Rod Tucker, Laureate Emeritus Professor at the University of Melbourne and a member of Labor's Expert Panel that advised on the NBN, told iTWire that because of the problems and limitations with fibre-to-the-node technology, that competitive retail market has been destroyed.
An opposing view came from Robin Eckermann, adjunct professor at the Canberra University, who said the proposition did not withstand scrutiny.
Prof Eckermann told iTWire that the pressure to keep the cost of the NBN off the budget books by "clinging to the illusion that it will be a profitable investment has created a massive problem that will sooner or later have to be addressed".
Prof Tucker said the NBN Co had attempted to sidestep the problem of slow speeds on the FttN network by arguing that customers should ask retail service providers about the kind of service they should expect and choose a provider accordingly.
A technician working on an FttN cabinet. Courtesy: NBN Co.
"But how can the average retail customer be expected to know what questions to ask?" he asked. "And even if the RSP has technically-proficient people on their help desks, who can expect the general public understand this level of technical detail?"
A review of the wholesale pricing model was unlikely to find who was to blame for customers' woes, he said, adding that a lowering of the CVC price could encourage RSPs to buy more access bandwidth.
But Prof Tucker (left) advised caution on this front. "In an apparent attempt to ease the situation NBN Co has announced a review of their wholesale pricing model and has signalled the possibly enforcing minimum service standards on RSPs for various services provided to retail customers," he said. "It is not clear how tweaking the wholesale pricing model will resolve the issue of who is to blame, although a further reduction in the CVC charge might encourage RSPs to buy more access bandwidth.
"And while very few details have been released by NBN Co, great caution needs to be exercised about such a move. It could cause many more problems than it solves. It would be a substantial mission creep for NBN Co to be intervening between RSPs and customers over service standards."
Had the NBN Co been rolling out a predominantly FttP network, then the question of bandwidth would not arise and any shortfall would be easily identifiable as the fault of the RSP. And any RSPs who were found lacking, would have been forced out of the market by "good old-fashioned retail competition forces".
"This concept of an active and competitive retail market place was built into the planning of Labor’s original FttP network," Prof Tucker said. "In those original plans it was correctly assumed that a competitive retail marketplace would resolve bandwidth shortfall issues, and customers would churn to those RSPs with good reputations for delivering the bandwidth they promise."
But he said, unfortunately NBN Co was rolling out a slower-speed FttN network. "And in this FttN network, it is not clear whether shortcomings in bandwidth are due to the RSP or the FttN connection. Unfortunately, the performance of FttN depends on a number of factors, including the distance between the node and the customer, the quality of the copper, rainwater in cables (etc)."
Prof Tucker said NBN Co needed to devise a method to invigorate real retail competition, which he said was more important that tweaking the CVC charges.
Prof Eckermann said the original Labor plan was based on "an unrealistic budget" of $43 billion. This was later cut to "an even less realistic $37.4 billion - with an expectation of a 7.1% return.
"As someone still wearing the scars of the biggest advanced broadband rollout prior to the NBN, I can assure you that neither the capital cost nor the expectation of a 7.1% return were realistic," he said.
"However, these assumptions set the scene for the pricing structures we see today. Of course, it would be nice to see FttP and FttK (aka FttDP) maximised – but the mixture of delivery technologies (satellite, fixed wireless, FttN, FttK, HFC and FttP) isn't at the heart of the problem. Rather, the pressure to keep the NBN "off the books" by clinging to the illusion that it will be a profitable investment has created a massive problem that will sooner or later have to be addressed."
Prof Eckermann, who led the development of TransACT through its incubation phase, said it was an unfortunate reality that fixed broadband costs were becoming increasingly unaffordable for many Australians - and CVC pricing was one contributing factor.
"The TransACT experience highlighted the lesson that at least 80% of Australians are driven by their hip pocket nerve, choosing the lowest cost service that meets their needs - and today, the majority of consumer needs are quite happily met with a 'last mile' connection speed of 25 Mbps (which can be delivered by any of the access network technologies)," he pointed out.
"They would all welcome faster connection speeds, but turbo-charging the few kilometres that the NBN provides is academic if either the costs go up substantially, or the end-to-end performance experience isn't significantly and consistently improved."
He said he was not ducking away from the fact that CVC pricing was constraining the potential of the NBN to achieve its full transformative potential.
"In a competitive world, RSPs have to manage costs very carefully in order to create offerings that the public would buy while still leaving them a profit margin," he said. "At current CVC pricing, this dictates operating at contention ratios that regularly impact on the customer's end-to-end performance experience (irrespective of the technology)."
But Prof Eckermann (right) hastened to add that CVC pricing was not the only constraint. "For example, competition is weak on some backhaul routes connecting NBN points of presence to major centres (such as between the mainland and Tasmania) and there can be many other bottlenecks between a user and the destinations they visit."
He said he would like to see the debate shift away from a singular ideological or political focus on access technology and address much broader questions.
Some of these questions were:
- "Should the NBN continue to be viewed as an aspiring profit-making business, or rather as a publicly subsidised asset used for national advantage?
- "With the dramatic shift towards mobile connectivity, has Australia got the right balance between the billions it is pouring into the NBN and the comparatively small investment it is making to improve mobile coverage?
- "Are appropriate efforts being made to promote vital change in every sector (health, education, transport, agriculture etc) in order to exploit the opportunities being unlocked by improved fixed and mobile communications?
- "Are current efforts to shield the NBN from free market competition with levies etc in the long-term interests of users, or a recipe for creating a new, ugly monopoly?
- "Is it sensible for the NBN to be wasting time and money overbuilding advanced broadband infrastructure owned by third parties when so many areas continue to languish with truly sub-standard broadband (often less than 5 Mbps)? And so on."
Prof Eckermann said that was not the extent of the issues that needed to be examined.
"On the more narrow access technology front, it would be good to see a stronger evidence base being assembled to address the relevant questions," he said. "For example, how will average need-for-speed grow over time? Rather than an average speed being delivered over copper (biased by fibre-to-the-building and VDSL2 technology), what is the average speed achieved over distance, and what proportion of premises lie at each point on this curve? What proportion of FttN-connected premises can be expected to find themselves constrained by speed limitations as needs grow? What developments can be anticipated on the xDSL technology front to boost speeds without recabling? What are the realistic costs of upgrading FttN to FttK or FttP?"
He ended on a gloomy note, saying that if a broader perspective was not adopted, then "I predict a growing number of Australians will conclude that they cannot afford both fixed and mobile broadband, and if one of them has to go, it's likely to be the fixed broadband because of its inferior utility for everything except video-streaming".
"This would see the cost recovery burden falling on a diminishing number of connected users, and exacerbate the financial crunch that is looming."