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Spinning Australia’s National Broadband Network – it’s a fail

Spinning Australia's National Broadband Network – It's A FailBill Morrow – CEO, nbn – under fire

“Every once in a while, you let a word or phrase out and you want to catch it and bring it back. You can’t do that. It’s gone, gone forever,” said Dan Quayle during his time as Vice President to George Bush Sr.

The boss of Australia’s National Broadband Network, Bill Morrow, may well be reflecting on Dan Quayle’s words, as an unguarded statement about the population’s lack of enthusiasm for high speed web surfing set the country’s creakingly slow internet if not alight, at least into a dull glow of indignation. Morrow was speaking at NBN’s half yearly report briefing, where the media present were less than impressed with the company’s disappointing financial situation and the progress of the network. Despite the project’s scope being downgraded in 2014 from a largely ‘fibre to the premises topology’ to a mainly ‘fibre-to-the-node’ service, it is still only at fifty percent the progress promised in the original business plan. The speed of the network and artificial pricing constraints have proved to be a real irritation for subscribers and when Morrow was asked why the company’s resellers aren’t offering gigabit services during the media conference he fell for the trap of suggesting Australians wouldn’t use it. From the NBN’s transcript of the conference;

Question: (Jennifer Dudley-Nicholson, News Corp, Media) Well, no, how much would it cost in terms of delivering the service – is it prohibitively expensive and is why people sort of can’t access it?

Bill Morrow: Well, again I suspect – all I can do is assume here because it’s the retailers that do their market research and determine which product.

But a gigabit per second is a lot of bandwidth. We did scour the planets and go around to talk to a variety of different carriers that have gigabit per second services in the market that Page 21 of 26 in fact are selling, and where consumers have taken up gigabit per second services. We asked the question, has anybody actually used that amount of bandwidth. The answer was unanimously no. There are not that many applications that warrant much above the products that are being sold at nbn today. So I suspect that’s the main reason. If I have to pay for it – to move from 100 up to a gigabit per second – I don’t really have the application or the need for it, so why would I pay more to do that. Jennifer, I believe that’s the market dynamic that is occurring today. Now I say that as we know there are things on the horizon that are going to increase the need for further demand.

What do you think about AR or AI, or any of these other elements with media streaming going to 4K and 8K and immersive sound. All of these other things could certainly drive up more of that consumer need, but we haven’t seen that as of yet because those aren’t really here to where people feel I need to pay extra money to get that kind of service. Even if we offered it for free, we see the evidence around the world that they wouldn’t use it anyway. It didn’t take long for the media and public to react to Morrow’s comments with the executive being blasted for being out of touch with the modern economy and the needs of businesses, households and internet users. Morrow, while right saying in most households don’t need a gigabit connection, became the lightning rod for the widespread dissatisfaction with the project which has so far missed the expectations of many who were hoping it would drag Australia’s notoriously expensive and slow telecommunications sector into the 21stCentury.

Far from being a luddite, Morrow was the boss of Vodafone’s Australian mobile network joint venture after running US telecommunications company Clearwire, California’s Pacific Gas and Electric Company and Vodafone’s Europe operations prior to becoming the NBN’s CEO in 2013. He is far from an old-school luddite public service manager of the type criticised by Paul Shetler when he parted ways with the Australian government1. Morrow’s problem comes back to how NBN is haunted by its history and Australian political ideology. In 2009, when the company was founded to undo forty years of poor telecommunications policy, the originally planned 43 billion Australian dollar project (33bn US dollars) was kept off the budget by the then Labor administration pretending the company would a profitable government owned enterprise by 2018. The current government has maintained the fiction that the money will be repaid.

To achieve this, the NBN was given an effective monopoly on building retail landline networks and a punitive regime of access fees was implemented for Internet Service Providers connecting to the NBN – the main reason why resellers won’t offer gigabit plans is such a service would cost somewhere between 300 and 400 a month for most households. As the damage from Morrow’s comments became apparent, the NBN’s well staffed PR and corporate comms machine went into overdrive ringing around Australia’s tech and telecoms journalists while sending Morrow on media charm offensive around the country where he was told in no uncertain terms by the punters that they were deeply unhappy. Morrow himself wrote a blog post on the company’s site defending his position2, explaining what he meant and touched upon the core problem in the company’s finances which requires them to artificially throttle speeds in the hope of upselling customers to higher services.

The nbn(TM) network is costing around $49 billion to build – and we need to recoup that cost – given that our business model is split between driving revenues from access and consumption charges, we simply cannot match the kind of 1Gbps pricing on offer in markets like Singapore and Hong Kong. Whether the project turns out costing $49 billion remains uncertain, along with its prospects of profitability, as currently only 1.8 million premises are connected against the four million projected in the company’s 2010 business plan. That shortfall seriously hurts the cashflow projections and as the NBN cuts access charges in response to public pressure, the funding situation doesn’t look like it will get better soon.

For Australians the more telling statistic is at the time of NBN’s launch in 2009, content delivery network Akamai ranked Australia’s average internet speed at 24th3. By last year the country had fallen to 60th in Akamai’s global survey. To be fair to Morrow and the company’s current management, many of the problems they are facing were inherited from the previous executive team that left the mostly fibre project 70% behind schedule when the government changed in 2013. Those delays have been compounded by political interference which saw the incoming government rescope the project to become largely fibre to the node – a change described by the now Prime Minister, Malcolm Turnbull, as delivering cheaper and faster rollout. It did neither.

Australia’s national broadband project was always an ambitious scheme, sadly let down by political interference and at best indifferent management by Bill Morrow’s predecessors in the early days to f the scheme. While little of that is Morrow’s fault, he’s surely learned a lesson to choose his words carefully if he doesn’t want to antagonise Australia’s frustrated internet users or be remembered as the internet version of Dan Quayle.

My take

I encountered the community anger towards Bill Morrow’s comments and the NBN PR blitz myself last week when hosting my irregular national Australian Broadcasting Corporation tech program. The NBN was the main topic and all but two callers – one was an NBN flack – expressed their dismay or disgust at the service. A few hours before the show I’d been contacted by another earnest NBN comms guy explaining how the CEO was taken out of context. Despite the PR blitz, those callers are right – the National Broadband Network is Australia’s tragedy.

The project promised to revolutionise the country’s telecommunications infrastructure and resolve forty years of poor policy decisions that had entrenched Telstra’s domination of the market and stunted growth of the nation’s online industries. Sadly it wasn’t to be as the original management team, lead by former Alcatel Lucent executive Mike Quigley, was more focused on buying flashy coffee machines for the staff tea rooms rather than getting on with building the project. Had the project being running on schedule and budget in 2013, it would have been much harder for the incoming Liberal government to tear up the original plans.

The politics though has been the bigger problem with both governments subscribing to a fiction that such a project could be kept off the budget through financial fictions and those fantasies resulting in convoluted pricing structures which discourage customers from signing up to genuinely fast services. Watching NBN’s army of well paid PR people fanning out to explain the company’s position and the CEO’s insistent explanation of what he meant to say has been fun for jaded hack though. It’s an interesting case study of what happens when the public runs out of patience with corporate spin.

Image credit – Via nbn

References

  1. ^ criticised by Paul Shetler when he parted ways with the Australian government (diginomica.com)
  2. ^ wrote a blog post on the company’s site defending his position (www.nbnco.com.au)
  3. ^ Australia’s average internet speed at 24th (www.akamai.com)

Aussie’s want fast broadband – we also don’t need Gigabit NBN yet

If you’re anywhere near a radio today, or you’ve read the online news sites1 you might be forgiven for thinking that the boss of the National Broadband Network doesn’t think Aussie’s want high-speed broadband. That’s just crazy right? Aussie's Want Fast Broadband – We Also Don't Need Gigabit NBN YetYes, yes it is crazy. Crazy to think that’s what Bill Morrow NBN CEO has said. Yesterday, after reporting the half-year results of the taxpayer owned NBN, CEO Bill Morrow jumped on a conference call with reporters to discuss the network roll-out and take questions.

There had been reference to Telstra’s mobile 4G Gigabit service, so rightly, Mr Morrow was asked why consumers couldn’t get these speeds on the NBN given it has been discussed as a potential speed option for some time. Morrow answered, noting that 1.5 million Australian homes are currently capable of receiving Gigabit speeds (These homes are connected via the original Fibre-to-the-Home technology). Going on to say “We have a product that we can offer the retailers should they want to sell it.

Which is in fact the straight out, simple answer to the question – the Telco retailers (known as RSP’s – Retail Service Providers) such as Telstra, iiNet, Optus etc, simply haven’t offered it to their customers. Currently 100mbps is the fastest download speed you can buy. Gigabit is ten times that.

Mr Morrow added “the reality is that a couple of the retailers have signed up for a trial based as to where they’re looking at what a gigabit per second service might look like. But they have chosen not to offer that to the consumers. You’d need to talk to them as to why, but I will presume it is because there isn’t that big of a demand out there for them to actually develop a product to sell to those end users.”

So in fact, this “super-fast” broadband network people are reporting on today could be available if the retail telcos wanted to offer it.

Aussie's Want Fast Broadband – We Also Don't Need Gigabit NBN Yet

Why don’t they offer it? That’s a question for Telstra, Optus et al. But one can safely assume they don’t see a viable model to offer it, and perhaps they see little or no demand? He went on to say “We did scour the planet and go around to talk to a variety of different carriers that have gigabit per second services in the market that in fact are selling, and where consumers have taken up gigabit per second services. We asked the question, has anybody actually used that amount of bandwidth. The answer was unanimously no.”

You see, what those of us in the bubble of technology reporting like to think is that everyone wants the most amazing and fastest speeds. In fact, what most people want is a reliable connection at a faster speed than today.

Remember, millions of Australian homes are not getting 10mbps speeds, not even 15 and certainly not the 25 which the Government has mandated should be the minimum available speed to all homes under the NBN.

Aussie's Want Fast Broadband – We Also Don't Need Gigabit NBN Yet

I’ve had 100mbps for some time, via the cable network. And as one of the heaviest users and someone reliant on the internet, I see no reason to get a faster download speed. Businesses can and do see need for faster speeds, and there are business options to get that – there have been for years. What Mr Morrow is making clear is that there is no consumer demand for 1,000mbps speeds. Bill Morrow added “Even if we offered it for free, we see the evidence around the world that they wouldn’t use it anyway.” pointing specifically to the vast bandwidth Gigabit speeds would offer. There’s just very little “need” for it right now.

Laurie Patton, now former CEO of “Internet Australia” (he announced this week he is stepping down2) an industry representative and lobby group is widely reported with concerned comments about the NBN and about Mr Morrow’s comments re speed. The fact is Mr Patten is still holding a flame for a Fibre-to-the-premises roll out of the NBN. Sorry champ, the horse has well and truly bolted on that one. Here’s the raw facts, there are 1.6 million homes active and connected to the NBN. More than 50% of them are on Fibre to the Premises. Yet, just 13% of those homes have chosen the current fastest speed of 100/40.

82% of people have chosen the two lowest speed tiers of 12/1 and 25/5. 82%. And that number is only in households where the top 100/40 speed is available. Among Fixed Wireless customers the result is the same, with just 4% taking the top 50/20 speed tier.

So come on, let’s get real folks. There is no demand for gigabit, and if there is, the business case for it probably doesn’t stack up.

Aussie's Want Fast Broadband – We Also Don't Need Gigabit NBN Yet

The NBN recently launched its own advertising campaign to educate Australians about the available speed tiers, because you know what, it’s in their interests for us to choose faster speeds – they would make more money! As we’ve said, time and time again – it’s time to let the NBN build a network3, using the varied technologies nominated and deliver some minimum standards to every household.

Meanwhile – aside from today’s beat up, the actual news from yesterday’s nbn reporting are the numbers:

  • The number of premises able to order an nbn service rose to 3.8 million, an increase of 129 per cent versus the six months ended 31 December 2015
  • The number of homes and businesses with an active service over the nbn network increased to 1.6 million, a 125 per cent increase
  • Revenue earned in the half-year was $403 million (146 per cent increase in comparison to H1 FY2016)
  • Average revenue per user remains constant at $43 in comparison to H1 FY2016

If you want to draw your own conclusions as to what Mr Morrow was talking about regarding speed and data – here’s the transcript:

Jennifer Dudley-Nicholson (News Ltd): So we’ve heard you make reference to this mobile phones network plan costing – one gigabit per second speed. The nbn has been saying that this is possible for some time, but it’s not available to consumers. Why do you think it’s not available, and when do you foresee the RSPs making it available?

Bill Morrow (NBN CEO): So we have roughly 1.5 million homes that can have the technology to give a gigabit per second service capability today. We have a product that we can offer the retailers should they want to sell it.

Jennifer, the reality is that a couple of the retailers have signed up for a trial based as to where they’re looking at what a gigabit per second service might look like. But they have chosen not to offer that to the consumers. You’d need to talk to them as to why, but I will presume it is because there isn’t that big of a demand out there for them to actually develop a product to sell to those end users.

Jennifer Dudley-Nicholson (News Ltd): how much would it cost in terms of delivering the service – is it prohibitively expensive and is why people sort of can’t access it?

Bill Morrow (NBN CEO): Well, again I suspect – all I can do is assume here because it’s the retailers that do their market research and determine which product. But a gigabit per second is a lot of bandwidth. We did scour the planets and go around to talk to a variety of different carriers that have gigabit per second services in the market that in fact are selling, and where consumers have taken up gigabit per second services. We asked the question, has anybody actually used that amount of bandwidth. The answer was unanimously no.

There are not that many applications that warrant much above the products that are being sold at nbn today. So I suspect that’s the main reason. If I have to pay for it – to move from 100 up to a gigabit per second – I don’t really have the application or the need for it, so why would I pay more to do that.

Jennifer, I believe that’s the market dynamic that is occurring today.

Now I say that as we know there are things on the horizon that are going to increase the need for further demand. What do you think about AR or AI, or any of these other elements with media streaming going to 4K and 8K and immersive sound. All of these other things could certainly drive up more of that consumer need, but we haven’t seen that as of yet because those aren’t really here to where people feel I need to pay extra money to get that kind of service.

Even if we offered it for free, we see the evidence around the world that they wouldn’t use it anyway.

References

  1. ^ online news sites (www.couriermail.com.au)
  2. ^ he announced this week he is stepping down (www.itwire.com)
  3. ^ it’s time to let the NBN build a network (eftm.com.au)

In a Reversal From its Fiber-Optic Retreat, Verizon Begins Boston Rollout

In A Reversal From Its Fiber-Optic Retreat, Verizon Begins Boston Rollout

Broadband Breakfast Insight: Although this article highlights the negatives, it is a bit of a reversal that, in spite of its general withdrawl from the FiOS marketplace, Verizon is going full-scale in Boston.

Verizon begins fiber optic rollout in Boston – The Verge

Verizon is beginning its $300 million FiOS rollout in the Boston area, eight months after it announced that it was building a fiber optic platform. The rollout is expected to take place over the next six years and the company has already installed more than 160 miles of fiber optic wiring. In a statement, Verizon’s consumer landline business lead Ken Dixon said FiOS service will be offered to more than 25,000 addresses by the end of December. Rollouts will start in Dudley Square Innovation District and expansion will continue street-by-street in Roxbury, Dorchester, Roslindale, and West Roxbury. Verizon put on an optimistic front, calling residents “the winners” of its FiOS launch and its partnership with the City of Boston.

Based on Verizon’s past FiOS launch, however, there are good grounds to be skeptical of the actual benefits Boston residents will reap. In 2008, Verizon partnered with

New York City’s Department of Information Technology and Telecommunications (DOITT), promising all New York City residents access to fiber by the summer of 2014. What eventuated was a disagreement between DOITT and Verizon over the terms of Verizon’s obligations, when an audit conducted by Mayor Bill de Blasio’s administration and DOITT revealed that there were over 40,000 unfulfilled FiOS requests.

Source: Verizon begins fiber optic rollout in Boston – The Verge1

References

  1. ^ Verizon begins fiber optic rollout in Boston – The Verge (www.theverge.com)