The devil in the NBN’s satellite magic pudding

There’s good news and bad news for Australians waiting for the National Broadband Network in yesterday’s announcement about the project’s satellite services.

For those on the outskirts of major cities the good news is more areas will get faster fibre and wireless connections while many rural users are going to find their satellite connections further limited.

Rolling fibre out to the entire nation under the NBN was never going to be feasible and the broadband solution for most of the country’s land mass – although only 3% of the population – was going to be satellite internet.

Overloading the satellites

Unfortunately for the NBN, the wireless and satellite services proved to be way more popular than expected with projections of 600,000 regional homes, businesses and farms wanting a connection compared to the original estimates of 230,000.

For the government the choice was to send up another satellite to cater for these needs or to extend the planned fibre and wireless networks.

The latter option was chosen which means around 300,000 premises than originally planned will get wireless, rather than satellite connections and an additional 25,000 will get fibre access.

Bad news for the regions

For those in outer suburban areas an improved service is great news but for people in more remote areas NBN Co intends to manage demand by putting download caps on the satellite service.

A stingy 20Gb per month will stunt the growth of startups and other businesses outside the wireless and fibre footprints. In its 2013 survey of the nation’s digital economy, the Australian Communications Media Authority found that fixed line internet users are downloading over 30Gb each month and that number grew 57% over the previous year.

Clearly businesses in the satellite footprints are going to be disadvantaged compared to their city cousins and overseas competitors. For agricultural startups the limited speeds and data caps of satellite services is going to make it harder for these ventures to grow while based in rural locations.

A magic pudding

The cost of extending the fibre and wireless footprint to regional areas is estimated to be $1.5 billion. NBN Co’s management claim this is “within the envelope” of the $41 billion budget of the project.

A magic pudding mentality was one of the hallmarks of NBN Co’s earlier management where Mike Quigley and his team always maintained that everything was under control as things were allowed for in the company’s Corporate Plan. The assurance that an additional $1.5 billion cost is allowed for in the current numbers is not encouraging; whether the current leadership is better at controlling costs, reducing delays and meeting expectations remains to be seen.

The challenge facing the CEO Bill Morrow’s team in meeting existing timeframes shouldn’t be underestimated with the project stalled in many parts of the country, contractors at war with their subcontractors and customers complaining about problems in being connected in the areas where NBN Co has completed work.

An uncertain future

Adding to Morrow’s task is the uncertainty of the coalition’s multi-technology-model (MTM) where no one is quite sure exactly how many premises will be connected to fibre, copper or the Pay-TV cables. Until the scope of the project is defined, it’s going to be difficult to figure out what the ultimate costs and timings will be.

That the take up rate of satellite was far greater than expected shows just how important broadband is to regional businesses, for Australia’s startup sector getting the NBN right is essential to being able to compete in the digital economy.