is up to the retailer (who provides end-customers with their broadband) to connect them into the broader internet world. 

In broad terms, the NBN today is an aggregation of seven different methods of delivering broadband to end-customers, split into fixed line connections and fixed wireless connections:

Fixed line connections:

  • Fibre to the premise (FTTP)
  • Fibre to the node (FTTN)
  • Fibre to the curb (FTTC)
  • Fibre to the building (FTTB)
  • Hybrid-fibre-coaxial (HFC)

Fixed wireless connections:

  • Fixed wireless
  • Satellite

End-customers do not have a choice on the delivery method – the delivery method is determined by your location and the infrastructure which was already in place. The best outcome for end-customers is to have fibre to their premises which, as at the end June 2019, was the situation which applied to just under a quarter of households:

Why the NBN is a flawed plan and what needs to be done instead

 Source: NBN

This proportion is likely to fall by the end of the NBN rollout because it was earlier households who received fibre to the premise – later households are generally receiving one of the other delivery options.

Ideally, each of these delivery options would have the same delivery capability for the end-customer, but the reality is that each option is different in terms of the characteristics which matter to end-customers, like speed, reliability and latency (i.e. the time that a data packet takes to travel from one point to another). Fibre-to-the-premise (FTTP) is unequivocally the best – nothing beats fibre for speed and reliability and stated speeds for fibre are ‘the most true’ among the delivery methods.

Other delivery methods involve a mix of delivery platform, with fibre from the POI switching to copper or wireless between the node and the end-customer. The outcome for the end-customer will depend on the particular location of the end-customer and the infrastructure already in place. For example, the quality of a FTTN connection depends on several factors, including:

  • Distance from the node;
  • Population density (the number of other customers connected to the node); and
  • Copper quality.

Is the NBN flawed?

There has obviously been controversy around the speed and extent of congestion on the NBN, with complaints around speeds not being as great as advertised, constant drop-outs, broadband congestion, particularly in the evening peak and in some extreme cases, lower speeds for end-customers than they had prior to be switched over to the NBN.

However, to be fair to the NBNCo, not all of these complaints may be due to the NBN infrastructure itself, as the poor NBN broadband service could be related to the retailer not acquiring sufficient capacity, rather than the NBN infrastructure itself.

There could be a couple of reasons for this:

  • The retailer simply seeking better margins (by minimising the amount of capacity it acquires); and
  • 121 NBN POIs around Australia makes it incredibly difficult for small retailers to have any margin and this setup force retailers to acquire less CVC capacity from the NBN.

Since the initial ramp-up in delivery of the NBN, the situation has improved, as the NBN has made more CVC capacity available (and improved the charging regime to motivate retailers to offer greater capacity bundles), the ACCC has improved its monitoring of NBN service levels and retailer advertising, end-customers have become more informed and the market has become more sophisticated, with retailers differentiating themselves on aspects such as CVC congestion.

Where to from here?

While the NBN end-customer experience has improved, COVID-19 has highlighted that the collective broadband experience remains patchy and broadband capacity still has a long way to go. Our usage of data and ‘the need for speed’ continues to grow, as we download more data-heavy content (like video clips and streaming services) and utilise video conferencing facilities like Zoom, Google Hangouts, Microsoft Teams and a host of others.

Many households have struggled with the coincident broadband demand of children ‘zooming’ in to schools and parents ‘zooming’ in to work at the same time, at a time also when most other households are doing the same. Most people are only now beginning to also understand the importance of ‘upload’ speeds for video conferencing, something which has generally been ignored when people discuss broadband speed.

NBN was very successful in delivery of its main goals of delivering broadband for everyone and creating jobs within the economy (remember that the NBN in the aftermath of the GFC and job creation was a major consideration).

The Government was successful in creating tens of thousands of new construction jobs, construction and development contracts for a range of different companies and the establishment of a large number of new organisations during NBN rollout, but the quality of the broadband service is mediocre. So while the NBN fulfilled economical requirements, the next logical step would be to provide high quality broadband service to Australians. There are many examples around the world of how it can be done well.  In NZ, for example, private companies are doing extremely well in providing much of the high quality broadband service. 

In my opinion, the Australian situation would improve if the rollout will be handed to private companies – it’s commonly understood that competition motivates companies to provide the highest quality service/product at the lowest price. This approach will benefit end-customer. Of course, there are some areas which are less beneficial for a private sector rollout, namely lower density areas. This is where the Government can support and incentivise private companies. In fact, there are already several programs released by the State Governments to achieve this, with the NSW Government’s Gig State tender process being a notable example.

At this stage, with the NBN rollout almost complete, it would be beneficial to provide broader access to NBN infrastructure and an opportunity for private telcos to upgrade it to FTTP. There are a raft of private companies (such my own company, DGtek), which are already rolling out fibre to the premise and this will allow those private telcos to build their own architecture using only required NBN services. As a result, they will be able to offer lower prices and higher service quality. Also, the NBN currently utilises HFC in many locations and this is not well suited to upgrade – it is likely that, over time, those areas will require an upgrade to fibre and as highlighted above, the most efficient way for that to occur would be via the private sector.

David Klizhov is the CEO and founder of DGtek

Why the NBN is a flawed plan and what needs to be done instead