The chairman of NBN Co, Harrison Young, hopes to broaden the debate about the merits and cost of the government's National Broadband Network in a public speech today.
Mr Young will argue that changing the network design to the Coalition's preferred "mix of technologies" could increase the long-term costs of the network and fail to deliver key policy targets, at a forum about “Australia's Digital Future" and hosted by the Committee for Economic Development of Australia (CEDA) in Sydney.
Mr Young's speech outlines three "interwoven" aspects of the NBN – a super-fast broadband network that will cost about $40 billion to construct - the telecommunications market structure, infrastructure and future applications and benefits of the network, according to a draft copy obtained by Business Day.
While saying he wants to stay out of the debate about whether fibre to the premises is needed when fibre to the node technology exists, Mr Young says that “if you retain Telstra infrastructure as part of the national broadband network, even just the last bit, you will not have accomplished the separation of [Telstra] wholesale from retail that was a major objective of Project NBN”.
A fibre-to-the-premise model runs fibre optic cables all the way from an exchange into households, while fibre-to-the-node only runs fibre cable from the exchange to an air-conditioned street side cabinet – the node - serving dozens of premises but keeping the copper wire between the node and households.
Mr Young also says fibre-to-the-node is more expensive over the long term than NBN Co's current design.
“The apparent cost advantage of fibre to the node decreases as you lengthen the time frame you look at. In the long run, as Keynes famously said, we are all dead. Estimating costs is an engineering problem. Deciding on the relevant time frame is a policy question.”
Opposition communications spokesman Malcolm Turnbull has promised a Coalition government would deliver “very fast broadband sooner, cheaper and more affordably” using a mix of technologies, including fibre-to-the-node.
A future Coalition government would also keep the pay-television and internet cable owned by Telstra and Optus, which is connected to about 1.2 million households in wealthy inner-city areas.
NBN Co has struck commercial deals with Telstra and Optus to buy their cable customers and decommission the cable, a move that is heavily criticised by the Opposition.
But Mr Young will today tell the CEDA audience that since the cable networks were only built in suburbs containing Australia's wealthiest households, forcing NBN Co to keep to cables and not build fibre would create the “ironic situation that the wealthiest suburbs have the lowest-quality broadband in the country”.
NBN Co's super-fast fibre network will start operating at 100 megabits per second, but can be upgraded to 1 gigabit per second and faster speeds in coming years. The existing cable network does not have the same upgrade capacities.
Mr Young, who is a director at the Commonwealth Bank, former director at the Bank of England and former chair of Morgan Stanley Australia, lays out the policy and market reforms the current Labor government wants to achieve and says natural monopolies can be the most most efficient use of society's resources.
Using the example of bridges, he says building two toll bridges right next to each other would halve the flow of traffic on each bridge and push tolls to cover the owner's construction costs higher than a single bridge-owner would have to.
Further, NBN Co will not become another Telstra because it is not allowed to sell services at the retail level, he says.
“The problem with Telstra is not that it is a regulated monopoly supplier of wholesale services but that it has been able to behave like a monopolist in the provision of retail services, which is not a natural monopoly.”
Mr Young will be speaking alongside the chair of Regional Development Australia, Dave Abrahams, managing director of IBM in Australia and New Zealand, Andrew Stevens, head of customer relationship management and Medibank, Dermot Roche and head of telecommunications research at Ovum, David Kennedy.
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