Which party has the better broadband plan?: A SmartCompany Q&A

The promise of ultra-fast broadband looms a key battleground for business in this year’s election debate.

With the Coalition finally revealing its plan to abandon the NBN, upgrade existing networks and let the private sector carry much of the weight for future network development, the fight over how future governments should involve itself in broadband infrastructure is now well underway.

The differences between these two plans couldn’t be bigger.

Labor’s National Broadband Network is a giant, expensive, nation-building exercise and is one of the biggest infrastructure projects Australia has ever seen.

The Coalition’s plan promises a modest investment, and relies on what it calls the ingenuity of the Australian telecommunications sector to continue rolling out fast broadband at a speed dictated by the demand of everyday users.

But which plan is better? And which is going to ensure Australian users and businesses have access to ultra-fast internet in the years to come?

With the broadband debate now more important than ever, it’s time for a SmartCompany Q&A.

Let’s start with the NBN plan. Take me through some of the details.

The National Broadband Network is Labor’s plan to make sure the majority of Australian households have access to ultra-fast broadband capable of speeds of 100Mbps.

A Government-owned company, the National Broadband Network Company, is overseeing the construction of a giant cable network that will literally connect individual homes and commercial buildings to fibre optic cables. Those homes that aren’t connected through cables will be connected via a combination of wireless and satellite.

This means homes in outback WA will still be able to access the same speeds as a business in the Sydney CBD, because they’re using the same type of technology and are using the same network.

The network is wholesale-only, meaning the Government actually won’t sell services to users through it. Instead, companies like Telstra, Optus and iiNet will be able to use the NBN to offer their own products.

The idea is that 93% of homes and buildings will be connected, in one way or another, to this giant network. It’s set to be completed by 2017.

Faster internet is always good. So what does the Coalition have to give?

The Coalition is going down a different road altogether. It says the private sector is doing just fine on its own, and the Government doesn’t need to spend billions creating a huge network to connect every home. Instead, it wants to fill in the gaps through a few different initiatives over time.

These include:

• $2.75 billion to construct a new backhaul network to complement routes currently controlled by Telstra, freeing up competition for smaller players.
• $750 million in grants for telcos to extend networks to those users currently unable to be serviced by existing networks in outer urban areas.
• $1 billion in wireless investment to help fix Blackspots in urban areas, and another $1 billion to construct a broadband network in other rural areas.
• $700 million to create satellite services to connect the rest of the market.

Communications spokesman Tony Smith said yesterday the Coalition’s plan will deliver a minimum speed of 12 Mpbs, and will cover 97% of the population. All in all, they’re pledging about $6.3 billion, and say their plan will deliver the same benefits as the NBN.

If that’s true, the Coalition’s plan sounds better already.

Saving money is always good, but the issue of constructing high-speed broadband is a complex one and each side has its disadvantages.

The Coalition’s plan is certainly cheaper, which avoids spending billions on a network when telcos will be able to build their own as users demand it. Wireless services in rural areas is also a good improvement, particularly as more businesses in the outback start taking up smartphones and portable devices like iPads.

But there are a few problems with this.

As analysts point out, the Coalition isn’t using new technology. Instead, it will just upgrade existing DSL and copper networks, which telcos say is outdated and slow compared to Labor’s promise of high-quality fibre cable. It promises a minimum of 12Mpbs – hardly the blistering 100Mpbs speeds offered by Labor.

It’s also important to note here the Coalition is offering a baseline of 12Mpbs. At some point in the future, users will be able to access 100Mpbs speeds but its network isn’t designed to provide that sort of service.

The Coalition’s point is that demand for high-speed services isn’t concrete, and points to the relatively low take-up of fibre services on existing private networks, such as those owned by Telstra and Optus.

But the industry is upset these networks aren’t being upgraded. Optus director of government affairs, Maha Krishnapillai, said this morning it was disappointing a new network wasn’t proposed to break up Telstra’s monopoly.

Competitive Carriers Coalition chairman Matt Healey also said he was “devastated” by the Coalition’s approach.

But hey, rural areas get wireless. They’d have to be happy, right?

While remote and isolated areas are being promised connections in the form of wireless networks, these are often unreliable and can’t offer the same speeds as a fixed-line network like the NBN would provide.

And as Stephen Conroy pointed out at the National Press Club debate yesterday, they’re particularly complex to build.

The other major point is that while the Coalition says telcos will build networks as users demand them, that plan hasn’t really worked so far. There are plenty of suburbs, even in metropolitan areas, where homes can’t connect to high-speed networks because they are located in areas which aren’t commercially viable.

The Coalition even admits this is a problem – it’s promoting regulatory reform and says its $2.75 billion backhaul investment will help connect those users lost in the fray.

But as Ovum research director David Kennedy points out, the Coalition’s plan isn’t exactly future-proof. “If demand for high-speed broadband is eventually proven then the issue must be faced afresh.”

The other political issue here is that the Coalition doesn’t even seem to be taking this issue seriously –Tony Abbott wasn’t present for his party’s own broadband announcement yesterday, leaving Tony Smith to take the stage with finance spokesman Andrew Robb.

Okay, so the Coalition’s plan isn’t perfect. But what about the NBN, surely it has a few cracks?

The NBN is definitely a big risk. For one thing, $43 billion is a hefty price tag and with no detailed business case, many are right to wonder how financially viable the network will actually be.

And as Kennedy says, the network is disruptive. Trenches will be dug and cables ripped up across the country through the next eight years.

“Further, it requires the government to manage a complex, long-term infrastructure project. The record of public management of such projects is patchy.”

The NBN Co. board definitely has a lot of executives with experience in telecommunications, but in many ways they’re still venturing into unknown territory.

However, the major benefit is that the NBN is future-proof. The majority of Australians will have all the bandwidth they need for decades, which will enable more businesses to deliver instant services directly to users.

Digital delivery of services, including entertainment like films, music and streaming television, is becoming more and more popular. Think of downloading a high-definition film in just a few minutes, or being able to handle a high-definition video conference with participants in several different countries at once.

By the way – why do both sides keep going on about Telstra?

Telstra owns the majority of the broadband infrastructure in Australia including a large proportion of the “exchanges” or hubs, in suburbs where connections are then rolled out to individual homes in streets.

The problem is that smaller telcos are often unable to access these areas.

Both parties admit this is a problem. Labor has already made a deal with Telstra, and in exchange for handing over $11 billion will receive access to trenches and infrastructure, and will shut down some of Telstra’s cable network over time.

Telstra will be less of an infrastructure provider and more of a retail company, allowing other telcos to compete more freely.

On the other hand, the Coalition will leave Telstra alone. It says its backhaul upgrades will help smaller companies reach new connection areas and increase competition.

So will Abbott actually shut down the NBN?

That’s his plan. Although the NBN has already started construction in Tasmania, the Coalition plans to sell that off to private buyers if it comes to power on Election Day. The nation-wide rollout will cease immediately.

The Tasmanian NBN is acting as a sort of test-bed for the rest of the country. Telcos including iiNet, Primus and Internode have already signed up high-speed services on the NBN, but if the Coalition has its way that network will be completely sold off.

So the big question: Which plan is better?

There is no doubt the National Broadband Network is a risky, expensive project, but it’s also the most comprehensive solution to one of the most important issues of our time – the need for constant, fast broadband connectivity.

The Coalition is right to say the local telecommunications industry has done a good job of providing high-quality services, but in order to compete as a nation over the next 50 years, Australia will need widespread high-speed coverage its plan simply cannot provide.

The NBN is a much-needed nation-building exercise that will ensure Australian SMEs, whether they are located in metropolitan or rural areas, have access to the connections they need to keep growing their business and keep Australia competitive on a global scale.