NBN History

This is designed to be a basic history of the lead up to the current NBN. It is not a complete history, but covers the most relevant and pertinent points that drove the current NBN to be implemented.

Broadband in Australia

The history of broadband in Australia goes back well into the 1990's. Optus and Telstra were offering basic "broadband" internet services over their HFC TV cables in the late 1990's after the "cable wars", whereby Optus announced its' rollout of HFC to provide PayTV via cable to customers in Sydney, Brisbane and Melbourne....and Telstra chased Optus' cables down the same streets to win back customers. This resulted in HUGE capital losses for each company, as total subscriber numbers on both networks combined were less than 400 000 by the end of the cable rollouts in the early 2000's, while 3 Million had been passed. Even today, the total subscribers is STILL under 1 Million premises, with the reach extended to 3.5 Million and that's with the option of only having broadband over cable, not a PayTV/Internet bundle back then.

ULL and Competition

But the most significant point to come for broadband was the access to the ULL (Unbundled/Unconditioned Local Loop) in 1999. Up until then, all competitors of Telstra had to provide phone and internet services (namely Dial up back then) by wholesaling the entire line. This meant, seeing as Telstra controlled the wholesale price of the line and it was usually much higher than what it cost Telstra to run the line, competitors could not compete on price. And without the ULL regulation, they could not attach their own, perhaps more innovative, equipment to the line. The ACCC saw the stifling of competition and forced Telstra to open up access to the ULL.  Competitors could now attach their own equipment and this paved the way for xDSL technologies to be offered in competition to Telstra's in 2000 by Optus to business customers first.

DSLAM's and Competitive ADSL

The way these xDSL technologies were offered was by DSLAM's ((Digital Subscriber Line Access Multiplexer). These were inserted between the customers line (copper) at the exchange and the competitors switch, also in the exchange and allowed direct leasing of the copper line for broadband services, straight to the competitor without using Telstra's entire network- only the copper line to the customer was hired. Internode first did this in 2003 (under the name of Agile Communications) in Meningie, SA. Many competitors followed. Along with Optus and Internode, there was iinet, Adam Internet, Westnet, iPrimus, TPG, AAPT, Exetel....the list goes on. By 2005, there was broadening choice for Australian consumers in broadband, including the option from competitors of 8Mbps ADSL1, while Telstra continued to artificially limit ADSL to 1.5Mbps on all its' own and wholesaled lines..... but competitors had less than 15% market share total. 

FTTN and Telstra

2005- A time of a Solomon Trujillo lead Telstra, a strong and as yet unchallenged, by K Rudd, Coalition government and a different time for broadband in Australia. The ULL system forced on a hostile Telstra by the ACCC in 1999 is allowing competitors to access customers as an alternative to Telstra. But the biggest coup, following many years of lobbying and hard work by Internode, iinet and TPG, has lead to the ACCC rejecting Telstra's undertaking for pricing on the ULL at $22/line in 2004 and $30/line in 2005, leaving it at around $18/line for metropolitan areas (70% of the population). This system allows these competitors to access many of the profitable exchanges in Urban and semi-urban areas on a exchange-by-exchange basis affordably. However, after 2 rejections from the ACCC to raise ULL prices, it appears Telstra, lead by Sol Trujillo, a man aggressively hostile towards regulation, is mulling over how it can again gain control of the broadband and fixed line market once again. Enter Telstra's bid to build a FTTN network to around 4 Million premises in the 5 major capitals- Sydney, Melbourne, Brisbane, Adelaide and Perth. 

Telstra enters into discussions with the ACCC in March of 2006. But an alliance between, primarily, Optus, iinet, Internode, TPG and several smaller ISP's emerges that wages war against what iinet CEO Michael Malone, at the time described as "a ridiculously transparent attempt to return to a monopoly position"This FTTN network would see Telstra control, once again, the entire line to the customer, with no way for the competitors to access unless they paid a "fee" which was undisclosed at the time. It would essentially remove the work the ULL had done at de-monopolising the Telecommunications sector.

So, Telstra is losing money from its' wholesale business every year, steadily, because of the encroach of competition in fixed-line. There was alot of hostility between the CEO, Sol, of Telstra and the Howard Government back then because of regulatory pressures. Telstra offers up the proposal of the FTTN network to "upgrade the ailing infrastructure" in March 2006. It entered into discussion with the ACCC.....and got precisely nowhere by August 2006, thanks largely to the unofficial alliance formed by the other ISP's. The ACCC discussions amounted to Telstra saying "We'll build it, but we want primary access to it, with other competitors a secondary concern"....to which the ACCC promptly replied "Mmmmm......NO" in essence. It would've seen a return to pre-ULL days, which the ACCC had just worked through. It was for exactly this reason many believed Sol offered this "solution"- to reclaim the lost revenue from ULL wholesaling regulation.

The 2007 Election

Now, with an election nigh in late 2007, Enter K Rudd and his Labor Opposition solution. A National Broadband Network (often called NBN Mk1 in circles) with a FTTN (primarily) solution to 98% of the population for $4.7 Billion in March 2007, providing minimum 12Mbps. This was based on the Optus/G9 alliance that had sprung up against Telstra's FTTN plan and the Opposition said, while no details had been made available, they would provide the funding if the solution was right. The Coalition government comes to the table with, what becomes colloquially known (because that was the company who won the tender for it) as OPEL- a $2 Billion ($1 Billion from government) WiMAXX network, primarily aimed at getting those in regional and rural areas 12Mbps broadband, in June 2007. It is expected to cover 890 000, primarily rural and regional premises, giving them access to "up to" 12Mbps at "equivalent city prices" of between $35 and $60/month.  


As we know, Labor stormed to victory in the 2007 election, with the "NBN" playing a significant, if small part. Likely, this was because while OPEL may very well have seen some rural/regional people get access to badly needed broadband, FTTN saw them AND the rest of Australia get the same- including many major regional and semi-urban premises who also had little decent access to broadband. However, OPEL also became troubled for several reasons: Telstra, again still with a hostile Sol at the head, started legal action in July of 2007 against the government alleging the tendering process for the OPEL WiMAXX plan had been carried out illegally. The government subsequently froze OPEL signings and funds in August 2007, just before the deal was due to be signed. Telstra also muddied the waters, signing agreements with the government to rollout ADSL2+ in many of the OPEL areas, leading people to believe OPEL for those areas was now pointless (whereas in reality, offering ADSL2 on those lines would likely not have increased speeds available to the majority of people in rural and regional areas because of copper line lengths). Finally, it was believed WiMAXX could not adequately cover 90% of premises in the coverage area, with some figures showing and Senator Conroy reporting only 72% would be reached. As a consequence OPEL was cancelled in April 2008.

Next went the discussion on FTTN. An expert panel is formed to discuss the options in early 2008....and by the end of 2008 (November) the tender process is finished....to have Telstra excluded a few weeks later for refusing to produce a complying bidThis extract from the Evaluation Report, from January 2009, into the FTTN tenders by the 6 consortiums (including Telstra) shows an interesting point- The excuse given by the committee to exclude Telstra is that "Telstra had failed to submit a Small and Medium Enterprise (SME) Plan as required under the RFP." This is a fairly small and technical point to throw an entire tender out by the largest Telco and therefore most likely contender to build the FTTN in Australia. But, then, Telstra had provided only 13 pages for their bid, compared to the Terria consortium's 1000. Why? Perhaps Sol knew the Labor government wasn't seriously considering Telstra- after all, this government was even MORE hostile towards Telstra. The extract notes: 

"The Proposals have also demonstrated that rolling out a single fibre-to-the-node- likely to require exclusive or near-exclusive access to Telstra’s existing copper sub-loop customer access network (CAN), the so called ‘last mile’, thereby confirming that strong equivalence of access arrangements would be essential.  As well, providing such access to a party other than Telstra runs a risk of liability to pay compensation to Telstra.  The Proposals have this risk remaining with the Commonwealth but they have not addressed the potential cost to the Commonwealth of any such compensation.  In any event, the Panel considers that no Proponent could accept the cost risk and continue to have a viable business case."

This was the true harbinger of the death of the FTTN NBN, because, sources inside Telstra (including Phil Burgess, Sol Trujillo's manager of Public Policy and Communications) tell us now, as seen in this ABC report (and 4 Corners) that while the network may very well have cost the Labor government $4.7 Billion to build, the Telstra CAN would have to be boughtbecause the nature of the FTTN architecture meant the CAN had to be cut at crucial locations to splice in the nodes. This cost? $20 BILLION. And Telstra would then use that money to build past the FTTN network it just built for the government with an FTTP network in many areas, cherry-picking all the customers off with better services for less money.....

Needless to say, there were many rumours surrounding what Kevin Rudd did and said when he was advised of this.....perhaps that was where his penchant for bad language came from? 

So, the board is empty. Next comes the bit of folklore, which says that Rudd, quite miffed with Sol and Telstra about the whole thing, says to Conroy and his advisors "Why don't we just screw Telstra completely and build our own?" Supposedly, this discussion was had on his jet when travelling from/to Canberra and "written on the back of a napkin." And the idea? A FTTH network, which completely bypasses Telstra's CAN (hence saving the money being paid to them to buy it and stopping them overbuilding the new network) to 90% of the country, with the final 10% being serviced by wireless, satellite and existing ADSL. Total cost? $43 Billion. 

Welcome, to the National Broadband Network.

NBN Mk2 Costings

The Labor Government commissions a study, by KPMG/McKinsey, into the purpose, scope and cost of the NBN in mid-2009. In the meantime, to get the ball rolling, the government starts The National Broadband Network Company- NBNCo in April 2009. This will be the company that plans, builds, maintains and operates the network. The government also forces Telstra to sit down and talk about structural separation to ensure the NBN can be viable, by using its' ducts, pits and exchanges and forcing a no-competition clause for 10 years during build. This is likely to save alot of money, time and wastage, making the business case better for the NBN. They manage this by threatening to force Telstra to divest its' HFC/cable TV subsidiary and barring it from future wireless spectrum bid (an absolute nightmare for a company who is seeing major revenue climbs thanks to its' mobile business). Telstra sits, now with David Thodey CEO at their head and much less hostile and begins discussions.

The KPMG/McKinsey report is released to the government in early 2010 and then to the public in May 2010. It says the NBN is achievable, that it will be cheaper than believed originally (around $38 Billion total, but only $27 Billion to government- perhaps less including Telstra deals), should be able to reach to 93% with fibre, not 90% and confirms that an FTTH (fibre) NBN is the way of the future, for future upgradability and maintenance. It also recommends the final 7% be served by fixed wireless (4%- via LTE) and satellite (3%).

Telstra Agreement

The Telstra definitive Financial Heads of Agreement deal with NBNCo. and the government, designed to allow savings to NBNCo. by using existing cable duct and exchange infrastructure and migrating customers to the NBN to increase revenue, was agreed in June 2011. But the vote for shareholders was pushed back to December 2011 from the original July Telstra Shareholder meeting because of negotiation delays. The shareholders, as discussed, voted almost unanimously to accept the deal and the deal came into force in March 2012.

NBN Trials- Fibre, Satellite and Wireless

The first FTTH trials started to rollout in Tasmania, where a State NBN had already been planned and given to Aurora Energy, as a direct result of the FTTN bid in 2008 and the government had tied up a deal to incorporate that into the NBN at large. That saw the first FTTH trials rolled out in 2010 by Aurora and after legislation was passed in early 2010, saw that come under NBNCo. jurisdiction. The trials were completed and the first services tested in mid-2011, modest as they were (several thousand premises were connected, a few hundred used the service). Several thousand are now connected since commercial services have been turned on, with tens of thousands now passed.

The next fibre trials, on mainland Australia were in Armidale, Kiama, Townsville, Wilunga and Brunswick. These covered varying geographies and societal differences. They were announced in April 2011 and conducted until September 2011, when commercial services were launched in the trial sites. Again, initial takeups of the service were small, but have now risen to many tens of % in several of the sites after commercial service was turned on, including to nearly 35% in Kiama. While this seems small in the overall scheme of things, as a comparison, takeups of 15% overseas in similar rollouts at this stage in the rollout are considered normal.

In the meantime, satellite deals for NBNCo's "Interim Satellite Services", which see 6/1 services supplied over existing commercial satellites, were signed in May 2011 with Optus and IPStar and offered from July 1 2011. These services have much cheaper prices than normal commercial services (see SkyMesh and compare NBN Satellite with IPStar satellite plans) and much higher speeds, with much higher downloads. And the contention is managed on these satellite slots, meaning these NBN customers continue to receive higher speeds when in peak times, on the same satellites. Once NBNCo. launch their own satellites, by 2015, there will be 90Gbps shared between 200 000 people. This seems low; after all, if everyone were to download at full speed the entire time, it would result in 450Kbps maximum speed. However, the satellite area is so vast, the likelihood of even half these services downloading at full speed (12/1) at the same time is negligible.

The second mainland fibre trial sites partially skipped "trial" phase and instead switched on commercial services as soon as connected. These were done at 15 other locations and expanded 4 of the original locations in the trials, resulting in some 65 000 connections by April of 2012. However, reported takeup was only some 3700 actual services by then, on fibre.

Wireless trials were conducted from April this year, with a few hundred premises outside the fibre footprint of the trials in Armidale, being connected via NBNCo's fixed wireless LTE solution, for current speeds of 12/1. This was expanded to Toowoomba and Tamworth in June. There are a little over one thousand people on the NBNCo. wireless plans.

All these trials have been planeed, executed and spaced out according to the best ways to tackle the various geographies of Australia. The trials are now totally completed. Full commercial rollout of the NBN services, announced as part of the 3 Year Rollout plan in very late March this year (just after the Telstra agreement signed in December took effect in March), were to begin this month. Some 750 000 connections will be started or completed by the end of this year and 3.5 Million will be started or completed by 2015.

No comments:

Post a Comment