Part 1: Let’s put politics aside. It’s time to fix the NBN.

This article is part of a three part series. Part 1 examines the merits and problems experienced from Labor’s Fibre to the Premise Network. Part 2 investigates the Coalition’s multi technology mix using a smorgasbord of technologies and the challenge of using aging networks to deliver super fast broadband into the future. Finally, in Part 3, we examine if Australia’s largest infrastructure project can be saved with a combination of Skinny Fibre and FTTdp, and if sky high Connectivity Virtual Circuit (CVC) pricing and RSP consolidation is creating a monopoly white elephant, crippling Australian business and innovation.

While former Prime Minister John Howard had tinkered with Broadband Connect and OPEL in 2006/07, the National Broadband Network, in its current form, came to fruition in the May 2009 budget.

With claims the Australian economy was struggling from the grips of the worse financial crisis since the great depression, the then government announced a $22.5 billion dollar Nation Building program comprising of infrastructure projects in road, metro rail, ports, clean energy, hospitals and health, tertiary education, research and innovation, and broadband.

The biggest slice of the fund went to broadband – some $4.7 billion. This was the first installment in what was expected to be a $43 billion dollar project over 8 years.

Australia had privatised its existing, aging copper telecommunications network and the incumbent had neglected the network in the pursuit of profit. Stories of technicians using plastic PET bottles and biodegradable plastic shopping bags to water proof the network was, unfortunately, all too common.

The incumbent monopoly owned the wholesale copper access network (CAN), while also operating, often anti-competitively, in the retail space. Competitors who tried to gain the upper hand by installing their own equipment in exchanges and utilising the incumbent’s last mile copper network would often be locked out when the incumbent “couldn’t find the keys to the exchange”.

A network for the 21st century

During the depression, the United States built the Hoover Dam to stimulate the economy. In the 21st Century, Australia would build a super-fast broadband network.

Apart from directly supporting “up to 25,000 jobs a year, on average, over the eight-year life of the project”, the objective of the National Broadband Project was to future proof Australia’s telecommunications network, providing up to 90 percent of homes and workplaces with speeds up to 100 megabits a second. It would completely replace the neglected, outdated and corroded copper network, Australia so heavily relied upon.

It would be a wholesale only network, offering a true level playing field to all retail service providers (RSPs). More importantly, it would allow Australian business to Innovate, work smarter and more efficiently. It would open up possibilities in e-health and tele-health, in video conferencing and improve access to online education.

The May 2009 Federal budget paper indicated “The National Broadband Network is the single largest nation building infrastructure project in Australian history.”

Add Australia’s dysfunctional political system, and it was inevitable something would go wrong.

NBN Version 1: Fibre to the Premise (FTTP)

According to ASIC, NBN Co Limited, ABN 86 136 533 741 was first registered on the 9th April 2009. It was tasked with building the High Speed Fibre to the Premise (FTTP) network covering approximately 90 per cent of Australia’s population.

While the most equitable objective would be to have all businesses and homes connected to fibre optic cable, the vast continent Australia is means this is not practically possible.

Where it is not practical to lay fibre, the remainder of premises were intended to be serviced by fixed 4G TD-LTE (Long Term Evolution) point to point links or via satellite.

NBN Co Limited would strive to achieve an internal rate of return of 7 per cent with the possibility of selling the network in the future. The rollout would begin in Tasmania.

An early, independent cost benefit analysis suggested the network build was achievable within the forecast budget and recommended extending the fibre network to 93 per cent of the population.

The majority of the network was based on GPON (Gigabit Passive Optical Network) technology. It would consist of a Distribution Fibre Network (DFN) – a redundant fibre ring connecting optical line cards – effectively the exchange to Fibre Distribution Hubs (FDHs) or cabinets scattered about the neighborhood. These hubs would consist of a passive optical splitter and being passive, would not require connection to the electricity network. A hub would typical serve 576 connections, a portion allocated for future expansion.

The Local Fibre Network (LFN) would be a starred fibre network from the distribution hub to the premises, via ‘multiports’ in the pits. Fibre cables in both the distribution and local networks were spiced, requiring skilled personnel.

Each dwelling would be fitted with a NTD (Network Termination Device) at NBN Co’s cost, providing two UNI-V interfaces/plain old analog telephone ports, and four UNI-D interfaces/broadband data ports. Each NTD was backed up with an alarm battery.

The ‘optical budget’ allowed the exchange housing the Optical Line cards to be up to 15,000 meters from the NTD installed in the customer’s premises.

The four data ports enabled four different services to be provisioned on each port. For example, you could have up to four broadband services, ideal for a share house where each occupant is responsible for their own data quota. Or in the future, you could provision dedicated IPTV services, private VPN links back to the office or remote CCTV / Alarm monitoring. The government had even considered a government network, providing access to Medicare and other services.

With four data ports, you could also provision a new broadband connection and test it, before canceling the old, ensuring continuity of service.

On the decrepit copper network, the incumbent would have to borrow inactive copper pairs to repair and patch active customers. To get a new connection on the copper access network where your lines were borrowed, it wasn’t unheard of having to wait 28 days and pay $299 for provisioning. On the NBN, with automated provision, this could be reduced to under one hour.

The network was considered mildly opulent, but a real asset for the future. Something that could serve the country for decades to come.

Points of Interconnect

NBN Co had initially designed its network around 14 points of interconnect (POI), roughly one or two points in each state or territory. A POI is where the Retail Service Provider (RSP) connects into the NBN to service local subscribers. The smaller number of POIs were thought to reduce barriers of entry for smaller ISPs and encourage competition. A smaller ISP who desired to only provide broadband services in one state, might only require one or two connections into the NBN. As they grow, they can connect into other POIs.

The Australian Competition and Consumer Commission (ACCC) argued such a design would give NBN Co monopoly over backhaul and instead supported 121 points of interconnect. This would require RSPs to maintain 121 connections into the NBN to service all of Australia, or utilise a third party wholesale aggregator. As we will learn later, this was believed to be one of the primary causes of consolidation within the Australian broadband industry, eroding competition.

An incumbent 800 pound gorilla called Telstra

Rolling out a high speed fibre network requires telecommunication pits and ducts. NBN Co could have dug their own, but it made sense to use existing infrastructure and reduce infrastructure duplication.

It also made sense to encourage the incumbent to decommission its network and migrate subscribers to the NBN to improve the commercial viability of the project. Some argued the later was anti-competitive and was simply creating another monopoly – although this time it would be a wholesale only monopoly.

But the incumbent 800 pound Telco gorilla in Australia goes by the name of Telstra and he doesn’t play well. The copper access network had been a cash cow for Telstra. Shutting it down would take some persuasion – and a two plus year protracted negotiation.

NBN Co had initially valued the use of duct and pit infrastructure, plus compensation for shutting the copper access network down at $8 billion. Telstra said they needed $12 billion.

Some persuasion stemmed from sweeping regulatory reforms in late 2009 when Telstra was instructed to structurally separate wholesale and retail operations.

A heads of agreement was reached between NBN Co and Telstra on the 20th June 2010 after 9 months of “detailed and complex negotiations” according to then NBN Co chief, Mike Quigley. NBN Co would pay Telstra $9 billion for access to infrastructure including pits and ducts and the government would pay another $2 billion towards structural separation issues and universal service obligations.

Another year passed before an announcement on the 23rd June 2011 with the signing of Binding Definitive Agreements. Under the agreement, NBN Co would access the Telstra infrastructure for a minimum of 35 years and pay Telstra progressively for disconnection of customers from Telstra’s “legacy fixed-line networks”, but excluding HFC pay-TV customers. Interim arrangements were negotiated for immediate access to Telstra infrastructure, enabling the network to begin roll out.

On the 7th March 2012, the then Communications Minister Senator Conroy announced definitive agreements had come into force.

Multiple Dwelling Units (MDUs)

One of the problems confronting a fibre network reaching 93% of the population is the thirty or so per cent who live in Multiple Dwelling Units (MDUs) – flats, apartments and businesses in shopping centers. Getting fibre to the premises or to the MDF (Main Distribution Frame) under Schedule 3 of the Telecommunications Act 1997 is reasonably easy. The act allows carriers to enter property to inspect, install and maintain infrastructure.

But getting fibre up the cores of buildings or through the common area is another thing. Depending on the structure and state or territory, it can involve the body corporate, owner’s corporation, building manager etc, etc. This can take considerable time and extra planning.

I’m one of the lucky few, privileged to have a NBN FTTP connection. However, I wasn’t so lucky when the twenty townhouses of which, one I occupy, was marked as being a MDU. This is despite each of the twenty dwellings having our own LIC (lead in conduit) to Telstra’s pit infrastructure.

On the 31st March 2014, our fibre serving area (FSA) went ready for service (RFS). This allowed single dwelling subscribers in our area to start ordering NBN connections. Under the agreement with Telstra, no more copper services would be connected and we would have 18 months before the copper network was shutdown.

But our MDU was not ready for service. Details of our premises were passed onto Downer EDI who had the contract for connecting the MDUs in my state. It took just shy of three months for Downer EDI to gain approvals from all the owners/residents, draw up comprehensive plans and install boxes (PCDs) on our walls. This was considered expedient for our simple site. It took another four months after the PCDs were installed, before the addresses went ‘SC2’ – ready for service with a PCD.

An almost instantaneous call to my RSP ensured a contractor visit within 7 days, only to have the NTD installed and find out the multiport in the pit was missing and that the problem would have to be escalated back to Downer.

For what should have been a simple site, and by prodding my fellow neighbours in my community plan to return correspondence to Downer, I was rewarded with a superfast 50/20 connection on the 10th November 2014, just over 7 months later.

But during that 7 months, I had neighbours who had moved in and were unable to connect to any fixed line network. They were left in limbo. As our fibre serving area was ready for service, Telstra would no longer connect any copper services, but our MDU was not yet ready for fibre either.

NBN Version 1 Progress

By the middle of election year 2013, the FTTP network was picking up steam. According to NBN Co’s Annual Report 2012-13, at the end of fiscal 2013, over 1.1 million fibre brownfield premises were either completed or had commenced construction. In the June 2013 quarter, more than 1000 premises/lots were being connected per day. This was expected to rise to 4 thousand/day over the next 12 months.

At June 30, 70,100 subscribers were now connected to the NBN via 64 POI, a fourfold increase over the previous year. The average speed provisioned across the fibre network was 39 Mbps – much higher than expected. On the 20th April 2013, NBN Co announced the intention to launch a 1,000/400Mbps (1 Gigabit) service by December 2013.

Politics aside, the NBN was progressing as well as could be expected for such a large scale infrastructure project. It got off to a very slow start with complex negotiations with the incumbent telco over access to its pit and duct infrastructure and the shutdown of the copper network which for so long had been the incumbent’s cash cow. It would have been naive to expect the incumbent to simply roll over.

In early 2013, Asbestos was found in the incumbent’s pit and duct infrastructure. Remediation works at one stage was halted after improper handling and dumping was observed. After risk assessments and contaminated pits were identified, contractors underwent training on asbestos further adding to delays. It is understood some 10 to 20 per cent of the incumbent’s ducts and pits are made of asbestos, the majority built by James Hardie.

The project suffered with an inadequate number of trained fibre splicers. There were reports many were learning on the job, resulting in faulty connections that then had to be remediated. NBN Co implemented measures in place to address “address challenges in [the]construction, including the training and employment of additional specialist telecom workers.”

Coming up in Part 2, we examine NBN Version 2: Multi-Technology Mix followed by , Skinny Fibre, FTTdp and CVC pricing.