Below is reproduced the
text of the website NBN MYTHS.
interspersed my comments in RED
The website is, according to the "about" tab, written by "Jamie" who is
a firefighter/Hazardous materials technician who runs a photography
business in the Blue Mountains.
Jamie proposes some exaggerated "straw man" stories about the NBN, and
then "mythologises" them.
The top 10 NBN myths debunked 26 September, 2010
With the NBN and its related myths constantly evolving, this list was
revised in August 2011
1. The NBN will cost taxpayers $50 billion dollars. We can’t afford it
and it’s uncosted
The total capital cost of the NBN is $36.9 billion dollars, not $50
billion. Of the $36.9bn, the government investment is set at $27
billion. The remainder will come from revenue and NBN Co’s private
debt. Unlike most Government expendiature though, the NBN is forecast
to return all of the Government funds, plus interest, by 2034. It is
forecast to begin repaying the Government funds in 2020.
The $50 billion figure often quoted by Malcolm Turnbull is deceptive.
It’s a “rounded up” number achieved by adding the NBN capital cost
($36.9bn), together with the payments to be made over time to Telstra
for the leasing of their pit, pole and exchange network ($11bn).
However, these payments to Telstra are operating expenses, which are
paid from the revenue of the NBN. They take place gradually over its
lifetime and do not add anything to the Government or debt funding
required to build the NBN. Claiming they should be included in the cost
of building the network would be akin to adding the cost of electricity
to run the Opera House for 30 years to its build cost.
The project has been fully studied and costed by NBN Co and respected
independent firms. The 2010 KPMG-McKinsey NBN Implementation Study
found that the network could be built for $42.8bn (this was prior to
the Telstra deal), would not have any net cost to the Government and
would have an estimated net value of $40bn in 2025, earning a return on
investment (ROI) of 6-7%, which is more than enough to repay the debt
and equity used to build the project. The NBN Business case has also
been independently analysed by respected global corporate advisor
Greenhill-Caliburn, which found the revenue and cost projections in the
business case were reasonable.
No Jamie. It's more like
leasing the Opera house for forty years after blackmailing the owners
(under threat of not getting any more mobile bandwidth) to sell it to
you cheap. If nobody comes to the opera, you still have to
pay the lease.
2. If it were viable, the private sector would build it
a. The private sector could not afford it. ~$37bn is a huge investment
for any company, and well beyond any telco operating in Australia.
What about Telstra Jamie? It
could borrow the money if it made commercial sense. The problem
is, it doesn't. In the meantime the Australian people are losing
the opportunity cost of that investment.
b. The private sector demand a ROI of at least 15%, because they need
to earn a profit for their shareholders. The NBN has a projected 7%
ROI. While this is well below commercial rates, it’s quite acceptable
for a Government, which is not seeking to earn a profit.
It has been demonstrated that the private sector only builds the most
profitable infrastructure. You only need look at the HFC networks built
by Telstra and Optus in the 1990s. They only cover the most densely
populated sections of a few capital cities. A network built under such
a basis would not achieve the Government’s desired aims of universal
broadband access across the country.
But "Jamie", I like to think that
Australia's limited capital resources are being used efficiently.
That means most profitable. This will take money away from
schools, hospitals, roads...
It has also been demonstrated that when the private sector does build
super-fast fibre broadband networks, the monthly costs are far higher
than those provided under the NBN. In South Brisbane, where Telstra was
forced to replace their copper with fibre due to a need to move the
telephone exchange, the wholesale pricing is about double that of the
NBN for slower speeds.
As explained above, that is the
real cost without government subsidies to "sell" it to the
electorate. And why did you not compare pricing for higher speeds?
3. We will never need that much speed or data
Now "Jamie"! This is an
example of overstatement. Obviously, some day we might need that
much speed and data. But not right now, probably not for decades,
and not at all those remote locations.
This claim ignores the massive growth in average internet speeds that
have occurred over the relatively short lifetime of the internet. As
speeds continue to grow, new applications are quickly developed to take
advantage of those new speeds. MP3 files and iPods, YouTube, Skype, HD
video, Cloud storage. None of these applications were possible until
sufficient bandwidth became available. The Cloud is probably the next
Big Thing, but with current broadband speeds in Australia, we will be
unable to take advantage of the opportunities it presents.
Jamie. You really should not
overstate your case. Even on my mobile computer (2 Mbits/sec) I
can access the cloud.
Check out this graph showing the increase in the speed of
internet access in Australia. Due to the limitations of wireless and
copper systems, the only way we can maintain this increase is to move
to a fibre-based system.
Historic and future internet speeds
Something is wrong about this
graph "Jamie". The LHS scale at the top reads 100,000 max speed,
which is 100 Kilobits per second, not 100 Mbits per second. Even
ignoring that, if the current(2012) average in Australia is about 2
Megabits/sec as shown on your next graph, how does that relate to the
approximately 40 Megabits shown on this graph for 2012? In any
event, the graph shows an order of magnitude increase in speed every
eight years. So by 2020 our speeds would be only about 20
1,000 Megabits per second as your graph purports to show.
The other remark I should make is that not everything in commercial
practice keeps growing exponentially. For instance commercial
air transport reached a speed of about Mach 0.85 (which is around 950
KM/H) as far back as the 1970's. And it has not increased
much since. (Except for the ill fated Concord, which was a
commercial flop. Perhaps we should call the NBN
4. Noone else in the world is installing such a system
Fibre-To-The-Premises or Home (FTTP/H) is currently being rolled out in
over fifty countries around the World, including New Zealand, Canada,
the UK, Germany, Norway, France, Sweden, Kenya, Qatar, Japan,
Singapore, Malaysia, Hong Kong and China. Google have announced they
are building a trial network to cover up to 500,000 homes in the USA,
which complements the Verison FiOS network already covering over 12
million premises. South Korea have announced that they are now
spending US$26 billion on upgrading their old 100Mbps FTTB network to
full FTTP in order to deliver speeds of 1Gbps, the same as the
Australian NBN. This is happening even though they already have a
4G wireless network.
The OECD actually recommends that Governments build FTTP networks.
Come on "Jamie". Speed (DSL)
depends on distance from exchange or Node. South Korea is less
than half the size of the state of Victoria, and has 50 million people
whose per capita income is $32,000 per annum. Obviously it is
cheaper to deliver faster broadband in densely settled places like
South Korea and Singapore.
5. Our internet speed is good enough
Australia has amongst the slowest available broadband speeds in the
developed world. This is a huge impost to new technologies for business
and education. Where FTTP is available, the cost is so high that only
the largest businesses can afford it.
Australia’s average speed of just 1.7Mbps is less than 1/30th of the
average speed available in Japan, and about 1/3 of the average speed in
the USA. Even the Slovak Republic and Turkey have faster average
internet access than Australia! What a disgrace.
As FTTH networks are rolled out around the world, we are moving further
and further behind.
"Jamie", why do you keep using the
word AVERAGE. Australia has a very dispersed population, which
means that we have many remote users, which reduces the average value
in comparison to densely settled countries.
The dismal position of Australian internet speeds
6. A Wireless (eg 4G, LTE, WiMax) or DSL (ADSL2+/VDSL/HDSL) network can
provide the same speed for a fraction of the price
Much is claimed (usually by those with a vested interest) about the
potential of wireless networks, with speeds such as 300Mbps being
quoted. But this is highly deceptive, because those are peak speeds per
cell site (ie per tower), not realistically achievable speeds for
individuals. For example if the “300Mb” tower has just two users
active, then speed is halved to 150Mbps. A trial of “4G/LTE” in 2009
showed that with just 20 people using any one tower, speed plummeted to
just 7Mbps. Distance, topography, buildings and weather also degrade
available speeds. To put this in perspective, if only 2% of Australians
wanted to be able to access even the slow 7Mbps speed at any one time,
we would need to double the number of mobile phone towers across the
country. For wireless to be an effective alternative to fibre, we would
quite literally need a tower on every street corner.
My Exetel mobile telephone plan
costs $19/month, and includes 1.5 Gbits at a speed of about 2
MBits/sec. But I only use it when wifi is not available.
LTE speed falloff for distance and congestion
DSL (Digital Subscriber Line) is a technology most familiar to us as
ADSL, which uses a normal copper phone line to deliver data. While it’s
true that variations of this technology can achieve about 300Mbps, this
is reliant on extremely short distances along with a technique called
bonding, which uses two pairs of copper phone lines. So to achieve
these speeds you’d need to run a second phone line into your house,
thereby eliminating the supposed cost advantage of DSL over fibre,
despite delivering speeds that are a fraction of fibre’s capabilities.
The other massive problem with any DSL technology is distance. At just
3km from a phone exchange, DSL speeds fall to around 10Mbps. This
makes it unsuitable for many areas outside dense metropolitan areas.
So why are these alternatives being pushed? Because many of the people
doing so either own companies who distribute 4G wireless technology
and/or they own small CBD-based FTTP networks. If you owned a FTTP
network and could charge thousands of dollars a month for access, how
would you feel if the NBN arrived offering the same speeds for a tenth
of that price?
ADSL and VDSL speed comparisons
DSL speed falloff over distance
7. People don’t want fixed internet, they only want mobile
There is no doubt that people want some data on the move, and wireless
connections are the fastest growing (in number) of all data
connections. However wireless is a low volume convenience solution that
can never physically replace a fixed connection for large amounts of
information. The growth in this market is predominantly smartphones and
handheld devices such as iPads. Mobile broadband is not making any
inroads to high-volume home or business internet connections. Wireless’
high latency (lag) makes it unsuitable for gaming, video conferencing
and VOIP just for a start. Average costs per MB are over 10 times
higher than for fixed connections but only offer around ¼ of the
speed, making them impractical and uneconomical for high-volume use.
The NBN will not preclude the ongoing development of wireless internet,
and companies will continue to upgrade their wireless systems in the
future. But these will always supplement fixed internet, not replace it.
The NBN will also allow for a huge expansion in affordable and fast
wifi hotspot locations (like McDonalds and Starbucks), which will add
to the mobile data options available to the public.
The Australian Bureau of Statistics has found that while the number of
3G/Wimax mobile broadband subscribers is rapidly increasing, the amount
of data they are downloading is actually falling, while fixed broadband
downloads continue to increase rapidly (50% per year), and the number
of fixed broadband connections continues to grow. The data downloaded
over ADSL and Cable networks is growing 16x faster than data over
mobile broadband. These figures support the view that mobile broadband
is for low volume, convenience use, while fixed broadband is
8. It will be too expensive to have an NBN connection
Exetel have released NBN phone/broadband bundle pricing ranging from
$34.50 to $99.50 per month. Their entry-level 12Mbps bundle at $34.50
is around 30% cheaper than current entry-level phone+ADSL or Naked ADSL
plans, and provides (on average) 50% greater download speeds than
obtained via ADSL2+ in Australia. It includes 20GB of data, which is
more than the Australian monthly average of 18GB.
Moving further up the NBN speed chain, for the same price as Telstra’s
cheapest phone/broadband bundle (with just 5GB of downloads), an Exetel
NBN customer receives 50Mbps speeds and 200GB of downloads. That
equates to an average of 2-5x faster speeds and 40x more data allowance
for the same monthly price.
But "Jamie"! My current
EXETEL ADSL2+ plan provides greater than 12 MPS is for 210GB and costs
me $40/month. Your NBN plan delivers one tenth of the data for a
10% discount in that price. I had not realized how much the NBN was
going to rip me off.
9. It will cost thousands of dollars to install it into my house
NBN Co will install fibre into your home during the build for no cost,
providing you with 4 data ports and 2 phone ports. Simply plug your
current wireless router and cordless phone into that socket, and you’ll
get your internet and phone anywhere in the house, just like you do
now. There is no need to rewire your house unless you want hard-wired
access in other places of your home.
Maths lesson "Jamie". If we
divide the $50 billion cost of NBN by 8 million connections, we get
per connection. I am not so naive that I believe that I will not
have to ultimately pay full price with interest for that connection.
10. Fibre optics only last a maximum of 15 or 20 Years.
Manufacturers now quote an average lifetime of 60 years for fibre-optic
cables, which is about 10 years more than the typical underground
copper cabling we have now. Fibre-optics are also unaffected by water
penetration, unlike copper cables. Maintenance costs are much lower for
fibre than copper.
Nortel Networks report that they are running over 100Gbps over
15-year-old fibre networks without a problem, saying “The age of the
fibre has nothing to do with it any more, thanks to the dispersion
compensation techniques we use.”
I do not think, "Jamie" that it is
quite fair to cite technology news several years old as FALSE
So Jamie, basically your case is that (1) the NBN is not going to cost
more than $38 billion, (2) the NBN is too expensive for the private
sector to build, (3) we need one gigabit speeds by 2020, (4) everyone
else in the world is installing FTTP, (5) our current average (1.7
Mbits/sec) is slower than the average in a whole lot of more densely
settled countries, (6) wireless is no match for a hardwired connection
for speed, (7) people want fixed internet as well as mobile, (8) NBN
connections will be cheaper and faster and bigger (more data) than what
we have now, (9) NBN will be free to install, and (10) NBN will last
forever (well it might last as long as copper anyhow)
But the facts are (1) NBN is going to cost more than $50 billion, (2)
The private sector could & would build it if it saw a buck in it,
(3) Your graph is wrong and so is your math in predicting we need 1
Gbit/sec by 2020, (4) Come on Jamie, not "everybody in the world" is
installing FTTP to the penetration that the NBN proposes, (5) Densely
populated countries can build nodes closer by virtue of their denser
population, which makes speed less expensive. (6) Well you had to
get something right I suppose. Hardwire is generally
faster. (7) I know quite a few people who are quite happy
with just a mobile internet connection. (8) Well on the published
data, that is JUST NOT TRUE. Exetel is currently offering a
cheaper, faster ADSL2 connection than it forecasts for an NBN
connection. (9) Assuming that it is not funded from general
revenue, the average cost for each of eight million connections would
be over $6,000.00. At 8% interest over 20 years the
interest bill would be a further $6,000.00. That is an average
cost in 2012 dollars of $600 per annum. And that is just the
installation cost. (10) The NBN will need replacing, and
there is no guarantee that it will last longer than copper.
And "Jamie", you totally avoid the issue of mismatch. We are a
small population English speaking country, So (unlike e.g.
Japan) we need to connect to other English language countries.
Currently we have a six terabyte connection to the USA. A six Tb
connection across the pacific costs about $400 million dollars.
You want our current speed to go from 1.7 Mbits/sec to 1 Gigabit/sec by
2020? So have you factored in the cost of expanding the trans
pacific network from 6 terabits to 3,000 terabits?
If private industry can't afford the NBN, who is going to pay for the
trans pacific data network?